Formula E! – E118

Great to chat with Cailey Patterson, Executive Director at Saints Performance Automotive Design, the University of St Andrews Formula Student E team! They are designing and building a performance electric car! We discussed the competition, the future of electric vehicles in competition, how to start a cleantech project and more!

https://carbotnic.com/spad

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James

The unedited podcast transcript is below

James McWalter

Hello today we’re speaking with Cailey Patterson executive director at Saints Performance Automotive Design or SPAD, welcome to the podcast Cailey.

Cailey Patterson

Thank you so much for having me very excited to be here.

James McWalter

Fantastic to start? could you tell us a little bit about SPAD.

Cailey Patterson

Yes, so we compete in the formula student competition. Um, it’s a global engineering competition held at silverstone every year um and we compete in both you know business side of the competition and in the engineering. Um, and yeah, we’ve kind of started this society. Um, it was started by a group of 6 students who felt that their technical knowledge didn’t have an opportunity to be exercise in a more practical manner. Um, particularly in one like mechanical engineering. Um so spad was founded um to fill that gap and we’ve kind of grown the past year ah to team of around maybe 50 students. Um, so it’s been very exciting.

James McWalter

Those original 6 students before you know the massive growth and I guess to start could we talk a little bit about the um, the program you know, not everybody listening will understand silverstone understand formula one and so on. So yeah, we’d love to hear a little bit more context about the you know the opportunity that already existed. And then why that kind of original group of 6 students started in the space and.

Cailey Patterson

It’s a formula student. Um, in particular, it’s run by the institute of mechanical engineering. Um and it was backed by Ross Braun um his big name and Mercedes formula one racing and. It was kind of you know this student competition that was supposed to naturally feed into the formula motorsport world. Um, and traditionally it’s an engineering design competition. But we’ve kind of entered into this field. Without an engineering department. Um, so from our perspective. Um, we’ve really learned that there’s so much more to this competition than engineering. Um. I mean when we started we had absolutely nothing. No garage space. No funding from the university um, no tools. Not a lot of knowledge. Um, necessarily. But yeah, it’s taking the initiative and um.

So Formula student ah was created by the institute of mechanical engineering ah to give University students the chance to compete In. You know the motorsport universe. Um, within their curriculum. Um, and I think with our team in particular, we sort of you know we don’t have an engineering department So We’ve taken that and have you gained a much more.

Cailey Patterson

Okay, um, so how we approach the competition is yeah, it’s a lot more than just engineering it requires marketing. Um. Sponsorship we’re fundraising everything ourselves. Um you we’re one of the only teams that doesn’t receive funding from their university. Ah so there are a lot of challenges built into it for us specifically um that we’ve taken more of a business or approach to it and.

James McWalter

Like yeah and let’s talk a little bit about St Andrews itself. So you know the name of spad. It’s a saints right? and that comes from the fact that University you’re talking about St Andrews and I was particularly interested in this because I.

Cailey Patterson

Good.

James McWalter

Disscent Andrews and for the Kar audience St Andrews is you know I think it’s the third oldest english speaking university in the world. It’s kind of nestled in this very very quaint fit village the village of town of St Andrews in Scotland but yeah, we’d love to hear a little bit of context about St Andrews and you know you you mentioned it didn’t have. A suitable department and so you’re trying to um, bring to bear the tools and the resources you do have to bear. So yeah, so we’d love to hear a little bit about you know your experience at 10 enders as you’re trying to you know, bring spad to the next level. So.

Cailey Patterson

Yeah, So our team in particular. Um we have a lot of physics students students in chemistry maths Computer Science Sustainable development I’m an international relations and econ major. Um, we have some students in philosophy and geography and we’ve all sort of come together and the initial you know reason for starting spd um was to establish you know some kind of engineering community here. Um, but we’ve all. Kind of come together to take this interdisciplinary approach to the competition. Um, because I think innovation is driven by you know, a different interdisciplinary approach and.

Cailey Patterson

Technology in particular advances relative to its capacity to differentiate. So I think with St Andrews being such a diverse community. Um yeah I think that we can produce something very interesting.

James McWalter

Um, and formula student itself as you said it’s a competition. How do you win.

Cailey Patterson

Well so breaking down their static events and dynamic events. The static events are the more business related events. There’s a lap time simulation a business plan presentation cost report. And an engineering design event and then on the dynamic side you have 5 different engineering events on track so we have like a skid pad acceleration autocross endurance which is 26 labs and there’s also an efficiency score. So with that. Um, you need to perform well in both categories so to win per se um, our approach is to make it in the endurance lap because that’s the one that generates the most points. Um, and it’s also the one that not a lot of teams finish. So our goal is to try to finish that and event in particular.

James McWalter

So you mentioned these different types of ways to win and you said that you’re having a particular focus on the endurance part of the competition and why is that the most interesting and is there particular advantages that working with an electric vehicle has for that particular event.

Cailey Patterson

Ah, well actually I think that’s the worst event to compete in with an electric vehicle. We’re having some and real issues with cooling Ah, in particular, we’re not allowed to use water cooled.

Cailey Patterson

Methods It’s you know, usually the safe bet is to use an air cold system. Um, so we spend a lot of our design focus in that regard on a those systems. So yeah.

James McWalter

Um, Okay so that that’s fascinating. Um, but I guess as you’re thinking through the different ways that you could you know win certain parts of the composition versus others. How much does the. Yeah, and the nature of an electric vehicle come into play.

Cailey Patterson

I Will I think our decision. Um, you know obviously the easy choice would be to build an internal combustion Engine vehicle. Um, especially with our experience. It’s just the easiest you know way to actually. Compete with the car wrong track. But what we had to think about especially the start of last year was you know a lot of students on the team are going to Graduate. We Want this society to continue long after that. Um so thinking in terms of Sustainability. Where’s the competition going to Move. Where’s the industry going to move the choice had to be E B Um, and it also fits with.

02:22.74

Cailey Patterson

And our University values of Sustainability. Um our own personal values even and you know making an impact in that industry now even at a formula student level. And something that we were particularly interested in being a part of.

James McWalter

And so do you think that formula students will eventually even mandate electric vehicles down the road.

Cailey Patterson

I think so I think it’s going to be sooner and than we anticipate. Um I mean just the movement from you know last year to now I think majority of the grid is going to be ev. Um, and I think there might be 1 or 2 ice vehicles still left um and usually ice is a good backup if something happens with the power train just throw an engine in the back that we can still compete. Um, but I think everyone’s going to be. Going for Ev this year

James McWalter

And thinking about yeah the environment of St Andrews itself and again for the audience. It’s incredibly quaint, but it’s also surrounded by rural roads. Um. Yeah, very quiet here as often common to see a tractor as you are to see cars or on some of the roads near and Andrews. Um, when test driving and so on how does all that work. Well.

Cailey Patterson

So we’re actually going to go to an airfield um, there’s one in England that we think we can get on but we’re essentially going to set up the formula student track. Very much an abridged version of the track at Silverstone. It’s only on one section of it so we’re going to replicate that track at this airfield and test the car there because obviously there’s not. Really anywhere in st andrews we can test it besides the beach maybe but I’m feeling our engineering team won’t like that. No yeah.

James McWalter

It It be her to get it up off it. Um up to up some those steps and so on Um, and so even it loves to kind of dive in. So Even when you’re trying to figure out all right. We need a test place where you know you’re kind of more focused on the operation side. What that goes into actually just finding a place right? What are is the work. What are the you know the skills that you have to kind of leverage. Um, because I think for a lot of projects like this. They kind of seem you know, kind of very well- established or you know like these oh this. Yeah this this team they’re building this electric electric formula one car Like. Um, they must have all the support. It must have things already set up for them. Um, but as we both know you know there’s a ton of just like kind of the small little nudges you have to do every day to get products like this off the Ground. So even just in the case of finding that Airfield what are the things that your team had to do to get that you know to make that real right.

Cailey Patterson

I Mean everything Really we’ve had to be really scrappy. Um, you know, just picking up the phone calling as many people as we can, um even per things like our garage Space. We couldn’t find 1 in St Andrews Um, then you also have to think about things like insurance Coverage. Ah because we don’t We don’t operate under this framework that an engineering department normally provides to University Students. Ah. We don’t necessarily have the £15000000 insurance that formula student would like us to have um I think our University covers 5000000 which is you know, reasonable for us considering we’re not using any University buildings or.

Cailey Patterson

You know everything’s outsourced. Um, and we’ve also partnered with a metal fabrication company and Dundee. Um, we’re using a space in their garage. Um up until the chassis and suspension and all of that’s done and then. We’re going to have to find a place to keep it while we work on the power train. So a lot of different moving pieces. We kind of learn as we go and try to plan ahead as best we can.

James McWalter

And in terms of the university itself it it sounds like you know it’s definitely not this incredibly you know official stamp of approval type project. Um, but you know you’re you’re obviously working with aspects of the university. Everyone involved is a a member of. Yeah, a university club or society how exactly is the interaction with the university um, and where could you know? Ideally, if anybody e and Andrews is listening to this. Um, if they could give support were the areas that you’d love to receive more support for this project and.

Cailey Patterson

We received a lot of help from the alumni and development department. The student union kind of operates as our safety and risk mediator just to you know, ensure that everything is. Being taken care of properly in that respect but we would really love the support of the eden campus was just built. They have a battery lab that’ll be should be done by the end of the year and that’s something that we would really like to incorporate into our project. Um set space is designed for you know, entrepreneurial um maker space. You know that’s it’s that type of environment and we think our project perfectly fits within. The bounds of that purpose.

James McWalter

And how do you and the other members of the team. You know balance The you know the work you’re doing with spad and then your studies and like other commitments.

Cailey Patterson

Ah, so within the whole team. You know people take on different roles. So you know if you’re kind of just a general member. You know few hours a week here and there but I would say. Our central committee which is around 15 students. It’s all consuming. Um, and yeah I wake up in the morning I do my spat emails I set up meetings later in the day I do my Linkedin and then school kind of fits in between there and I know. Especially a lot of the calmsi physics math students. It’s you know time blocking and trying to have the best of both worlds and commit as much as you can to the project.

James McWalter

Um, and how I guess like thinking through the motivations of the team and I’m sure everyone’s motivations for being involved in something like this can vary. Um, what are typically some of the main reasons why people want to get involved.

Cailey Patterson

Um, I think a lot of people are sort of attracted to spad because they’re motor sport enthusiasts and then we we’ve had a lot of interest. There’s actually a growing.

Cailey Patterson

Community of people who are interested in engineering um around town we got invited to a community page on teams earlier this year so there’s definitely you know this need to actually. Work on something and I know um I talked to a few students who told me in high school. They used to have a mate like a little maker space at at their school and they should really love just building something and they come to spat even if they’re not interested in. Formula murder sport or mechanical engineering just to have that practical experience and learn how to Cad and fabricate and three d print and all of that.

James McWalter

That super cool. Um, and I guess you know thinking for for yourself, right? You know your international relations major something that’s quite removed I guess from ah you know like 3 d printing and motive for sports and so on. Um, I guess what? what are the kind of motivations and inspiration for why you’re involved in the project yourself. So.

Cailey Patterson

So I joined the team a few months after it started. Um I’m a big formula fan formula e and formula one and I saw an email that they started spd and I joined the team and. Once you you know become a part of it. You realize how how much there is to learn from it I mean from you know in terms of my career path. You know the sponsorship they’re reaching out to people. Emails Linkedin messages coming up with a strategy. Um, you know that’s based on this whole sales pipeline has been super beneficial and just the networking I mean I’ve probably reached out to 7000 people over the course of my time. And bad and you know I’ve met a lot of great alumni and people in different industries and I think that those relationships have been really good to have.

James McWalter

Yeah, you know one of them was me right? and that’s that’s how we we ended up chatting today. Um, actually I think it’s it’s such a kind of powerful message. You know a lot of time we talk on on the podcast to folks who are you know founders of different types of climate tech companies. But the motion for them to get.

James McWalter

Something from an idea to being a startup tackling a problem is pretty much identical to what you’re describing. You know you’re trying to build a team. You’re up against the odds. Um,, there’s some sort of Problem. You’re trying to solve right? You know in this case. Ah you know there’s a particular set of Criteria to win a competition. Um. So There’s like it’s a very kind oflivity defined problem. But how you get there is completely up to the efforts and and the skillets of the team you can build and that scrappiiness that you mentioned that’s all the better right? It’s a very similar to a startup team or a team trying to build an early stage prototype to solve a problem you have to like.

James McWalter

Pull every lever you have available to you. Ah and the idea of reaching out to 7000 people I think that’s probably intimidating to a lot of the folks not just students but people who are thinking about starting their own companies but those are the numbers you need to do um like I tell people that to get to the point where my own startup I was reaching out to a couple hundred people a week for Years um and you know I was ideating I was trying to understand different aspects of the different problem space I was in and it’s just necessary and as you kind of move through that you do start to kind of find specific ah points where it’s like okay. This is the type of knowledge base or person or whatever it may be that is the higher leverage way to move my project forward move my company forward. Whatever it may be um and so you you kind of mentioned you know thinking through careers and so on one of the things I think um. So some of the students you mentioned did philosophy that was my background it did masters in in Scotland in St Andrews and was actually going into a ph d program there before I ended up going and not staying in academia but moving into the you private industry. And 1 of the reasons I moved into private industry was it was very hard for me to see the real world effect of staying in academia um, I wanted to see the translation into some sort of real world impact and you know I think that is often something that a lot of students. Um.

James McWalter

And so and so you know students obviously can have a lot of different opportunities to try to figure out ways to better better leverage their experience in university to have the type of impact they want to have on the world after university um. But I think one of the things or critiques I have of the university system is often. It doesn’t give people the um, you know the opportunities to actually get exposed to like real-world type problems in a way that actually would maybe increase their learning and so you know for me everything that I look at is like oh through the prism startups um so it’s like oh yeah pretty much everyone going through university should at least have the opportunity even if they don’t want to actually do it. They don’t have to do it but should have the opportunity to be supported to try to start a company um because I think you just learn so much through the process of trying to solve a problem. Um, in that way. But I think projects like um like so spad also has this massive impact and so I guess at a high level Kali how could universities better encourage projects like spd from happening because it’s had such a massively positive effect on you and your team.

Cailey Patterson

You know honestly I think having the amount of autonomy that we do have from the university has allowed us to really shape this into what we want it to be ah, you know we’re not. Working within a certain curriculum or within a certain department so we have the flexibility to pretty much run the team. However, we want um, there’s really no oversight um on how we operate. Aside from risk and safety and I think that universities I know I’ve heard from you know, various different societies that you know when they try to go through the university particularly the students association like. In terms of what they’re allowed to do um, kind of gets limited I know there is a big debate over the use of power tools within societies all over St Andrew’s mermaids.

Cailey Patterson

They use power tools to create their set and the University kind of outlawed them.. There’s been this whole rise for the power tools initiative that started but I think overall universities can just create. Space for students to pursue their interest and make sure that that space is well equipped with whatever they might need and I think from that Ah, you’d be surprised what students can come up with.

James McWalter

Yeah, that power tools example is kind of remarkable. So what is the the rationale for banning Para toolsols from students.

Cailey Patterson

It’s a risk and safety concern I.

James McWalter

That’s that’s absolutely fascinating. Um I mean I could imagine there are you know? Maybe you don’t want to have like ah like an open ended pansaw or something but ah, you know surely that is that is remarkable.

Cailey Patterson

Is yeah, it’s been. You know? Um, we’ve actually started us in a few of the drama societies who need it for to build their sets and you know there’s 1 team who. Uses them occasionally for something and robotics. Um, we fall started this coalition to use our you know a little power tools.

James McWalter

Yeah, yeah, um, and again any st andrew administrators listening to this like cop on that is absolutely ridiculous. Um, yeah, like using these of power tools which have been around I don’t know hundred years um you know obviously you can mandate specific types of power tools.

Cailey Patterson

Um, yeah.

James McWalter

More than others but the idea of like not using them when people are truly clearly trying to have like these ways of building and and literally trying to build with you know hands side Underback is is wild and um, yeah I I’m sorry to hear that that’s that’s a classic example of like safety or you know safety of a wall else and.

Cailey Patterson

Is that.

James McWalter

It’s a nature of risk that actually allows folks to grow anywheres and so removing all risk I think removes all growth and this is just like such a kind of weird and silly example of that you know.

Cailey Patterson

Yeah I know especially um I mean we’ve submitted risk Assessments. You know it’s taken consideration and the high voltage low voltage systems that we’re using and. Some of those risks are death and electrocution and we’ve submitted those but something about the power tools.

James McWalter

Yeah, you’ve actually convinced me yes, having the ya university much more involved if that is the kind of level of involvement um might not be the kind of net good that it might look at first glance that it is better to have um that independence so that you can experiment um, because otherwise you know.

.

James McWalter

Things like this would potentially ground to a halt. Um, and I guess you know I think one of the really interesting things when I was asking you a little bit about the motivation of yourself and the rest of the team is that the climate element or the kind of need to work on electric cars from just that climate piece wasn’t like. 1 of the first things and what I think is kind of interesting about that is and correct me I wrong. There’s basically a supposition that that’s just the water we’re we’re going to have to swim in anyways and that you know the I’m interested. You know one one could be interested in a certain type of form a 1 racing. And oh yeah, of course that’ll be electric right? Just that’s that’s the kind of drive train of the future. It’s just kind of contained whereas I think ten years ago it’s it’d be like oh my god you know how can we force this cleaner alternative into the status quo but it sounds like The actual excitement is around. Oh this is the new this is the future. This is not just from a kind of environmental point of view but from a yeah, ah, the excitement around the torque that an electric vehicle can have and all these other elements as well. And so yeah, you know is that the case are folks kind of you know have basically internalized. Climate message and you know it’s these other elements now that actually are more inspirational in terms of building projects like this.

Cailey Patterson

I mean I think for everyone on the team. Yeah, our our own you know selfish priority was to build something but we were really excited about getting involved in ev once we realized that we could this is something that we could. Potentially do um because technology and ev is just moving so fast and arguably faster than it’s being developed. Um and you know I think we all share that same interest. ah ah I lost you for a second. Um I think that we all share that same interest to get into this industry that’s changing so fast and you know being a part of that movement and.

James McWalter

Yagenner.

Cailey Patterson

You know, potentially even you know, finding something new within that industry and ah the formula Student Universe to yeah.

James McWalter

You know we’ve kind of talked a little bit about this but let’s say ah you know there’s some bright students who or anybody they don’t have to be in a certain university but they have an idea they want to work on something and they don’t really know where to start right? Maybe it’s them and 1 friend or them and two friends and they’re like okay this is a project that we think would have a huge amount of impact. Yeah, and more maybe than anything else something that be really fun to work on for a couple of years what what should be like literally the first step that person would take.

Cailey Patterson

I mean that was started um like I said by group 6 students who were essentially just all sat in a room watching Tv and someone said do you want to build a car and. Now we’re building a car. So I think it’s just you know, finding that small group initially um and that you can reach out via Facebook groups. Messenger I found the team via email. So it’s just about. Getting the word out and because it’ll surprise you? Um, yeah there there will be more people who are interested in your project than you’d think.

James McWalter

And absolutely and another thing I would probably add to that is don’t wait. You know if you start and let’s say it’s 5 people sitting around watching Tv and and everyone’s like really excited and the next day it’s only you and 1 other who are like responding to the email to do that next step just keep going. People will come back in um, like it often just takes 1 or 2 people to just like put in those hard yards at the beginning and really drive forward and because yeah people have varying levels of risk appetite. And so what seems like a cool idea once they kind of realize amount of work involved. They may not necessarily want to do it right? this second but as a project has moved forward every single single step that the person or the founding group puts in de-risks it for the next person to join. Right? So somebody who is a slightly less risk tolerance but still wants to work on it like an early stage project like they might not be the one to literally send the 20 emails to just get it up and running but they might be the one once they get that email to do the next step and then somebody in their group. You extend the group might do the next step and so on um, and so you know it’s just a matter of like. Couple of people you know in this case is 5 or 6 people like just driving it forward from the beginning and like you know and that kind of mutual. Ah accountability is is incredibly powerful as well, right? It’s like you know I’m doing this. What are you doing and again it doesn’t have to be like a top-down, you know, looking over.

James McWalter

Each of the shoulders. It should be fun. It should be the kind of thing where um yeah, we’re we’re doing this together. Um, and that yeah is coupled with the accountability that we are actually doing it together.

Cailey Patterson

Yeah I completely agree I mean our whole premise of this first year in the competition is to set it up so that it’s not so painful next year for you know the generations of teams after us. Ah.

James McWalter

Right.

Cailey Patterson

And it’s kind of I mean even now you know I graduate in July I’m already kind of getting an idea of who might be able to replace me and how the interteam dynamics would work with that and hand over document. So yeah. I do think it’s all about that initial push.

James McWalter

You and you’re graduating. Um, what’s the plan after graduation.

Cailey Patterson

Um, um, I’d like ah to go into wealth management I’ve been working with a really great team for the past two summers. Um, and then hoping to go back.

James McWalter

And and where you’re looking to kind of relocate for that I don’t believe there’s a ton of wealth management in in St Andrews town itself. But yeah, where where you’re looking to to set up shop.

Cailey Patterson

Yes, I will be returning back to Texas got a little homesick. It’s a little cold and rainy here. Yeah.

James McWalter

It for desockk yeah I can imagine and especially with and and the sunlight a um, there was ah somebody I studied with who actually I think she’s also a texan who had to go back in January just because the darkness was but too much for her. Um, which I could be understand. It’s it’s quite a lot. Um bridge well Kaylee um, you know before you move off been great chatting is there anything I should have asked you about but did not.

Cailey Patterson

Um, um, I’d love to share some more about how you non-sudents and people outside of the University and the team can get involved. Yeah so ah at the moment.

James McWalter

Please.

Cailey Patterson

We’re in our fundraising stage and really what we’re looking for financial contribution would be great. Um, but we are really looking to connect with anyone who’s either interested in our project or interested in. Supporting us in some way. Um, and we offer a whole suite of packages to companies including in the marketing field. The way can I restart that I got distracted Sorry so we’re really looking.

James McWalter

You Yeah yet nowhere.

Cailey Patterson

For as many people to get involved in our project as possible whether that be via a financial contribution. Ah you know, exposure kind of like what we’re doing now. Um you know experience Expertise If You know someone who. Might be able to help us in some way we’re more than open to Welcom you weling you welcoming you to our team.

James McWalter

So brilliant and we’ll include some contact details in the show notes um, does brilliant. Thank you so much Kalee and and best to look with former student and the project.

Cailey Patterson

Um, yeah, thank you James.

Revenue-based financing – E117

Great to chat with Dimitry Gershenson, Co-founder and CEO at Enduring Planet, Enduring Planet offers rapid financing for Climate Entrepreneurs without dilution, personal guarantees, or collateral! We discussed revenue-based financing, the pros and cons of that compared to other forms of financing, how easy is the process like and more!

https://carbotnic.com/enduringplanet

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

Calculator: https://enduringplanet.com/resources/calculator 

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 Dmitry Gershenson co-founder and Ceo at Enduring Planet welcome to the podcast Dimitry great to start. Could you tell us a little bit about enduring planet.

Dimitry Gershenson

Thanks so much for having me James.

Dimitry Gershenson

Sure we provide fast flexible and founder friendly credit products to small businesses and startups that are working to address the climate crisis. So today we offer 2 Non-dilluted funding instruments 1 is a revenuebased financing product for sort of early revenue companies typically in they’ll like you know call it sub ten million a year in revenue range and then we also recently launched a new product to help folks. Ah, bridge the often long timing delays and state or federal grant funding in climate. So we’ll we’ll advance capital against you know state or federal grant funds that have been announced without necessarily dispersed and over time we’ll be adding additional.

Dimitry Gershenson

Credit products. We want to really have a full suite of non dilutive financing options for climate entrepreneurs from basically inception to Ipo.

James McWalter

What And what drove the initial decision to start enduring planet and.

Dimitry Gershenson

Oh man. Ah I think this has been a really long time coming for my co-founder and I we’ve both worked in in climate and catalytic finance. In fact, investing and credit kind of all the things that touch our work today. We’ve been. Doing those things independently for give or take a decade each and I had an opportunity to build a startup out of a venture studio last year a group called during ventures that I’d been working with for a little while and. Sort of presented me this opportunity and I I think I’d always really wanted to build this this business. The the capital gap in climate is is not nearly as often discussed as some of the other elements of the crisis right? So folks talk a lot about carbon removal They talk a lot about carbon offsets they talk a lot about you know tech that needs to be built etc. But I feel like the money side of the problem is not as sexy. That’s fine, but we need about five trillion a year in investment to actually get to two degree c we. Last by last count. It was like less than seven hundred billion that was invested so that’s an almost eight x increase that’s required and the credit side of that capital stack is dramatically like under. It’s just it’s just not happening and so weed up.

Dimitry Gershenson

Whole host of creative flexible like founder Friendly capital instruments in order for this transition to happen in a way that like reduces harm to you know, vulnerable people and really everyone and so we wanted to put a dent in that.

James McWalter

And as you’re thinking through like this scope and scale the problem and yeah, immediately when I hear trillions right? like these are exciting big Tam numbers and so on how do you start to think through what the you know the first set of customers might look like who should you service right? because.

James McWalter

You know it’s always the difficulty when you have these very very large opportunities. It’s like what is our kind of wedge into that opportunity and.

Dimitry Gershenson

Sure? Yeah I think it for us. You know we started with this kind of early revenue buckets or revenue based financing was our first product it in many ways was an ideal first product because it lends itself. Best to automation. Um. You you sort of if you look at the historical kind of alternative financing alternative credit landscape. There’s a lot of rbf lenders in ecommerce and saas and we thought the model would actually apply really well in the context of climate and it would also allow us to. Explore lending to both startups and small businesses which have very unique. They’re often look very different both in terms of the revenue trajectory but also in terms of the systems they use how they manage their accounting etc like there’s there’s a lot of what’s the word I’m looking for There’s just a lot of variability and so the revenue based financing was kind of an an attractive entry point and that meant that you know because we’re sort of on the initial portfolio we have ah a higher end cap on how much money we’re willing to put into any individual company because we don’t want to get overexposed and so. What that means is that we sort of artificially limited our initial customer pool to this sort of folks who have you know north of half a million in trailing twelve month revenue but less than call it 5 to 10000000 in trailing twelve month revenue and

James McWalter

Ah, yeah, yeah.

James McWalter

Yeah, and I’d love to just kind of get into some of the specifics around revenue-based financing you know I think a lot of the listeners will be familiar with traditional venture. They’ll be yeah familiar with even a lot of startups have founded themselves just with.

Dimitry Gershenson

Yeah, go ahead.

Dimitry Gershenson

Sure.

James McWalter

Too many credit cards or you know, ah kind of ah a quick personal loan. Whatever it is just to get something up and running and there’s been a kind of growth in revenue financing one of the big companies pipe and some of these folks have kind of emerged in the last few years so yeah so I’d love to kind of just you know understand a little bit more about revenue financing as a model and. You know the pros and cons of that compared to some other you know, maybe more common forms of financing and.

Dimitry Gershenson

Sure so I think maybe at first you got to split the capital available to entrepreneurs into two buckets diluted versus not so dilutive instruments. That’s you know your equity. Um, some debt can also be diluted because it has warrants or conversion principles that you have to sort of account for um, but that’s that bucket and then in the non-d diluto bucket. You have grants and you have debt those are the only types of capital there are and revenue based financing is a type of debt. It’s just not structured the way that. Think what most folks think of when they think debt base sort of imagine term loans where you sort of pay interest. You have principal payments if you miss payments you’re in default and gets really painful. Well revenue based financing takes a different approach to lending and so. In in our case, we provide a company capital and they give us a fixed percentage of revenue for an estimated term that allows us to like hit our our target returns we actually publish our term sheet on our website. So anybody who is interested in our capital can actually see. All of the dynamics of the product before they even apply. Um, and you know typically we’re lending sort of like less than half a million on the first go around that number will go up next year once we have a larger capital facility ourselves. But today we’re lending up to half a million

Dimitry Gershenson

Generally in exchange for anywhere from like 3 to 7% of top line revenue and typically it’s on like an estimated two year term. So now that capital that comes with with no collateral requirements. No personal guarantee requirements. There are no warrants. There’s no conversion There’s no complicated covenants. It’s like really simple, really fast. It’s you know is it more expensive than a traditional bank loan sure but the bank you know will take your personal. Assets as collateral in case, there’s a default and so if your business goes down the toilet your house is going with it and in our case, we will. We will never do that.

James McWalter

Right? And and even you know even besides those folks who have a house to to lose you know often Banks just won’t engage in technical startups Anyways, right? because they won’t really they already have the prism of what the kind of assets that those kind of companies are building until they’re quite large.

Dimitry Gershenson

That’s right, That’s right.

Dimitry Gershenson

Yeah I mean I think in general banks won’t lend unless there’s yeah 3 years of trailing revenue history. There’s a lot of collateral and even then they still want a personal guarantee and often those.

James McWalter

Have yeah.

Dimitry Gershenson

Multiple factors are like very difficult for a startup or a small business to achieve because even if you’re like you can be profitable and have a lot of history of of performance. But if you go to a bank and you have no collateral on your business balance sheet that you can put up in in order to secure the loan. They generally won’t do it unless you’re very large.

James McWalter

And as I think about yeah, where revenue-based financing might be suitable or not I’d imagine you you have both the type of company in terms of you know what? what’s their product and you know are they climate of course and not E to your your business but then also the business model of the company itself you know are there more.

Dimitry Gershenson

Um, yeah.

James McWalter

Are some business models more suitable for this kind of financing than others right.

Dimitry Gershenson

Sure, yeah, so for for revenue based financing. We typically look at one of sort of 4 models. 1 is pure software so typically Sas another is small. Or smaller hardware where there’s like a higher frequency of purchase and so there’s consistent growing revenue over time and there’s typically higher gross margins because we generally want to see about ah ah at least a 35% gross margin in order for us to do our behalf. Um.

Dimitry Gershenson

We’ll look at recurring services businesses or or services businesses with repeat purchases where maybe they don’t have a long-term contract but the same customers keep coming back and showing that there’s like repeat value and then we’ll also look at a hybrid model of any one of those 3 and so we. You know we kind of push the boundaries of where people historically have applied revenue based financing I think if you look at most of the other alternative finance players in the market they generally stick to saas some of them will do recurring services most of them won’t do hardware and and I think you know to some degree that’s been driven by. A lot of assumptions and sort of concerns about macro risks that in our case, we think climate creates a very unique sort of market opportunity where demand. At ah at a market level from consumers, enterprises, corporates, governments, etc. We kind of only go in one direction and there’s a lot of secondary factors that drive positive trends in the market including you know government incentives things like the ira etc which like don’t. Necessarily exist if you lend across Saas or if you lend an ecommerce and so that’s why we’re we’re comfortable, kind of pushing the bounds and and testing this model out with with businesses that often don’t look like what others will necessarily revenue base finance.

James McWalter

Exactly.

Dimitry Gershenson

Um, you know with our grant advance products we those restrictions don’t apply. We’re very comfortable advancing against grants regardless of the business model as long as it’s in climate and those grants are coming from State or federal sources.

James McWalter

And and just on that I actually have a little bit of personal experience. Um on you know the grant problem so a few years ago. A good friend of mine was involved in an arpe e soil carbon grant it was a 7 figure Grant and they wouldn’t get it for nine months and so they you know are trying to take this particular type of so science and and convert it it into a product right? that is something they can build. It was a piece of hardware. Um, and they had to raise and they went out and they raised a seed and basically it was a very um derisk seed from the seed. Investor’s point of view right.

Dimitry Gershenson

Um, yeah.

James McWalter

Could literally point to there’s going to be a couple million dollars coming into this company in nine months but they needed working capital right? because they didn’t you know the government was slower than startups right? So they needed to kind of get ahead. Want to start building the prototype and all that kind of thing. Um, and so I guess like compared to the type of work that you’re doing.

Dimitry Gershenson

Um, right.

James McWalter

Um, you’re eliminating that early dilution if you if you can avoid it at all.

Dimitry Gershenson

Oh yeah I mean it’s this is like a very common refrain that we hear is that folks will you know they’ll win a Doe Grant Usda grant california energy commission niceerta you name it, you pick an agency and most of them will tell you you’re getting the money. Somewhere in that 6 to nine month range before they actually start reimbursing you for expenses against the grant and that time is really painful and to your point folks will often go and raise equity. Which at that stage is incredibly expensive capital I mean it’s like 10 x more expensive than I think our grand advance on an effective irr basis because folks are you know they’re often getting sort of presee or see prices and they’re expecting a I don’t know hundred x return if they’re vtting at that stage. And so our our terms are very very different and in many ways we’re offering folks a product that I don’t I don’t think anybody else offers today and we’re pretty excited about the response we’re getting from the market.

James McWalter

Why do why? doesn’t it exist. It is actually shocking when because I saw ah you mentioned this you know I follow you of course on Twitter and um I think it was only a few weeks ago when when this is announced and I was like of course like like I literally had this conversation with my friend who was going through this whole thing about a year and a half ago and it never even.

Dimitry Gershenson

Right.

James McWalter

Kind of occurred to us that there was somebody who was doing an upfront loan like immediately both of our minds went to venture right? like that was the default because we didn’t even consider it but it seems just with the amount of money not just in the United States but around the world going into various grant programs. Not just for climate. But for ah other kind of applications.

Dimitry Gershenson

Right.

James McWalter

You know it’s surprising when you have literally a commitment of capital from the government in a sub one year period that no ah other financial institution has taken advantage to that.

Dimitry Gershenson

I I agree we’ve seen we’ve seen sort of boutique Lenders. Do this in limited context but and and and there are folks who do this with certain um tax incentives. So Like. There’s a group that that advances against R and D Tax credits that we’ve seen. But yeah, we’ve never we’ve never seen folks doing this at scale lending against state or Federal Grant funds especially in climate and so yeah I mean look the the opportunity is so vague that. I I would be I would welcome A many folks doesn’t want to come in and do this I think just in the Us It’s north at 30000000000 a year in funds that are dispersed through these mechanisms based on you know our conversations with folks who write these grants manage these grants et cetera and that’s ah, that’s a pretty.

James McWalter

Structure.

Dimitry Gershenson

Large amount.

James McWalter

And you know you have these 2 products now out what does it take to get a financial product live right? It’s you know finance I think it can be often complex people or at least from the outside you hear words like underwriting and like all these different things. You know what What’s the process from going to like. You know, look. We have this c climate round advance just because I’m naming it because it’s the more recent innovation but going from that as an idea through to it going live you know who are the kinds of people that you either have to have your your team or consult with to get to that stage.

Dimitry Gershenson

Um, yeah.

Dimitry Gershenson

So that’s a good question I think there’s a lot of pieces to this right one is that you need to actually have the permission to lend. So maybe we’ll start with compliance. You know these aren’t necessarily in in this order but these are like the key pillars right? so.

James McWalter

And.

Dimitry Gershenson

Need to be able to lend in a lot of the us commercial lending isn’t super regulated as long as you have like a signed contract in place most states allow business to be into business lending without much regulation. There are exceptions the state of California is one. We’re a licensed lender in the state of California that process took a long time is like a very long and painful process which ah it was just under a year I think um.

James McWalter

Yeah, are we saying over year or like just what’s long.

Dimitry Gershenson

Maybe a little less than that. Um, the thing is like you know it kind of depends on where you’re at you can you can technically do 1 or 2 loans in California business to business before you apply for your lending license and if you’ve done transactions. Ah, process is actually longer because they they sort of dig into those as well as the track record of the people who own the business. The people who run the business etc. There’s like a very large amount of diligence that’s done by the ah you know the sort of financial protection agency there. Um, so that’s compliance 2 you you know you need a team that can actually do underwriting who can understand sort of risk in ah in the context of credit who can understand where can a transaction break down with the grant advance. We spent a bit of time talking to um.

Dimitry Gershenson

I Mean one we sort of structured it internally and then we talked to a number of experts externally to sort of nail down the dynamics of the product because there’s there’s a lot of intentionality behind how the fees are charged and when and and sort of how the structure works and then um, you know you have to do ah a pilot transaction.

Dimitry Gershenson

Typically with capital off your balance sheets. You have to take some personal Well personal corporate risk to prove that the product is investible, um and and then you know if you have an outside credit facility. Ah you know or an outside fund or whatever where you have.

James McWalter

Yeah.

Dimitry Gershenson

External investors you have to convince them that that this is a product worth investing with under the mandate that you already have and so in our case, you know we we did 2 pilot deals and then we went to our investors for our first debt facility and we said hey we’d like to incorporate this product into our lending and they all. It’s unanimously approved and then and then we rolled it out. Um, so you know I I would say it was like ah at least a six month process from kind of start to making it public. Um, but there was actually quite a lot of work that happened before that.

Dimitry Gershenson

Where you know we we sort of understood the market. We did the homework we talked to entrepreneurs we tried to understand sort of where people where people’s comforts levels are around pricing and structure and what they what do they actually need in this product and you know frankly I wouldn’t be surprised if in six nine twelve months our grant advance looks very different.

James McWalter

But.

James McWalter

I and I guess that kind of goes to this quarithos I was reading on your website like 1 of the values of during planet is to be very kind of founder first and this is something.

Dimitry Gershenson

And it does today because we’re constantly getting feedback on how we can improve it.

James McWalter

That you know but bo you and I we have raised venture for our our current startups and a lot of people in the venture side right? Everyone’s founder first right? Um, so I guess how do you about you know, making sure that that value is kind of en shr in yeah, the products in the company you’re building.

Dimitry Gershenson

Yeah, yeah.

Dimitry Gershenson

So we I mean we think about the the sort of the impact on on founders and and teams at every step of that sort of customer experience. So one is we have I would say pretty radical transparency when it comes to how we lend and. And what our instruments look like and what the process will look like with revenue based financing. We even built a tool that allows folks to estimate how much money they could raise from us before they even apply they don’t have to like sign up for any marketing. They don’t have to do anything weird. They can just play around with a calculator. Um. We also make the application itself very short and very simple so it takes about 10 minutes to apply for funding with us. It’s I would argue pretty effortless and then we also you know, spend a lot of time thinking about. How we communicate and negotiate throughout the the actual loan process. So once somebody’s applied generally they can expect to see a term she you within a week which is pretty fast that and that time is going to get much shorter as we sort of enshrine some of the automation we’ve been building over the last twelve months and we also are very clear about what we’re looking for and what we need and what’s missing I think a lot of the time you know as you and I probably both experienced raising money when you raise from vcs there is no incentive for good communication and.

Dimitry Gershenson

What it means is that often you will pitch someone and this won’t follow up or they’ll follow up at a random time or they’ll wait for you to get a lead or like you know they might turn you down but they won’t tell you why there’s like all these things that happen when you’re raising venture. Where in our case, we just don’t do that. So if you if you are not a fitter for our financing. We tell you exactly why we set up check-ins to make sure that we are aware of when you hit the mostones that we need to see for you to be sort of investible and like you know we we spend a lot of time. Making sure that founders have a good experience raising money from us and then beyond that we’ve built a pretty robust network like a pretty pretty big community of folks that bring additional value to the companies that we engage with even if they’re not our portfolio Businesses. So.

James McWalter

Yeah.

Dimitry Gershenson

We have a network of over two hundred and fifty vcs so we shared deal flow with and we will connect founders to those vcs whether their portfolio companies ours or not obviously the referral looks different if it’s somebody. We’re invested in but we’re we’re very open to make the introductions and.

Dimitry Gershenson

We’ve also have a network like I think close to 40 partners now that offer discounted services to climate entrepreneurs around pitch Deck design. Yeah fractional cfo bookkeeping and accounting Grant writing you name it. We probably have a resource for you and we’re very Like. We’re not shy about sharing those resources in in our mind climate entrepreneurs should have capital to build the solutions that they’re building at the pace that they are able to absorb that capital whether it’s our money or not because the the world’s on fire.

James McWalter

You Ah absolutely and within that though you also have ah which you might be finding. Ah you know non-climate companies. Did they ever approach you because.

Dimitry Gershenson

We don’t have time to fuck around.

James McWalter

1 of the things we are having um in my own company is. We’ve had some data centers and I won’t get into details of of our own product and my kind of day job startup. But yeah, we had data centers and you know cannabis farms and all these kind of things um, try to use our product and.

Dimitry Gershenson

Sure.

James McWalter

Um, I’m like oh do use renewable energy right? I Do you have some sort of climate peace and and they don’t and so in that case, we actually don’t We won’t work with them as customers um have you had anybody come in and you know say hey you know this this house sounds great. But yeah, we’re not really doing anything in the climate you know, will you make an exception and I guess how do you evaluate that? yeah.

Dimitry Gershenson

Ah, we you know it’s interesting. So our our application form sort of limits. People’s ability to apply unless they can define a climate narrative if if. If we don’t see it. We’ll often. That’s the first check is like hey can you help us understand how you are driving impact around the climate crisis we’re we’re pretty flexible with our definition of what’s sort of in scope or not as long as we see a path towards reducing emissions. Removing carbon out of the atmosphere or supporting adaptation and resilience we’re we’re pretty flexible. Um, and we’ve had to turn companies down in the past that don’t have a strong enough climate story we had at 1 point a business applied that was doing sort of oh god what was it? ah. Like a marketplace for beach related products I think and you know like I get that that sort of coral reefs are threatened as a result of climate change I get that. Um you know, obviously like people’s ability to enjoy the beach. It. Might be impacted by climate change. But if they come to us and said hey you know all the products we sell are 0 carbon and they’re all like friendly towards its coral reef restoration and that’s like a core ethos then they would have been in scope. But if they but because they don’t have that.

Dimitry Gershenson

That to us was not a strong enough link for us to fund So We we spend you know most most of the deals we’d see are very much in scope and we you know we’ll spend time to understand those edge cases so that we can make sure we’re not missing opportunities but also to make sure that we’re like staying true to our mission. Which is to be investing in the space.

James McWalter

And one of the things you kind of mentioned a little bit earlier is you know, being quite public and transparent and you know a lot of folks. Not that many I would say on average but like there’s more and more folks who are what they call building in public right? being very open about their process being very open on their steps.

Dimitry Gershenson

Um, yeah.

26:01.26

James McWalter

Actually you’ve gone to you know a very high degree of this because I know you had a Techcrunch review your a pitch deck and so just and which I read with great interest a few months ago when I came out and I’m sure it’s been really beneficial to a lot of folks to kind of see you know how like you know, basically it’s a critique of your pitch deck.

Dimitry Gershenson

That’s right.

James McWalter

Even though it’s successful in in raising money. It still kind of demystifies. A lot of these elements and so yeah I guess was building in public like this very kind of conscious decision and I guess what are the pros and cons of you know building in that kind of way right.

Dimitry Gershenson

Yeah, yeah.

Dimitry Gershenson

You know I don’t know if we take it to the same degree that I’ve seen other folks do I know there are companies who like make their all their ah financials public through there’s like a service that can sort of link into your banking and accounting and like publish core metrics and um.

Dimitry Gershenson

We don’t We. Don’t go that far I think for us we we feel very strongly about our role as a kind of enabling community-driven player in this ecosystem and whether it’s our capital our network our lessons. We want those things to be available to entrepreneurs who are you know building solutions for climate and I think that in some ways it almost feels like it’s not a choice because the stakes are so high. And I don’t think it actually generally benefits anyone to be super like closed off in this process. The the market is insanely huge. The opportunity is is just so Vast. It’s almost incomprehensible. And so you know even if somebody showed up tomorrow doing what we do I I like I wouldn’t even be worried about I’d want to help them build their business so that we could put more more money in the hands of climate Entrepreneurs. So I think you know one of the things that is has helped us is that it.

Dimitry Gershenson

Sort of cements this brand and and shows people that we’re like we’re we’re not um, we’re We’re not our goal is not to be an extractive actor in this ecosystem but it’s to contribute and to be part of a community and to.

Dimitry Gershenson

Help other people be successful and you know just today somebody approached us for funding and we talked about their model and I was like you shouldn’t take our money like there’s better money for you out. There. Let me connect you to the people who can provide you capital. That’s more aligned with the needs of your business like we could probably make it work but but then it just It’s like not the right capital. It’s not the right structure for what you’re trying to build and I think folks should have the conversations more often like I would love to see vcs who when somebody pitches them for funding. They say oh you’re trying to raise 3000000 but you’re planning to spend 1000000 of that on marketing like.

James McWalter

Now are.

Dimitry Gershenson

Why don’t you just raise 2 and then I’ll help you find some revenue based financing for that extra million so that you’re not taking on crazy expensive dilut of capital to find your business instead. They general like oh cool, more allocation like I’ll take it. But I think if we all sort of took that alternate position I think we would. I’ll be better off.

James McWalter

Yeah, it’s so interesting I mean first on the kind of competitive point. It’s one of the wonderful aspects of being in the climate space is that how helpful everybody is and you know I’ve taken calls with competitors. You know I’ve I’ve been helpful where I can and being very open to like.

Dimitry Gershenson

Um, yeah.

James McWalter

You know, disqualifying potential users. You know if they’re not very core right? So that they can get value elsewhere is is kind of super important and you know and we kind of touch upon at the beginning and I’ve talked I think actually think to 1 or 2 um vcs I’ve had on the podcast in the the past about how there definitely is this lack. Are nearly like a missing middle of financing right? and it’s actually come up more on the project financing side where somebody’s trying to build some piece of infrastructure and they’re using you know venture-backed capital to like build something that is just incredibly expensive, right? You think about like something like a vertical farm right?? um.

Dimitry Gershenson

Event.

Dimitry Gershenson

Jeff.

James McWalter

If you’re building a vertical farm you’re building physical assets in the real world Now you might want to raise venture for your technical team and your software team to manage you know some sort of software that does a certain type of lighting and all this kind of thing but the physical hardware and the physical real estate. Um, it’s very very expensive to use equity-based.

James McWalter

Ah, financing for that and I think a lot of it’s just been you know founders have been exposed and or haven’t been the products and available to actually say okay I’m going to have a slightly more complex Capital Stack. You know 40% of it’s going to be in this bucket 30% in this bucket in the in this other bucket. Um up to now like. I Don’t think people thought in terms of like okay I might have to have a slight more complexity in order to kind of maximize the value and make sure the right book is a capital are being used for the right things.

Dimitry Gershenson

Absolutely you know it’s it’s always really interesting to me when companies spend a lot of time optimizing for their technical stack or their like organizational structure or their yeah, whatever it may be but then when they think about capital they have like a very simplistic view on what’s available how it should be used when it should be raised I can’t tell you the number of times I’ve talked to a founder and I said hey you know we think you’d be a good fit for this product and they’re like oh it’s okay, I’m I’m I’m raising venture right now and I’m like okay, but. You do know that the cost of that bench capital is like 5 x higher than what we’re what we’re offering what any like really anybody would offer for this particular use case and I think you know I think it’s okay, like it’s not It’s not founder’s fault that. In this position I think there’s a lot of sort of weird dogmatic narrative especially in the venture back startup community where like it’s like venture and venture debt. Those are the 2 products that people know and and like venture debt is this kind of like weird instrument that people sort of sometimes talk about but really, it’s about venture and you you know you you raised when you have 6 to nine months of runway and. That’s kind of like the model and it’s it’s it’s actually not geared towards the best outcomes for founders and their teams. It’s that those types of models are way more beneficial to investors who can secure greater allocation greater ownership greater control and so like.

Dimitry Gershenson

There’s nothing wrong with bench capital. You know we’re venturebacked we we have so we we love the folks that invested in us. They’ve been incredibly value additive to our process and like we’re raising around now you know there there is a role for bench capital to play but also. If we funded our entire loan book with venture capital we I don’t like I don’t know if it would even be possible like people just wouldn’t give us the money to do that. Um, and it and we would have to kind of be so be smaller and and still have to grow grow fast if it just be like a total mass and so I think that. Um, one of the things that’s been really exciting over the last few years in climate is that there’s this emergence and sort of explosion of creative financing that is slowly becoming available across the whole sort of gamut of need right? So both on the corporate and. Project finance universe um, but there’s still a lot of gaps I mean look man. You know we talked about the the $5000000000000 gap like a lot of that is actually not because money is available and it’s just not flowing. It’s that like the the products don’t necessarily even exist in the ecosystem they may exist elsewhere in in capital markets. But they’re not being applied to climate for you know, 1 reason or another and so we see a lot of opportunity there and I think other folks are starting to sort of wake up to that as well is that hey if we’re gonna if we’re actually going to try to keep us the two degree. C.

Dimitry Gershenson

And insane amount of money needs to flow into the space and it has to look very different than what it looks like today.

James McWalter

Yeah, and personally you know I think one of the big bright spots in the economy right now is everything to do with climate clean energy in particular with you know and some of the kind of carbon sequestration parts that Ira is funding or helping to ah yeah, yeah, kind of firear means that. You have a ton of traction and growth happening with certain companies but evaluations have been crushed because of the broader market. You know, maybe it’d be nice to be able to delay fundraising and that six to nine months right and so revenue-based financing enables that and it’s actually honestly something we’ll probably you know deeply consider next year we’re kind of running off to our own kind of next round and it’s great to have that as an option.

James McWalter

And again, you know the right tool for the right use and so you still kind of think through all the different options. Um, but you know we’re you’re talking a lot about kind of the opportunities on the financing Side. You’re being exposed to a lot of different types of climate companies doing a lot of cool things. What’s kind of getting you excited and also I guess where you wish there’s more innovation you know where are kind of some. Bots that are being you know I guess underutilized and smart entrepreneurs could kind of focus on it and say oh,, there’s actually a lot of kind of blue space in this particular area.

Dimitry Gershenson

So it’s funny I get this question a lot and I have like maybe the most disappointing answer I can possibly give I am so excited about all of it. We see we see companies every single day that span the gamut from.

James McWalter

That right.

Dimitry Gershenson

You know, really frontier crazy I don’t know refrigeration tack to like compost subscription businesses in major metropolitan areas and they’re equally exciting to me right? I I I see. There’s so much like innovation and growth even in this like small business space and for us the things that matter are like are you did you have you found a customer and is it working right? like like. You know we look at the financial performance of the business. Not necessarily how many tons is it going to eliminate. Not you know um, like how how exciting is the Tam. We’re like oh are you selling a thing are you are you. Doing better this year than you were last year are your are your margins. They’re cool. We can do revenue based financing or oh hey, are you did you win a big grant and you don’t want to wait like cool. We can advance against that grant and I I think for us what What’s awesome is that there’s this really incredible. Universe of entrepreneurs that are building these solutions that come from all sorts of places and all sorts of backgrounds. We prioritize investing in underrepresented founders endeavors teams and I’m proud to say that I think 80% of our portfolio conforms to our like dei criteria and.

Dimitry Gershenson

And think so a similar percentage of our sort of forward looking pipeline does and I’m just like stok to to back these people to build all sorts of different solutions from compostable diapers to you know power system Management hardware and software that. That supports grade resiliency in disasters like those those things are comparable to me in terms of excitement is that Weird. Ah.

James McWalter

And it’s it’s not and and honest see I mean well let’s that’s the inspirational bit right? like there’s there’s a role for everyone. You know, take take the pie take the things you know right? like look around the the problems you see and there’s tons of opportunities. Um, but Demetri just been brilliant. Really enjoyed it before we live. Leave off is there anything I should have asked you about but did not.

Dimitry Gershenson 

Ah, yeah, it’s a good question I mean I think maybe just to say like if people want our kind of capital where should they go. They should go to enduring planet dot com and they can just click apply now and. Put an application takes 10 minutes and they get a termm sheet in a week so if you want some founder friendly flexible, fast non diluted financing. You know where to find us.

James McWalter

Yeah, and we’re going to include in particular the link to the calculator because I think that’s a great first step when I was trying to get ah get a handle. It’s like oh this this is exactly you know you put in your a you know your monthly revenue you put in a couple other numbers and all of a sudden. It’s like okay this is the kind of range I could potentially.

Dimitry Gershenson

Um, yeah, excellent.

Dimitry Gershenson

Or yeah, perfect love that. Thank you so much you too.

James McWalter

Um, utilize and it makes a ton of sense.

James McWalter

Well thank you Dimitry Gershenson is progression.

Title: Revenue-based financing – E117

Great to chat with Dimitry Gershenson, Co-founder and CEO at Enduring Planet, Enduring Planet offers rapid financing for Climate Entrepreneurs without dilution, personal guarantees, or collateral! We discussed revenue-based financing, the pros and cons of that compared to other forms of financing, how easy is the process like and more!

https://carbotnic.com/enduringplanet

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

Calculator: https://enduringplanet.com/resources/calculator 

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 Dmitry Gershenson co-founder and Ceo at Enduring Planet welcome to the podcast Dimitry great to start. Could you tell us a little bit about enduring planet.

Dimitry Gershenson

Thanks so much for having me James.

Dimitry Gershenson

Sure we provide fast flexible and founder friendly credit products to small businesses and startups that are working to address the climate crisis. So today we offer 2 Non-dilluted funding instruments 1 is a revenuebased financing product for sort of early revenue companies typically in they’ll like you know call it sub ten million a year in revenue range and then we also recently launched a new product to help folks. Ah, bridge the often long timing delays and state or federal grant funding in climate. So we’ll we’ll advance capital against you know state or federal grant funds that have been announced without necessarily dispersed and over time we’ll be adding additional.

Dimitry Gershenson

Credit products. We want to really have a full suite of non dilutive financing options for climate entrepreneurs from basically inception to Ipo.

James McWalter

What And what drove the initial decision to start enduring planet and.

Dimitry Gershenson

Oh man. Ah I think this has been a really long time coming for my co-founder and I we’ve both worked in in climate and catalytic finance. In fact, investing and credit kind of all the things that touch our work today. We’ve been. Doing those things independently for give or take a decade each and I had an opportunity to build a startup out of a venture studio last year a group called during ventures that I’d been working with for a little while and. Sort of presented me this opportunity and I I think I’d always really wanted to build this this business. The the capital gap in climate is is not nearly as often discussed as some of the other elements of the crisis right? So folks talk a lot about carbon removal They talk a lot about carbon offsets they talk a lot about you know tech that needs to be built etc. But I feel like the money side of the problem is not as sexy. That’s fine, but we need about five trillion a year in investment to actually get to two degree c we. Last by last count. It was like less than seven hundred billion that was invested so that’s an almost eight x increase that’s required and the credit side of that capital stack is dramatically like under. It’s just it’s just not happening and so weed up.

Dimitry Gershenson

Whole host of creative flexible like founder Friendly capital instruments in order for this transition to happen in a way that like reduces harm to you know, vulnerable people and really everyone and so we wanted to put a dent in that.

James McWalter

And as you’re thinking through like this scope and scale the problem and yeah, immediately when I hear trillions right? like these are exciting big Tam numbers and so on how do you start to think through what the you know the first set of customers might look like who should you service right? because.

James McWalter

You know it’s always the difficulty when you have these very very large opportunities. It’s like what is our kind of wedge into that opportunity and.

Dimitry Gershenson

Sure? Yeah I think it for us. You know we started with this kind of early revenue buckets or revenue based financing was our first product it in many ways was an ideal first product because it lends itself. Best to automation. Um. You you sort of if you look at the historical kind of alternative financing alternative credit landscape. There’s a lot of rbf lenders in ecommerce and saas and we thought the model would actually apply really well in the context of climate and it would also allow us to. Explore lending to both startups and small businesses which have very unique. They’re often look very different both in terms of the revenue trajectory but also in terms of the systems they use how they manage their accounting etc like there’s there’s a lot of what’s the word I’m looking for There’s just a lot of variability and so the revenue based financing was kind of an an attractive entry point and that meant that you know because we’re sort of on the initial portfolio we have ah a higher end cap on how much money we’re willing to put into any individual company because we don’t want to get overexposed and so. What that means is that we sort of artificially limited our initial customer pool to this sort of folks who have you know north of half a million in trailing twelve month revenue but less than call it 5 to 10000000 in trailing twelve month revenue and

James McWalter

Ah, yeah, yeah.

James McWalter

Yeah, and I’d love to just kind of get into some of the specifics around revenue-based financing you know I think a lot of the listeners will be familiar with traditional venture. They’ll be yeah familiar with even a lot of startups have founded themselves just with.

Dimitry Gershenson

Yeah, go ahead.

Dimitry Gershenson

Sure.

James McWalter

Too many credit cards or you know, ah kind of ah a quick personal loan. Whatever it is just to get something up and running and there’s been a kind of growth in revenue financing one of the big companies pipe and some of these folks have kind of emerged in the last few years so yeah so I’d love to kind of just you know understand a little bit more about revenue financing as a model and. You know the pros and cons of that compared to some other you know, maybe more common forms of financing and.

Dimitry Gershenson

Sure so I think maybe at first you got to split the capital available to entrepreneurs into two buckets diluted versus not so dilutive instruments. That’s you know your equity. Um, some debt can also be diluted because it has warrants or conversion principles that you have to sort of account for um, but that’s that bucket and then in the non-d diluto bucket. You have grants and you have debt those are the only types of capital there are and revenue based financing is a type of debt. It’s just not structured the way that. Think what most folks think of when they think debt base sort of imagine term loans where you sort of pay interest. You have principal payments if you miss payments you’re in default and gets really painful. Well revenue based financing takes a different approach to lending and so. In in our case, we provide a company capital and they give us a fixed percentage of revenue for an estimated term that allows us to like hit our our target returns we actually publish our term sheet on our website. So anybody who is interested in our capital can actually see. All of the dynamics of the product before they even apply. Um, and you know typically we’re lending sort of like less than half a million on the first go around that number will go up next year once we have a larger capital facility ourselves. But today we’re lending up to half a million

Dimitry Gershenson

Generally in exchange for anywhere from like 3 to 7% of top line revenue and typically it’s on like an estimated two year term. So now that capital that comes with with no collateral requirements. No personal guarantee requirements. There are no warrants. There’s no conversion There’s no complicated covenants. It’s like really simple, really fast. It’s you know is it more expensive than a traditional bank loan sure but the bank you know will take your personal. Assets as collateral in case, there’s a default and so if your business goes down the toilet your house is going with it and in our case, we will. We will never do that.

James McWalter

Right? And and even you know even besides those folks who have a house to to lose you know often Banks just won’t engage in technical startups Anyways, right? because they won’t really they already have the prism of what the kind of assets that those kind of companies are building until they’re quite large.

Dimitry Gershenson

That’s right, That’s right.

Dimitry Gershenson

Yeah I mean I think in general banks won’t lend unless there’s yeah 3 years of trailing revenue history. There’s a lot of collateral and even then they still want a personal guarantee and often those.

James McWalter

Have yeah.

Dimitry Gershenson

Multiple factors are like very difficult for a startup or a small business to achieve because even if you’re like you can be profitable and have a lot of history of of performance. But if you go to a bank and you have no collateral on your business balance sheet that you can put up in in order to secure the loan. They generally won’t do it unless you’re very large.

James McWalter

And as I think about yeah, where revenue-based financing might be suitable or not I’d imagine you you have both the type of company in terms of you know what? what’s their product and you know are they climate of course and not E to your your business but then also the business model of the company itself you know are there more.

Dimitry Gershenson

Um, yeah.

James McWalter

Are some business models more suitable for this kind of financing than others right.

Dimitry Gershenson

Sure, yeah, so for for revenue based financing. We typically look at one of sort of 4 models. 1 is pure software so typically Sas another is small. Or smaller hardware where there’s like a higher frequency of purchase and so there’s consistent growing revenue over time and there’s typically higher gross margins because we generally want to see about ah ah at least a 35% gross margin in order for us to do our behalf. Um.

Dimitry Gershenson

We’ll look at recurring services businesses or or services businesses with repeat purchases where maybe they don’t have a long-term contract but the same customers keep coming back and showing that there’s like repeat value and then we’ll also look at a hybrid model of any one of those 3 and so we. You know we kind of push the boundaries of where people historically have applied revenue based financing I think if you look at most of the other alternative finance players in the market they generally stick to saas some of them will do recurring services most of them won’t do hardware and and I think you know to some degree that’s been driven by. A lot of assumptions and sort of concerns about macro risks that in our case, we think climate creates a very unique sort of market opportunity where demand. At ah at a market level from consumers, enterprises, corporates, governments, etc. We kind of only go in one direction and there’s a lot of secondary factors that drive positive trends in the market including you know government incentives things like the ira etc which like don’t. Necessarily exist if you lend across Saas or if you lend an ecommerce and so that’s why we’re we’re comfortable, kind of pushing the bounds and and testing this model out with with businesses that often don’t look like what others will necessarily revenue base finance.

James McWalter

Exactly.

Dimitry Gershenson

Um, you know with our grant advance products we those restrictions don’t apply. We’re very comfortable advancing against grants regardless of the business model as long as it’s in climate and those grants are coming from State or federal sources.

James McWalter

And and just on that I actually have a little bit of personal experience. Um on you know the grant problem so a few years ago. A good friend of mine was involved in an arpe e soil carbon grant it was a 7 figure Grant and they wouldn’t get it for nine months and so they you know are trying to take this particular type of so science and and convert it it into a product right? that is something they can build. It was a piece of hardware. Um, and they had to raise and they went out and they raised a seed and basically it was a very um derisk seed from the seed. Investor’s point of view right.

Dimitry Gershenson

Um, yeah.

James McWalter

Could literally point to there’s going to be a couple million dollars coming into this company in nine months but they needed working capital right? because they didn’t you know the government was slower than startups right? So they needed to kind of get ahead. Want to start building the prototype and all that kind of thing. Um, and so I guess like compared to the type of work that you’re doing.

Dimitry Gershenson

Um, right.

James McWalter

Um, you’re eliminating that early dilution if you if you can avoid it at all.

Dimitry Gershenson

Oh yeah I mean it’s this is like a very common refrain that we hear is that folks will you know they’ll win a Doe Grant Usda grant california energy commission niceerta you name it, you pick an agency and most of them will tell you you’re getting the money. Somewhere in that 6 to nine month range before they actually start reimbursing you for expenses against the grant and that time is really painful and to your point folks will often go and raise equity. Which at that stage is incredibly expensive capital I mean it’s like 10 x more expensive than I think our grand advance on an effective irr basis because folks are you know they’re often getting sort of presee or see prices and they’re expecting a I don’t know hundred x return if they’re vtting at that stage. And so our our terms are very very different and in many ways we’re offering folks a product that I don’t I don’t think anybody else offers today and we’re pretty excited about the response we’re getting from the market.

James McWalter

Why do why? doesn’t it exist. It is actually shocking when because I saw ah you mentioned this you know I follow you of course on Twitter and um I think it was only a few weeks ago when when this is announced and I was like of course like like I literally had this conversation with my friend who was going through this whole thing about a year and a half ago and it never even.

Dimitry Gershenson

Right.

James McWalter

Kind of occurred to us that there was somebody who was doing an upfront loan like immediately both of our minds went to venture right? like that was the default because we didn’t even consider it but it seems just with the amount of money not just in the United States but around the world going into various grant programs. Not just for climate. But for ah other kind of applications.

Dimitry Gershenson

Right.

James McWalter

You know it’s surprising when you have literally a commitment of capital from the government in a sub one year period that no ah other financial institution has taken advantage to that.

Dimitry Gershenson

I I agree we’ve seen we’ve seen sort of boutique Lenders. Do this in limited context but and and and there are folks who do this with certain um tax incentives. So Like. There’s a group that that advances against R and D Tax credits that we’ve seen. But yeah, we’ve never we’ve never seen folks doing this at scale lending against state or Federal Grant funds especially in climate and so yeah I mean look the the opportunity is so vague that. I I would be I would welcome A many folks doesn’t want to come in and do this I think just in the Us It’s north at 30000000000 a year in funds that are dispersed through these mechanisms based on you know our conversations with folks who write these grants manage these grants et cetera and that’s ah, that’s a pretty.

James McWalter

Structure.

Dimitry Gershenson

Large amount.

James McWalter

And you know you have these 2 products now out what does it take to get a financial product live right? It’s you know finance I think it can be often complex people or at least from the outside you hear words like underwriting and like all these different things. You know what What’s the process from going to like. You know, look. We have this c climate round advance just because I’m naming it because it’s the more recent innovation but going from that as an idea through to it going live you know who are the kinds of people that you either have to have your your team or consult with to get to that stage.

Dimitry Gershenson

Um, yeah.

Dimitry Gershenson

So that’s a good question I think there’s a lot of pieces to this right one is that you need to actually have the permission to lend. So maybe we’ll start with compliance. You know these aren’t necessarily in in this order but these are like the key pillars right? so.

James McWalter

And.

Dimitry Gershenson

Need to be able to lend in a lot of the us commercial lending isn’t super regulated as long as you have like a signed contract in place most states allow business to be into business lending without much regulation. There are exceptions the state of California is one. We’re a licensed lender in the state of California that process took a long time is like a very long and painful process which ah it was just under a year I think um.

James McWalter

Yeah, are we saying over year or like just what’s long.

Dimitry Gershenson

Maybe a little less than that. Um, the thing is like you know it kind of depends on where you’re at you can you can technically do 1 or 2 loans in California business to business before you apply for your lending license and if you’ve done transactions. Ah, process is actually longer because they they sort of dig into those as well as the track record of the people who own the business. The people who run the business etc. There’s like a very large amount of diligence that’s done by the ah you know the sort of financial protection agency there. Um, so that’s compliance 2 you you know you need a team that can actually do underwriting who can understand sort of risk in ah in the context of credit who can understand where can a transaction break down with the grant advance. We spent a bit of time talking to um.

Dimitry Gershenson

I Mean one we sort of structured it internally and then we talked to a number of experts externally to sort of nail down the dynamics of the product because there’s there’s a lot of intentionality behind how the fees are charged and when and and sort of how the structure works and then um, you know you have to do ah a pilot transaction.

Dimitry Gershenson

Typically with capital off your balance sheets. You have to take some personal Well personal corporate risk to prove that the product is investible, um and and then you know if you have an outside credit facility. Ah you know or an outside fund or whatever where you have.

James McWalter

Yeah.

Dimitry Gershenson

External investors you have to convince them that that this is a product worth investing with under the mandate that you already have and so in our case, you know we we did 2 pilot deals and then we went to our investors for our first debt facility and we said hey we’d like to incorporate this product into our lending and they all. It’s unanimously approved and then and then we rolled it out. Um, so you know I I would say it was like ah at least a six month process from kind of start to making it public. Um, but there was actually quite a lot of work that happened before that.

Dimitry Gershenson

Where you know we we sort of understood the market. We did the homework we talked to entrepreneurs we tried to understand sort of where people where people’s comforts levels are around pricing and structure and what they what do they actually need in this product and you know frankly I wouldn’t be surprised if in six nine twelve months our grant advance looks very different.

James McWalter

But.

James McWalter

I and I guess that kind of goes to this quarithos I was reading on your website like 1 of the values of during planet is to be very kind of founder first and this is something.

Dimitry Gershenson

And it does today because we’re constantly getting feedback on how we can improve it.

James McWalter

That you know but bo you and I we have raised venture for our our current startups and a lot of people in the venture side right? Everyone’s founder first right? Um, so I guess how do you about you know, making sure that that value is kind of en shr in yeah, the products in the company you’re building.

Dimitry Gershenson

Yeah, yeah.

Dimitry Gershenson

So we I mean we think about the the sort of the impact on on founders and and teams at every step of that sort of customer experience. So one is we have I would say pretty radical transparency when it comes to how we lend and. And what our instruments look like and what the process will look like with revenue based financing. We even built a tool that allows folks to estimate how much money they could raise from us before they even apply they don’t have to like sign up for any marketing. They don’t have to do anything weird. They can just play around with a calculator. Um. We also make the application itself very short and very simple so it takes about 10 minutes to apply for funding with us. It’s I would argue pretty effortless and then we also you know, spend a lot of time thinking about. How we communicate and negotiate throughout the the actual loan process. So once somebody’s applied generally they can expect to see a term she you within a week which is pretty fast that and that time is going to get much shorter as we sort of enshrine some of the automation we’ve been building over the last twelve months and we also are very clear about what we’re looking for and what we need and what’s missing I think a lot of the time you know as you and I probably both experienced raising money when you raise from vcs there is no incentive for good communication and.

Dimitry Gershenson

What it means is that often you will pitch someone and this won’t follow up or they’ll follow up at a random time or they’ll wait for you to get a lead or like you know they might turn you down but they won’t tell you why there’s like all these things that happen when you’re raising venture. Where in our case, we just don’t do that. So if you if you are not a fitter for our financing. We tell you exactly why we set up check-ins to make sure that we are aware of when you hit the mostones that we need to see for you to be sort of investible and like you know we we spend a lot of time. Making sure that founders have a good experience raising money from us and then beyond that we’ve built a pretty robust network like a pretty pretty big community of folks that bring additional value to the companies that we engage with even if they’re not our portfolio Businesses. So.

James McWalter

Yeah.

Dimitry Gershenson

We have a network of over two hundred and fifty vcs so we shared deal flow with and we will connect founders to those vcs whether their portfolio companies ours or not obviously the referral looks different if it’s somebody. We’re invested in but we’re we’re very open to make the introductions and.

Dimitry Gershenson

We’ve also have a network like I think close to 40 partners now that offer discounted services to climate entrepreneurs around pitch Deck design. Yeah fractional cfo bookkeeping and accounting Grant writing you name it. We probably have a resource for you and we’re very Like. We’re not shy about sharing those resources in in our mind climate entrepreneurs should have capital to build the solutions that they’re building at the pace that they are able to absorb that capital whether it’s our money or not because the the world’s on fire.

James McWalter

You Ah absolutely and within that though you also have ah which you might be finding. Ah you know non-climate companies. Did they ever approach you because.

Dimitry Gershenson

We don’t have time to fuck around.

James McWalter

1 of the things we are having um in my own company is. We’ve had some data centers and I won’t get into details of of our own product and my kind of day job startup. But yeah, we had data centers and you know cannabis farms and all these kind of things um, try to use our product and.

Dimitry Gershenson

Sure.

James McWalter

Um, I’m like oh do use renewable energy right? I Do you have some sort of climate peace and and they don’t and so in that case, we actually don’t We won’t work with them as customers um have you had anybody come in and you know say hey you know this this house sounds great. But yeah, we’re not really doing anything in the climate you know, will you make an exception and I guess how do you evaluate that? yeah.

Dimitry Gershenson

Ah, we you know it’s interesting. So our our application form sort of limits. People’s ability to apply unless they can define a climate narrative if if. If we don’t see it. We’ll often. That’s the first check is like hey can you help us understand how you are driving impact around the climate crisis we’re we’re pretty flexible with our definition of what’s sort of in scope or not as long as we see a path towards reducing emissions. Removing carbon out of the atmosphere or supporting adaptation and resilience we’re we’re pretty flexible. Um, and we’ve had to turn companies down in the past that don’t have a strong enough climate story we had at 1 point a business applied that was doing sort of oh god what was it? ah. Like a marketplace for beach related products I think and you know like I get that that sort of coral reefs are threatened as a result of climate change I get that. Um you know, obviously like people’s ability to enjoy the beach. It. Might be impacted by climate change. But if they come to us and said hey you know all the products we sell are 0 carbon and they’re all like friendly towards its coral reef restoration and that’s like a core ethos then they would have been in scope. But if they but because they don’t have that.

Dimitry Gershenson

That to us was not a strong enough link for us to fund So We we spend you know most most of the deals we’d see are very much in scope and we you know we’ll spend time to understand those edge cases so that we can make sure we’re not missing opportunities but also to make sure that we’re like staying true to our mission. Which is to be investing in the space.

James McWalter

And one of the things you kind of mentioned a little bit earlier is you know, being quite public and transparent and you know a lot of folks. Not that many I would say on average but like there’s more and more folks who are what they call building in public right? being very open about their process being very open on their steps.

Dimitry Gershenson

Um, yeah.

26:01.26

James McWalter

Actually you’ve gone to you know a very high degree of this because I know you had a Techcrunch review your a pitch deck and so just and which I read with great interest a few months ago when I came out and I’m sure it’s been really beneficial to a lot of folks to kind of see you know how like you know, basically it’s a critique of your pitch deck.

Dimitry Gershenson

That’s right.

James McWalter

Even though it’s successful in in raising money. It still kind of demystifies. A lot of these elements and so yeah I guess was building in public like this very kind of conscious decision and I guess what are the pros and cons of you know building in that kind of way right.

Dimitry Gershenson

Yeah, yeah.

Dimitry Gershenson

You know I don’t know if we take it to the same degree that I’ve seen other folks do I know there are companies who like make their all their ah financials public through there’s like a service that can sort of link into your banking and accounting and like publish core metrics and um.

Dimitry Gershenson

We don’t We. Don’t go that far I think for us we we feel very strongly about our role as a kind of enabling community-driven player in this ecosystem and whether it’s our capital our network our lessons. We want those things to be available to entrepreneurs who are you know building solutions for climate and I think that in some ways it almost feels like it’s not a choice because the stakes are so high. And I don’t think it actually generally benefits anyone to be super like closed off in this process. The the market is insanely huge. The opportunity is is just so Vast. It’s almost incomprehensible. And so you know even if somebody showed up tomorrow doing what we do I I like I wouldn’t even be worried about I’d want to help them build their business so that we could put more more money in the hands of climate Entrepreneurs. So I think you know one of the things that is has helped us is that it.

Dimitry Gershenson

Sort of cements this brand and and shows people that we’re like we’re we’re not um, we’re We’re not our goal is not to be an extractive actor in this ecosystem but it’s to contribute and to be part of a community and to.

Dimitry Gershenson

Help other people be successful and you know just today somebody approached us for funding and we talked about their model and I was like you shouldn’t take our money like there’s better money for you out. There. Let me connect you to the people who can provide you capital. That’s more aligned with the needs of your business like we could probably make it work but but then it just It’s like not the right capital. It’s not the right structure for what you’re trying to build and I think folks should have the conversations more often like I would love to see vcs who when somebody pitches them for funding. They say oh you’re trying to raise 3000000 but you’re planning to spend 1000000 of that on marketing like.

James McWalter

Now are.

Dimitry Gershenson

Why don’t you just raise 2 and then I’ll help you find some revenue based financing for that extra million so that you’re not taking on crazy expensive dilut of capital to find your business instead. They general like oh cool, more allocation like I’ll take it. But I think if we all sort of took that alternate position I think we would. I’ll be better off.

James McWalter

Yeah, it’s so interesting I mean first on the kind of competitive point. It’s one of the wonderful aspects of being in the climate space is that how helpful everybody is and you know I’ve taken calls with competitors. You know I’ve I’ve been helpful where I can and being very open to like.

Dimitry Gershenson

Um, yeah.

James McWalter

You know, disqualifying potential users. You know if they’re not very core right? So that they can get value elsewhere is is kind of super important and you know and we kind of touch upon at the beginning and I’ve talked I think actually think to 1 or 2 um vcs I’ve had on the podcast in the the past about how there definitely is this lack. Are nearly like a missing middle of financing right? and it’s actually come up more on the project financing side where somebody’s trying to build some piece of infrastructure and they’re using you know venture-backed capital to like build something that is just incredibly expensive, right? You think about like something like a vertical farm right?? um.

Dimitry Gershenson

Event.

Dimitry Gershenson

Jeff.

James McWalter

If you’re building a vertical farm you’re building physical assets in the real world Now you might want to raise venture for your technical team and your software team to manage you know some sort of software that does a certain type of lighting and all this kind of thing but the physical hardware and the physical real estate. Um, it’s very very expensive to use equity-based.

James McWalter

Ah, financing for that and I think a lot of it’s just been you know founders have been exposed and or haven’t been the products and available to actually say okay I’m going to have a slightly more complex Capital Stack. You know 40% of it’s going to be in this bucket 30% in this bucket in the in this other bucket. Um up to now like. I Don’t think people thought in terms of like okay I might have to have a slight more complexity in order to kind of maximize the value and make sure the right book is a capital are being used for the right things.

Dimitry Gershenson

Absolutely you know it’s it’s always really interesting to me when companies spend a lot of time optimizing for their technical stack or their like organizational structure or their yeah, whatever it may be but then when they think about capital they have like a very simplistic view on what’s available how it should be used when it should be raised I can’t tell you the number of times I’ve talked to a founder and I said hey you know we think you’d be a good fit for this product and they’re like oh it’s okay, I’m I’m I’m raising venture right now and I’m like okay, but. You do know that the cost of that bench capital is like 5 x higher than what we’re what we’re offering what any like really anybody would offer for this particular use case and I think you know I think it’s okay, like it’s not It’s not founder’s fault that. In this position I think there’s a lot of sort of weird dogmatic narrative especially in the venture back startup community where like it’s like venture and venture debt. Those are the 2 products that people know and and like venture debt is this kind of like weird instrument that people sort of sometimes talk about but really, it’s about venture and you you know you you raised when you have 6 to nine months of runway and. That’s kind of like the model and it’s it’s it’s actually not geared towards the best outcomes for founders and their teams. It’s that those types of models are way more beneficial to investors who can secure greater allocation greater ownership greater control and so like.

Dimitry Gershenson

There’s nothing wrong with bench capital. You know we’re venturebacked we we have so we we love the folks that invested in us. They’ve been incredibly value additive to our process and like we’re raising around now you know there there is a role for bench capital to play but also. If we funded our entire loan book with venture capital we I don’t like I don’t know if it would even be possible like people just wouldn’t give us the money to do that. Um, and it and we would have to kind of be so be smaller and and still have to grow grow fast if it just be like a total mass and so I think that. Um, one of the things that’s been really exciting over the last few years in climate is that there’s this emergence and sort of explosion of creative financing that is slowly becoming available across the whole sort of gamut of need right? So both on the corporate and. Project finance universe um, but there’s still a lot of gaps I mean look man. You know we talked about the the $5000000000000 gap like a lot of that is actually not because money is available and it’s just not flowing. It’s that like the the products don’t necessarily even exist in the ecosystem they may exist elsewhere in in capital markets. But they’re not being applied to climate for you know, 1 reason or another and so we see a lot of opportunity there and I think other folks are starting to sort of wake up to that as well is that hey if we’re gonna if we’re actually going to try to keep us the two degree. C.

Dimitry Gershenson

And insane amount of money needs to flow into the space and it has to look very different than what it looks like today.

James McWalter

Yeah, and personally you know I think one of the big bright spots in the economy right now is everything to do with climate clean energy in particular with you know and some of the kind of carbon sequestration parts that Ira is funding or helping to ah yeah, yeah, kind of firear means that. You have a ton of traction and growth happening with certain companies but evaluations have been crushed because of the broader market. You know, maybe it’d be nice to be able to delay fundraising and that six to nine months right and so revenue-based financing enables that and it’s actually honestly something we’ll probably you know deeply consider next year we’re kind of running off to our own kind of next round and it’s great to have that as an option.

James McWalter

And again, you know the right tool for the right use and so you still kind of think through all the different options. Um, but you know we’re you’re talking a lot about kind of the opportunities on the financing Side. You’re being exposed to a lot of different types of climate companies doing a lot of cool things. What’s kind of getting you excited and also I guess where you wish there’s more innovation you know where are kind of some. Bots that are being you know I guess underutilized and smart entrepreneurs could kind of focus on it and say oh,, there’s actually a lot of kind of blue space in this particular area.

Dimitry Gershenson

So it’s funny I get this question a lot and I have like maybe the most disappointing answer I can possibly give I am so excited about all of it. We see we see companies every single day that span the gamut from.

James McWalter

That right.

Dimitry Gershenson

You know, really frontier crazy I don’t know refrigeration tack to like compost subscription businesses in major metropolitan areas and they’re equally exciting to me right? I I I see. There’s so much like innovation and growth even in this like small business space and for us the things that matter are like are you did you have you found a customer and is it working right? like like. You know we look at the financial performance of the business. Not necessarily how many tons is it going to eliminate. Not you know um, like how how exciting is the Tam. We’re like oh are you selling a thing are you are you. Doing better this year than you were last year are your are your margins. They’re cool. We can do revenue based financing or oh hey, are you did you win a big grant and you don’t want to wait like cool. We can advance against that grant and I I think for us what What’s awesome is that there’s this really incredible. Universe of entrepreneurs that are building these solutions that come from all sorts of places and all sorts of backgrounds. We prioritize investing in underrepresented founders endeavors teams and I’m proud to say that I think 80% of our portfolio conforms to our like dei criteria and.

Dimitry Gershenson

And think so a similar percentage of our sort of forward looking pipeline does and I’m just like stok to to back these people to build all sorts of different solutions from compostable diapers to you know power system Management hardware and software that. That supports grade resiliency in disasters like those those things are comparable to me in terms of excitement is that Weird. Ah.

James McWalter

And it’s it’s not and and honest see I mean well let’s that’s the inspirational bit right? like there’s there’s a role for everyone. You know, take take the pie take the things you know right? like look around the the problems you see and there’s tons of opportunities. Um, but Demetri just been brilliant. Really enjoyed it before we live. Leave off is there anything I should have asked you about but did not.

Dimitry Gershenson 

Ah, yeah, it’s a good question I mean I think maybe just to say like if people want our kind of capital where should they go. They should go to enduring planet dot com and they can just click apply now and. Put an application takes 10 minutes and they get a termm sheet in a week so if you want some founder friendly flexible, fast non diluted financing. You know where to find us.

James McWalter

Yeah, and we’re going to include in particular the link to the calculator because I think that’s a great first step when I was trying to get ah get a handle. It’s like oh this this is exactly you know you put in your a you know your monthly revenue you put in a couple other numbers and all of a sudden. It’s like okay this is the kind of range I could potentially.

Dimitry Gershenson

Um, yeah, excellent.

Dimitry Gershenson

Or yeah, perfect love that. Thank you so much you too.

James McWalter

Um, utilize and it makes a ton of sense.

James McWalter

Well thank you Dimitry Gershenson is progression.

Becoming a Solar Developer – E116

Great to chat with Tim Montague, Solar Developer, NABCEP trainer and host of the Clean Power Hour podcast! The Clean Power Hour is a weekly news roundup of the latest solar, wind, storage and energy transition news! We discussed how Tim become a solar project developer, the challenges in developing solar projects, community solar and more! 

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

www.cleanpowerhour.com

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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 joined by Tim Montague solar developer and host of the clean power hour podcast welcome to our podcast Tim! brilliant.

Tim Montague

Thanks James. It’s great to be here.

James McWalter

Sir would love to hear how you ended up becoming a solar developer.

Tim Montague

I grew up in the small city of Albuquerque New Mexico and my dad was a professor at the University Of New Mexico he taught environmental studies and we were doing backyard solar thermal meaning making hot water from sunlight. Was a thing back in the seventy s eighty s and 90 S Pv was hardly on the scene because it was very expensive pv was invented in the 50 s but it didn’t go mainstream and literally until the early 2000 so fast forward I was doing sustainability consulting. In the twenty ten s and was casting about for my next big thing and a canadian named paul was kind enough to cold call me on a saturday morning and said hey we’ve reached grid parody and what that means is that solar.

James McWalter

Man.

Tim Montague

Is now cost competitiveive with other sources of energy and that was in 2 sixteen I dove in with both feet I was primed for a career in clean energy and shortly thereafter I Found a a great solar installlar called Continental Energy Solutions. And I became the head of business development for continental selling and developing commercial solar projects so that was that was the long and short of it. But it was a homecoming you know sustainability is in my blood I was an ecologist by training both bachelors and masters and had never. Ah, really found traction until I started doing green business consulting I’m a business guy. That’s the bulk of my career is doing B Two B Sales marketing and consulting and so solar just brings it all together.

James McWalter

I yeah so interesting I mean if I think about my own kind of journey to here so much can be pointed back to the fact that the farm I was growing up on converted to organic farming in the late 90 s and that was like a point of like oh you know we actually do have to be better stewards of of the land had to be better stewards of. Environment more generally and you know even though I didn’t end up working on anything with a climate impact until the last year or so that was always kind of there in the background and so it’s fascinating how these kind of know elements of our um of our upbringing kind of affect us. But I guess you know diving into that when that you got that phone call you know going from there and you know making a decision to kind of. You know change career directions and so on. Um, what? What would the the kind of next you know, let’s say 6 to 18 months like what? what were the kind of learnings you have to do because one of the things I think we’re going to see particularly post-ira is a lot of folks trying to come into the industry become so developers and so on. And so yeah, how did you kind of optimize your own learning in that time. Yeah.

Tim Montague

Yeah, and and I love this question because I help dozens and dozens of people get into the solar industry and I want to help more. So if you’re listening to this and you’re interested in clean energy in the energy transition in any aspect of it whether that’s electric. You know electrification of transportation or making food systems more sustainable but obviously also solar wind and battery storage where I’m quite an expert I am a very curious person I love technology I love entrepreneurship I had worked as a business advisor. Ah, my local small business development center working with technology entrepreneurs. So I just I love that nexus of of technology and business and now sustainability and so pv while I had a lot to learn. About like construction and what are the components of a solar array and how do you discern the good. The bad from the ugly in terms of those products and how do you qualify a commercial solar project I had to learn that truly even though I knew a lot about b two b sales. I didn’t know a lot about selling projects that were you know these are projects that are $50000 at the very small end to 5000000 or even more maybe $10000000 in the c and I and small utility solar space and.

Tim Montague

So I had a ton to learn and I just dove in with both feet. Of course I had colleagues I was working with a gentleman named Brian Howe whose shoulders I stand on he was the president of the Illinois solar energy association and the president of continental energy solutions and i. Then worked very closely with a cadre of project managers at continental and then started networking like a mad dog with other solar professionals and other energy professionals I had actually gotten involved with Illinois solar energy association several years before when I was doing corporate relations for. The notoart nature museum which is a a well-known institution on the on the north side the near north side of Chicago they had a rooftop solar array and I hosted a meeting of isia at the at our facility. So I had an interest in in clean energy and was. Was gathering bits and pieces and and building a network and I still have many of those contacts that I made back that was back in like 2005 and now you know fast forward and the the industry is just exploding so I was an early adopter. And but it pays to be curious. It pays to be outgoing or take the risk of of stepping out of your comfort zone so to speak right? because I had never sold a solar project and then I was the head of business development for a oh you know about $100000000 business at the time and.

Tim Montague

Ah, you know it’s sink orwin but but I was well suited to the job and and I love working with business owners. You know, helping them reduce their ah cost of energy. That’s the bottom dollar for you know that is the impact that solar makes you reduce your energy bill with a rooftop or ground mountund solar array that that plugs into your facility.

James McWalter

Events.

Tim Montague

And that’s a feelgood right? because we’re greening the grid we’re reducing air pollution and we’re saving money which then can be used for other things like R and D or hiring So. There’s no one single path right for any particular career in clean energy. But it starts with being curious and then finding those organizations those networks and those nodes I Like to think of people and organizations as nodes and each node will then be a connector for you to many other nodes.

James McWalter

No, that that makes a ton of sense and there’s a phrase. Ah a friend of mine uses. You know you have to try to maximize serendipity right? You know like things don’t always come to you. It’s often good to try to find yourself and in yeah, in the middle of a node or try to build that yourself where all of a sudden people are connecting to you and you know I think. But of us do that individually with our own podcasts. Um I’ve done that with you know, events and and groups that I’ve run over the years and but if I think about like the business development side of things right? There’s actually a lot of you know I guess buying and selling within the energy space and at the different layers and you mentioned the kind of business owners that you were you know selling to um, what was kind of a. Ah, typical provo of of a customer and how has that change and not just in terms of maybe the profile of the customer over the years but also what they care about.

Tim Montague

1 of my favorite projects is a project called Simmons Knife S I M M O N S Simmons knife and they make knife blades for the food processing industry and for the furniture industry and this is a multi-generational family business. Have about a fifty Thousand Square Foot facility I made a small video about the project and I interviewed the Ceo on my podcast so this is not sensitive information. They’re they’re in the wild about them going solar and ah but they were. Um, you know they were intrigued by the opportunity to make their facility more sustainable. We were able to offset about 70% of their electrical load with a rooftop array. So the facility is constrained right? The roof wasn’t quite big enough to put a new array on to put a. A big enough array on to offset 100 % of their load but they were very particular about this about trying to achieve the greatest impact possible and and there are some subtle things about solar that that you have to tweak in this case. We used five degree tilt panels versus 10 degree and the difference is that you can squeeze more solar panels onto a roof by doing ° so it’s it’s a slightly lower degree tilt array and that way you can smash it smash more solar in and get more solar kwh out.

Tim Montague

And and this was just very interesting, right? that they were very clear at the get go and it was it was it was the the typical leadership team is the c-suite so we had the Ceo the Cfo the Ceo and the facility manager and and they were very aligned. Of course they were. They were you know following a charismatic. Leader Colin Murphy is his name and it was just they were just very clear that we want to be become more sustainable and we want to do something that’s good for our bottom dollar but also good for our employees and our other stakeholders meaning their customers right? So when you make saw blades. With clean green electricity. That’s a more sustainable product and so they’re greening their entire value chain and and becoming a leader in their you know in their ecosystem and and in their sphere of influence and showing others that hey this matters and this is an opportunity for you. You know. I almost never lead with sustainability because only about 1 in 10 business owners or leaders truly cares about sustainability and I’m not blaming them. You know you have to be very concerned with your bottom line as a business owner. It’s nontrivial to be profitable. And to be sustainable meaning to maintain your growth year over year and that involves you know, r and d and expansion and facilities and hiring and firing and running a business is complicated and then to layer on this this goal of well let’s become more sustainable that can be.

Tim Montague

Quite a journey but like luckily you know solar is not the most complicated thing in the world. It’s black panels that sit on your roof or on your field or on your parking lot and they make electricity from sunlight and then you’re just reducing your consumption from the grid so that was. That was kind of the long and short of it with Simmons life and they were just a model customer and my all time favorite to date.

James McWalter

Yeah I think absolutely the this tradeoff right between why I guess some people might get into specific industries. You know that that drive from the kind of conservation point of view. But then so these are all businesses and it was interesting like you didn’t get that phone call until the cost parodity. Had happened and now you know solar panels are in many parts of the world. The cheapest form of electricity generation that you can install and so that is what’s enabling. Yeah, the kind of dramatic distribution of these assets and building of these assets like you know incentives and things like inflation production act. These are all very very powerful ways of. Continuing to push things along, but it’s the actual cost curves coming down so quickly. That’s actually enabled um you know businesses to make profit building these things and then the customers to see that there is actual you know financial regions and to engage in it. But I guess like when you’re kind of think working through that particular project or other projects you know and I think this does very. Whether it’s ground-mounted or roof-mounted. What are some typical hurdles that you have to overcome and you know your kind of approach overcoming those hurdles change over the years

Tim Montague

Developing solar projects is not easy I don’t want to paint too rosy a picture. Um and it’s not so much that it’s changed a lot over the years it’s just I’ve experienced more nuances. You know you first run into the facility front and center. Ah, you’re looking for a rooftop that’s less than 10 years old and that’s hard to find many rooftops are more than ten years old and they have ah you know 20 years of life left in them and you just many times cannot put a solar array on that roof. And you know with Simmons knife they needed a new roof and they were prepared to put on a new roof and we were able to combine the 2 into a single cap x and that is a a trick of the trade that few installers know or use. So check that out and but you know, ah. It is a capital expense if they’re going to buy a project. Do. You don’t have to. They don’t have to cap x the project you could do a Ppa or third party ownership. There’s also commercial leases for these facilities. So there’s many ways to skin the financial cat so to speak and that can be a hurdle most. Of all, though you you need a you need to find a customer who’s dedicated to doing something right because you can spend a lot of time drilling down on a project and then go nowhere and it just kind of gets put on a shelf and.

Tim Montague

So time and money become constraints for these. Ah these facility owners. They’re busy doing whatever they do making widgets making you know, computer products or making monitoring systems for the solar industry. Perhaps and energy isn’t their first. Ah, line of business. They may be interested. Um, but you really have to be dedicated and so being able to sift through those. Ah you know those leaders and finding the team that is really going to get something across the line is is vital and that’s a very nuanced thing. Um. So I mean some of the other things are of course the landscape right in the us now we have really good legislation in 2022 called iro you refer to that in the introduction. The inflation reduction act that changed the landscape in in several ways. It’s it’s ah.

Tim Montague

Applying for example, an investment tax credit at 30 the investment tax credit was 26% and it was going to step down to 10% in the next couple of years now we have an a good 10 year run at 30% so that softens the blow so to speak or the capex for. Ah, for both third -party owners or first party host owners and it makes solar more affordable and it makes it pencil better and so that just increases the uptake we were growing at 40% a year in the solar industry. Globally now here in the us we’re going to start growing at 60% a year so on a very rapid trajectory. Um, so then there’s also so that landscape is very important legislation and that’s a local thing and a you know national thing you have to know what’s going on locally I happen to be in the industry because we have good legislation going on in illinois. And that was the other kind of perfect storm for me is that we had legislation that got signed in 2016 and really catapulted our state. We were. We only had eighty megawatts of solar in illinois in 2017 now we have over one point eight gigawatts five years later and that’s because of. The future energy jobs act and now we have something called the clean energy. Oh no, sorry the climate and equitable jobs act cija which has created a whole new host of of incentives which are an accelerant. Um, and then there’s things like you know, ah supply chain right? We had covid.

Tim Montague

Slowed things down then we had the chip shortage. There’s a human resource shortage right? There’s a shortage of labor. It’s hard to find installers. It’s hard to find engineers and project managers and financial analysts across the board. Everybody is. Is kind of hurting for proper staffing and this you know I can’t I kind of think it. It creates an awareness around how valuable people are and I like that because that’s at the end of the day. What this is about is creating a more a safer. And ah cleaner future for humanity one that is is going to be buffered from the ah the unpredictability of climate change. Hopefully if we can get there fast enough. It’s not a question of. Are we going to make the energy transition right? It’s It’s a question of will we make it fast enough.

James McWalter

Yeah, and I think it’s so interesting to talk about the like all the different elements all these different constraints on the deployment of these assets and I think what’s most fascinating to me again coming into this industry more recently is that money isn’t really the constraint anymore like Basically you have so much capital being deployed from public and private sources to buy these assets to operate these assets to develop these assets and the constraints are further upstream it’s constraints around land its constraints around people as you said, um, you know there are literal legal constraints from particular areas and all these kind of things. Supply chain’s a massive one. Um, you know you had some kind of wild things that happened earlier the year in terms of tariffs and and all these kind of things but to me, it’s like for folks who are thinking about coming into the industry. It’s like there’s a lot of problems to be solved but the money is not one of them. That’s a pretty solved problem. There’s just. A ton of money to be deployed and so if you can find a way to deploy assets faster develop assets faster help out in supply chain help out on retraining and getting more people who can be installers and work on the design and projects and all these different elements. There’s a lot of business to be done and a lot of smart people I think need to like look at the space in mophomore lotphomore detail.

Tim Montague

Yeah, I’m glad um, you’re drilling down on this. You know there’s a great opportunity in organizations like the department of energy right now the department of energy is the um, the department in the federal government that sets the tone for the future of. The energy landscape in the in the us and it is experiencing a renaissance right now they have new funding. They have some very charismatic leaders like Jigger Shah who’s the head of the loan program office. Yeah.

James McWalter

I was just about to mention jigger.

Tim Montague

and and jigger is ah is ah an og in the solar industry. He became famous for starting a company called Sun Edison which made the which popularized the commercial power purchase agreement or Ppa in the United States and and then he went on to ah to found generate capital which is a clean infrastructure finance company and now he’s the head of the loan program officer which is fueling next generation technologies and and helping to. Bring them to the light of day so to speak. But but the doe is hiring a thousand people now and these are guys like you and me James who have backgrounds in entrepreneurship or technology. Project management or sales and marketing all kinds of people are being hired by the doe and this is a great thing and just one of the many opportunities so there’s opportunities in government. There’s opportunities in the private sector. There’s ah opportunities as entrepreneurs. Or just for like recent high school grads right? You can become an electrician or a laborer on solar fields and make $30 an hour without a college degree which is a wonderful thing.

James McWalter

I absolutely and if I think about just the last few generations right? So when I came out of university in the early 2000 you know everyone who wanted to make money went into finance like it was you know pre the big crash in 2007 and that’s where everybody kind of flock to and then. After that is big tech right? Like if you wanted to make a ton of money and up to pretty much I would say just very recently that’s where you wanted to go to and now I think it’s it’s definitely going to be clean technology right with energy I think driving the vast majority. You’re starting to see just really impressive companies. You’re starting to see that support coming from those governmental agencies. Um Arpae is another like amazing organization that does a ton of funding for you know, moonshot type energy and related technologies that have a large climate component and so yeah, yeah, it’s ah a guy called sa griffith who talks about electrifying. Everything and you know he says there’s even this even roles for the lawyers right? like you know trying to navigate different permitting requirements and so on and so yeah, so anyone listening regardless of your skill set. There is a place right in this kind of revolution right.

Tim Montague

Yeah, I’m glad you mentioned Saul Griffith and electrify everything. Um I can’t remember the name of the organization. But but he’s got a book and sorry.

James McWalter

On their lab. Ah so Sal Griffa He’s a other lab I believe.

Tim Montague

Well, that is one of the organizations but there’s another one around electrify um that that he is spearheading and and they’re a nonprofit and you know so they’re they’re kind of a think tank and community organizing around. Okay, how do we transition. As fast as possible and he references things like the the world war ii effort right? that the us government made. We turned on a dime we converted our factories to making tanks and bombers instead of you know trucks and trucks and passenger airplanes. And and we did this in a very short period of time and it’s truly astounding that the federal government was able to form this joint partnership with private industry and just completely turn the economy towards defeating Hitler and it worked but it was a massive massive transformation ah transformation of the economy and that’s what we need. To see now in order to net zero the economy which is forty gigatons of co 2 equivalent per year that the economy is you know, spewing into the atmosphere and then we have to figure out how to reduce the eight hundred gigatons that are already up there from the last. You know one hundred and fifty years of industrialization it’s it’s no small feat but it’s totally doable. We have the technology like heat pumps and like solar arrays and wind farms and battery farms and other energy storage technologies. It really is a very a very exciting time.

James McWalter

And absolutely would’d would’d. Love to continue to get into some different parts of the development picture because we’re definitely talking a lot about you know the commercial industrial cni space but 1 of the kind of big developments in the last five years in particular is this idea of community solar and. You know there’s people from all around the country all around the world who may be you know in a jurisdiction that doesn’t really have a community solar program. What is community solar and why is it something that’s having a larger and larger impact on the development landscape. So.

Tim Montague

Community solar is a way to make solar accessible to people who don’t have a sunny roof or don’t own a home. Ah so this is renters and people who can’t afford to put a solar array on their home if they do own a home. Or people that have a shady roof right? which is many many people and um so you build a central array. Maybe a one megawatt to five megawatt solar farm these are say 5 to fifty acre solar farms and then you let. Residents in that geography subscribe to the solar array and thereby buying in directly to a solar project and it’s called community solar there’s subtle nuances and different ways of doing it but the most popular way in the you know United States is you build an array. And then you get subscribers from that territory in that utility territory. So in Illinois we have comet in Northern Illinois and amherin in central and Southern Illinois and then mid american in Western Illinois and in those 3 territories. Community solar is a thing. The state has a law that mandates those utilities these are investorowned utilities which you know covers a huge chunk of the population. Perhaps 70% of Illinois’s population lives in these io territories and now.

Tim Montague

If you’re an ammer and comment or mid american customer. You also have the ability to ah become a subscriber to a community solar project. You get a 10% discount approximately generally speaking. So you’re going to save money and not have a huge cash outlay a solar array costs. You know a residential solar project cost 20000 to $ 30000 it’s like buying a car and so while for some people that’s no big deal for many it is a big deal, especially if you don’t own your home the home right? You’re not going to install a solar array on a house that you rent or if you live in an apartment so community solar is very very important and it got started in Colorado. Ah. Ah, think sunchair was one of the first community solar developers in the Us. But now there’s dozens of community solar developers and there’s a handful of really good states that are driving this forward Illinois happens to be 1 Massachusetts is 1 New York up into Maine Maine has a good community solar program now. New Jersey has a struggling community solar program. But it is happening and California has a nascent community solar program. They really were a late comer. They had something called community choice aggregation which is a cousin to that. But. It really wasn’t this form of modern community solar. So now they’re they’re they’re getting in the game as well.

James McWalter

Yeah, what? what? I love about community. So as a concept is I mean it’s in the name right? It’s the community side of it. You know you are having people who don’t actually know you don’t know the other people in your community necessarily who signed up but I love this idea where you have you know thousands of people in. Couple counties. Let’s say worth of space and together they enabled through their pricing power through their buying decisions. You know a five Megawatts you know groundmounted solar farm you know, maybe 20 minutes drive from them and yeah, the kind of emergence of that kind of shared. Ability and like the way legislation has enabled that I think it’s like this is a really fascinating approach and and honestly it’s kind of ah surprising that it kind of emerge in the United States it’s something that sounds you know very european very irish or german to me, but it’s absolutely fantastic and I really love it. So.

Tim Montague

Yeah I have to say I’m I’m very excited about community solar because it does give such a broad swath of the populace access to solar and I mean I already so I live in urban illinois in central illinois. My city participates in a group purchase program called community choice aggregation and so they get together with a handful of other cities and they do this group by of clean energy. So they’re buying a contract to buy clean electrons from. Energy suppliers and and then the energy suppliers are going out on the open market and securing these large contracts from wind and solar developers for what’s called green tags or rex renewable energy credits and and that’s you know a legit way of buying clean energy. But it’s It’s so much more direct when you can say oh I’m buying power from the solar array on a closed landfill in downtown urbanna which there is a community solar farm on the closed landfill now in downtown Urbannna and it targets in their case, low income low and middle income residents. Of the city of Urbana which is wonderful right? because those people are already stressed financially and now they’re going to save money on their power bill consume local green electrons and it’s ah it’s just a win win.

James McWalter

And those are all the kind of positive sides of the community side but we also you know come across various issues from community objections to certain types of development. Um solar included have you come across any of those.. What are the typical reasons why a community might object to solar being built. Ah, you know at scale in their community and.

And so on the community Side. You know those are all the kind of positive aspects of Community solar. But you know Large-sca solar Definitely also has certain communities that object to it being built in their midst have you ever come across any ah you know projects that are struggling to get through. You know, public meetings and so on where there’s various objections and how have you dealt with that in your kind of own career.

Tim Montague

Well, this is a very important topic getting community buy in for large scale solar and I’m not a large scale solar developer I developed twenty megawatt and down projects. So 1 to Twenty Megawatt projects but even these community solar projects that I’m developing in Illinois are meeting pushback from local communities. So when you bring a change to the land. You know we’re talking about rural landscapes in many parts of the country. That’s where these community solar projects are getting built. It’s not only in rural landscapes some of it is um. On brown fields and and ah you know on the on the edge of of suburbia so to speak. But but here in the Midwest we have gobs and gobs of of flat farm ground and a landowner can triple their income by leasing their land to a solar or wind developer. So it’s compelling for the landowner to consider leasing their their land. So if the if the land is in the right geographic area meaning the right territory the right utility territory and has access to the right kinds of infrastructure meaning substations. And in ah, in my case threephase power lines because I do distributed generation or if you’re a large scale utility developer you want access to um, transmission lines the big power lines and and so when these changes are presented to local communities.

Tim Montague

It can create some pushback and that’s understandable. It is a change you’re going from corn and bean farming to solar farming and yes, you’re putting a structure of you know, steel and glass and silicon onto a field. I’m also an ecologist by training and so I care about the land and I know a lot about about ecology and this is actually really good for the land. So. It’s good for the landowner from an economic perspective. It helps them keep their land keep their family on the land. A lot of next generation. Farmers are you know their children want to go to the city and so farm communities are struggling and they’re struggling economically and so it’s also then creating a tax base for things like schools There are some huge number of taxing bodies in Illinois something like 15 different taxing bodies. So there’s many.

Tim Montague

Ah, institutions that benefit from this type of development. But so one of the biggest challenges is that then there’s neighbors to the facility. So There’s ah a farmhouse a couple doors down from this solar field or this potential solar field. And those landowners sometimes are not properly engaged in the discussion about the project prior to a meeting with a zoning board of appeals. For example, which is one of the permitting bodies that you have to talk about your project with in order to get a permit and. And so neighbors of projects do pushback sometimes and it’s both end. Um sometimes they can be educated and ah you know they come around and they will get behind a project and sometimes they don’t. And so we call this nimbyism in the industry not in my backyard. There’s also gimbyism. Yes in my backyard and and yeah and and and so my message to energy professionals is simply.

James McWalter

I I Proud D be over here. Why Proud I proud in my backyard on on my side. Yes, so.

Tim Montague

We need to up our game. We need to become more professional more proactive. We need to engage all the stakeholders in in the decision making process and and the more proactive we can be the the the smoother the transition is going to be 1 of the one of the risks here James is that. We’re not going to make the the energy transition fast enough to to really slow down climate change. Ah we have as you said the the money now the money’s on our side. There’s just gobs and gobs of finance flowing into wind solar and battery storage. But where where the rubber meets the road. Getting these things permitted and interconnected. So. It’s both the the local stakeholders and we have to be better about communicating the value proposition to local communities and working with local landowners and residents and then also utilities and getting the interconnection. Agreement for these projects and making sure that that is economical is also a major hurdle in some jurisdictions and and some geographies. So. It’s it’s a both end so we have many opportunities and and I say this with 100 % confidence that if you’re. Not in clean energy and you’re looking for a new a new career. Please come to clean energy. We are a nothing but pure growth for the next thirty years industry and then um, if you’re already in the industry.

Tim Montague

I can also help you find your you know your up your game and and find those best of breed companies and opportunities that are out there. So it’s it’s ah it’s a very exciting time.

James McWalter

Um, and I believe you’re also the host of the clean power hour podcast. Um, so yes I would love to hear about that and in particular is there anything surprising that’s come out from the you know the array of interviews that you’ve done with different guests.

Tim Montague

Well I’m never I never ceased to be amazed at how many passionate caring bright and and brilliant individuals. There are in the clean energy industry I um. I just did an interview with a lovely young woman named Kate Collardson who has started a nonprofit called solar recycle. It is a clearinghouse for the recycling and repurposing of used solar panels and while this is a small problem today because our industry is quite young. In the United States it’s going to be a big problem in 20 years we’re going to have to figure out better ways to repurpose and recycle and better ways to manufacture on the front end these products and. Um, create good legislation so that there are buyback programs so that the manufacturers have to take their products back and repurpose them themselves and that way they’re incentivized to create products that can be easily recycled because right now solar panels cannot be easily recycled. They can be recycled. But the the best debreed technology really is to grind them up and and sort them into their their component parts. The glass silicon aluminum etc. Um, so that’s the main thing is just I never cease to be amazed at the at the you know the caring and creativity.

Tim Montague

Of the professionals in our industry and that’s one of the things that I love about being in the solar industry is the vast majority of Professionals care about sustainability. Also right? they are purpose driven entrepreneurs and professionals and and that just is. You know who I prefer to be in relationship with and be colleagues with and do business with.. It’s not that I don’t want to do business with others of course I do business with all kinds of people and I and I welcome that diversity. But I Also want to be part of a tribe. And and that tribe is purpose driven professionals.

James McWalter

I absolutely and I definitely echo that and it’s it’s a great try to be part of very very pleased to be part of it myself as well and but Tim this has been brilliant really enjoyed the conversation. Um, yep before we leave off is there anything I should have asked you about but did not.

Tim Montague

Before I forget I identified the Saul Griffith organization it’s called Rewiring America and that’s the name of the website as well. Rewiringmerica.org check that out. Great book. Great organization. Um. No I don’t think I have anything else check out my podcast at clean powerhour.com I love to hear from my listeners I love to get your ideas for who to bring on to the show I um I love connecting with you if you’re interested in clean energy, bring it on.

James McWalter

I absolutely and we’ll include those links in the show notes. Thank you Tim.

Tim Montague

All right? Thank you James I really appreciate it.

Title: Becoming a Solar Developer – E116

Great to chat with Tim Montague, Solar Developer, NABCEP trainer and host of the Clean Power Hour podcast! The Clean Power Hour is a weekly news roundup of the latest solar, wind, storage and energy transition news! We discussed how Tim become a solar project developer, the challenges in developing solar projects, community solar and more! 

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

www.cleanpowerhour.com

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

James

The unedited podcast transcript is below

James McWalter

Hello today, We’re joined by Tim Montague solar developer and host of the clean power hour podcast welcome to our podcast Tim! brilliant.

Tim Montague

Thanks James. It’s great to be here.

James McWalter

Sir would love to hear how you ended up becoming a solar developer.

Tim Montague

I grew up in the small city of Albuquerque New Mexico and my dad was a professor at the University Of New Mexico he taught environmental studies and we were doing backyard solar thermal meaning making hot water from sunlight. Was a thing back in the seventy s eighty s and 90 S Pv was hardly on the scene because it was very expensive pv was invented in the 50 s but it didn’t go mainstream and literally until the early 2000 so fast forward I was doing sustainability consulting. In the twenty ten s and was casting about for my next big thing and a canadian named paul was kind enough to cold call me on a saturday morning and said hey we’ve reached grid parody and what that means is that solar.

James McWalter

Man.

Tim Montague

Is now cost competitiveive with other sources of energy and that was in 2 sixteen I dove in with both feet I was primed for a career in clean energy and shortly thereafter I Found a a great solar installlar called Continental Energy Solutions. And I became the head of business development for continental selling and developing commercial solar projects so that was that was the long and short of it. But it was a homecoming you know sustainability is in my blood I was an ecologist by training both bachelors and masters and had never. Ah, really found traction until I started doing green business consulting I’m a business guy. That’s the bulk of my career is doing B Two B Sales marketing and consulting and so solar just brings it all together.

James McWalter

I yeah so interesting I mean if I think about my own kind of journey to here so much can be pointed back to the fact that the farm I was growing up on converted to organic farming in the late 90 s and that was like a point of like oh you know we actually do have to be better stewards of of the land had to be better stewards of. Environment more generally and you know even though I didn’t end up working on anything with a climate impact until the last year or so that was always kind of there in the background and so it’s fascinating how these kind of know elements of our um of our upbringing kind of affect us. But I guess you know diving into that when that you got that phone call you know going from there and you know making a decision to kind of. You know change career directions and so on. Um, what? What would the the kind of next you know, let’s say 6 to 18 months like what? what were the kind of learnings you have to do because one of the things I think we’re going to see particularly post-ira is a lot of folks trying to come into the industry become so developers and so on. And so yeah, how did you kind of optimize your own learning in that time. Yeah.

Tim Montague

Yeah, and and I love this question because I help dozens and dozens of people get into the solar industry and I want to help more. So if you’re listening to this and you’re interested in clean energy in the energy transition in any aspect of it whether that’s electric. You know electrification of transportation or making food systems more sustainable but obviously also solar wind and battery storage where I’m quite an expert I am a very curious person I love technology I love entrepreneurship I had worked as a business advisor. Ah, my local small business development center working with technology entrepreneurs. So I just I love that nexus of of technology and business and now sustainability and so pv while I had a lot to learn. About like construction and what are the components of a solar array and how do you discern the good. The bad from the ugly in terms of those products and how do you qualify a commercial solar project I had to learn that truly even though I knew a lot about b two b sales. I didn’t know a lot about selling projects that were you know these are projects that are $50000 at the very small end to 5000000 or even more maybe $10000000 in the c and I and small utility solar space and.

Tim Montague

So I had a ton to learn and I just dove in with both feet. Of course I had colleagues I was working with a gentleman named Brian Howe whose shoulders I stand on he was the president of the Illinois solar energy association and the president of continental energy solutions and i. Then worked very closely with a cadre of project managers at continental and then started networking like a mad dog with other solar professionals and other energy professionals I had actually gotten involved with Illinois solar energy association several years before when I was doing corporate relations for. The notoart nature museum which is a a well-known institution on the on the north side the near north side of Chicago they had a rooftop solar array and I hosted a meeting of isia at the at our facility. So I had an interest in in clean energy and was. Was gathering bits and pieces and and building a network and I still have many of those contacts that I made back that was back in like 2005 and now you know fast forward and the the industry is just exploding so I was an early adopter. And but it pays to be curious. It pays to be outgoing or take the risk of of stepping out of your comfort zone so to speak right? because I had never sold a solar project and then I was the head of business development for a oh you know about $100000000 business at the time and.

Tim Montague

Ah, you know it’s sink orwin but but I was well suited to the job and and I love working with business owners. You know, helping them reduce their ah cost of energy. That’s the bottom dollar for you know that is the impact that solar makes you reduce your energy bill with a rooftop or ground mountund solar array that that plugs into your facility.

James McWalter

Events.

Tim Montague

And that’s a feelgood right? because we’re greening the grid we’re reducing air pollution and we’re saving money which then can be used for other things like R and D or hiring So. There’s no one single path right for any particular career in clean energy. But it starts with being curious and then finding those organizations those networks and those nodes I Like to think of people and organizations as nodes and each node will then be a connector for you to many other nodes.

James McWalter

No, that that makes a ton of sense and there’s a phrase. Ah a friend of mine uses. You know you have to try to maximize serendipity right? You know like things don’t always come to you. It’s often good to try to find yourself and in yeah, in the middle of a node or try to build that yourself where all of a sudden people are connecting to you and you know I think. But of us do that individually with our own podcasts. Um I’ve done that with you know, events and and groups that I’ve run over the years and but if I think about like the business development side of things right? There’s actually a lot of you know I guess buying and selling within the energy space and at the different layers and you mentioned the kind of business owners that you were you know selling to um, what was kind of a. Ah, typical provo of of a customer and how has that change and not just in terms of maybe the profile of the customer over the years but also what they care about.

Tim Montague

1 of my favorite projects is a project called Simmons Knife S I M M O N S Simmons knife and they make knife blades for the food processing industry and for the furniture industry and this is a multi-generational family business. Have about a fifty Thousand Square Foot facility I made a small video about the project and I interviewed the Ceo on my podcast so this is not sensitive information. They’re they’re in the wild about them going solar and ah but they were. Um, you know they were intrigued by the opportunity to make their facility more sustainable. We were able to offset about 70% of their electrical load with a rooftop array. So the facility is constrained right? The roof wasn’t quite big enough to put a new array on to put a. A big enough array on to offset 100 % of their load but they were very particular about this about trying to achieve the greatest impact possible and and there are some subtle things about solar that that you have to tweak in this case. We used five degree tilt panels versus 10 degree and the difference is that you can squeeze more solar panels onto a roof by doing ° so it’s it’s a slightly lower degree tilt array and that way you can smash it smash more solar in and get more solar kwh out.

Tim Montague

And and this was just very interesting, right? that they were very clear at the get go and it was it was it was the the typical leadership team is the c-suite so we had the Ceo the Cfo the Ceo and the facility manager and and they were very aligned. Of course they were. They were you know following a charismatic. Leader Colin Murphy is his name and it was just they were just very clear that we want to be become more sustainable and we want to do something that’s good for our bottom dollar but also good for our employees and our other stakeholders meaning their customers right? So when you make saw blades. With clean green electricity. That’s a more sustainable product and so they’re greening their entire value chain and and becoming a leader in their you know in their ecosystem and and in their sphere of influence and showing others that hey this matters and this is an opportunity for you. You know. I almost never lead with sustainability because only about 1 in 10 business owners or leaders truly cares about sustainability and I’m not blaming them. You know you have to be very concerned with your bottom line as a business owner. It’s nontrivial to be profitable. And to be sustainable meaning to maintain your growth year over year and that involves you know, r and d and expansion and facilities and hiring and firing and running a business is complicated and then to layer on this this goal of well let’s become more sustainable that can be.

Tim Montague

Quite a journey but like luckily you know solar is not the most complicated thing in the world. It’s black panels that sit on your roof or on your field or on your parking lot and they make electricity from sunlight and then you’re just reducing your consumption from the grid so that was. That was kind of the long and short of it with Simmons life and they were just a model customer and my all time favorite to date.

James McWalter

Yeah I think absolutely the this tradeoff right between why I guess some people might get into specific industries. You know that that drive from the kind of conservation point of view. But then so these are all businesses and it was interesting like you didn’t get that phone call until the cost parodity. Had happened and now you know solar panels are in many parts of the world. The cheapest form of electricity generation that you can install and so that is what’s enabling. Yeah, the kind of dramatic distribution of these assets and building of these assets like you know incentives and things like inflation production act. These are all very very powerful ways of. Continuing to push things along, but it’s the actual cost curves coming down so quickly. That’s actually enabled um you know businesses to make profit building these things and then the customers to see that there is actual you know financial regions and to engage in it. But I guess like when you’re kind of think working through that particular project or other projects you know and I think this does very. Whether it’s ground-mounted or roof-mounted. What are some typical hurdles that you have to overcome and you know your kind of approach overcoming those hurdles change over the years

Tim Montague

Developing solar projects is not easy I don’t want to paint too rosy a picture. Um and it’s not so much that it’s changed a lot over the years it’s just I’ve experienced more nuances. You know you first run into the facility front and center. Ah, you’re looking for a rooftop that’s less than 10 years old and that’s hard to find many rooftops are more than ten years old and they have ah you know 20 years of life left in them and you just many times cannot put a solar array on that roof. And you know with Simmons knife they needed a new roof and they were prepared to put on a new roof and we were able to combine the 2 into a single cap x and that is a a trick of the trade that few installers know or use. So check that out and but you know, ah. It is a capital expense if they’re going to buy a project. Do. You don’t have to. They don’t have to cap x the project you could do a Ppa or third party ownership. There’s also commercial leases for these facilities. So there’s many ways to skin the financial cat so to speak and that can be a hurdle most. Of all, though you you need a you need to find a customer who’s dedicated to doing something right because you can spend a lot of time drilling down on a project and then go nowhere and it just kind of gets put on a shelf and.

Tim Montague

So time and money become constraints for these. Ah these facility owners. They’re busy doing whatever they do making widgets making you know, computer products or making monitoring systems for the solar industry. Perhaps and energy isn’t their first. Ah, line of business. They may be interested. Um, but you really have to be dedicated and so being able to sift through those. Ah you know those leaders and finding the team that is really going to get something across the line is is vital and that’s a very nuanced thing. Um. So I mean some of the other things are of course the landscape right in the us now we have really good legislation in 2022 called iro you refer to that in the introduction. The inflation reduction act that changed the landscape in in several ways. It’s it’s ah.

Tim Montague

Applying for example, an investment tax credit at 30 the investment tax credit was 26% and it was going to step down to 10% in the next couple of years now we have an a good 10 year run at 30% so that softens the blow so to speak or the capex for. Ah, for both third -party owners or first party host owners and it makes solar more affordable and it makes it pencil better and so that just increases the uptake we were growing at 40% a year in the solar industry. Globally now here in the us we’re going to start growing at 60% a year so on a very rapid trajectory. Um, so then there’s also so that landscape is very important legislation and that’s a local thing and a you know national thing you have to know what’s going on locally I happen to be in the industry because we have good legislation going on in illinois. And that was the other kind of perfect storm for me is that we had legislation that got signed in 2016 and really catapulted our state. We were. We only had eighty megawatts of solar in illinois in 2017 now we have over one point eight gigawatts five years later and that’s because of. The future energy jobs act and now we have something called the clean energy. Oh no, sorry the climate and equitable jobs act cija which has created a whole new host of of incentives which are an accelerant. Um, and then there’s things like you know, ah supply chain right? We had covid.

Tim Montague

Slowed things down then we had the chip shortage. There’s a human resource shortage right? There’s a shortage of labor. It’s hard to find installers. It’s hard to find engineers and project managers and financial analysts across the board. Everybody is. Is kind of hurting for proper staffing and this you know I can’t I kind of think it. It creates an awareness around how valuable people are and I like that because that’s at the end of the day. What this is about is creating a more a safer. And ah cleaner future for humanity one that is is going to be buffered from the ah the unpredictability of climate change. Hopefully if we can get there fast enough. It’s not a question of. Are we going to make the energy transition right? It’s It’s a question of will we make it fast enough.

James McWalter

Yeah, and I think it’s so interesting to talk about the like all the different elements all these different constraints on the deployment of these assets and I think what’s most fascinating to me again coming into this industry more recently is that money isn’t really the constraint anymore like Basically you have so much capital being deployed from public and private sources to buy these assets to operate these assets to develop these assets and the constraints are further upstream it’s constraints around land its constraints around people as you said, um, you know there are literal legal constraints from particular areas and all these kind of things. Supply chain’s a massive one. Um, you know you had some kind of wild things that happened earlier the year in terms of tariffs and and all these kind of things but to me, it’s like for folks who are thinking about coming into the industry. It’s like there’s a lot of problems to be solved but the money is not one of them. That’s a pretty solved problem. There’s just. A ton of money to be deployed and so if you can find a way to deploy assets faster develop assets faster help out in supply chain help out on retraining and getting more people who can be installers and work on the design and projects and all these different elements. There’s a lot of business to be done and a lot of smart people I think need to like look at the space in mophomore lotphomore detail.

Tim Montague

Yeah, I’m glad um, you’re drilling down on this. You know there’s a great opportunity in organizations like the department of energy right now the department of energy is the um, the department in the federal government that sets the tone for the future of. The energy landscape in the in the us and it is experiencing a renaissance right now they have new funding. They have some very charismatic leaders like Jigger Shah who’s the head of the loan program office. Yeah.

James McWalter

I was just about to mention jigger.

Tim Montague

and and jigger is ah is ah an og in the solar industry. He became famous for starting a company called Sun Edison which made the which popularized the commercial power purchase agreement or Ppa in the United States and and then he went on to ah to found generate capital which is a clean infrastructure finance company and now he’s the head of the loan program officer which is fueling next generation technologies and and helping to. Bring them to the light of day so to speak. But but the doe is hiring a thousand people now and these are guys like you and me James who have backgrounds in entrepreneurship or technology. Project management or sales and marketing all kinds of people are being hired by the doe and this is a great thing and just one of the many opportunities so there’s opportunities in government. There’s opportunities in the private sector. There’s ah opportunities as entrepreneurs. Or just for like recent high school grads right? You can become an electrician or a laborer on solar fields and make $30 an hour without a college degree which is a wonderful thing.

James McWalter

I absolutely and if I think about just the last few generations right? So when I came out of university in the early 2000 you know everyone who wanted to make money went into finance like it was you know pre the big crash in 2007 and that’s where everybody kind of flock to and then. After that is big tech right? Like if you wanted to make a ton of money and up to pretty much I would say just very recently that’s where you wanted to go to and now I think it’s it’s definitely going to be clean technology right with energy I think driving the vast majority. You’re starting to see just really impressive companies. You’re starting to see that support coming from those governmental agencies. Um Arpae is another like amazing organization that does a ton of funding for you know, moonshot type energy and related technologies that have a large climate component and so yeah, yeah, it’s ah a guy called sa griffith who talks about electrifying. Everything and you know he says there’s even this even roles for the lawyers right? like you know trying to navigate different permitting requirements and so on and so yeah, so anyone listening regardless of your skill set. There is a place right in this kind of revolution right.

Tim Montague

Yeah, I’m glad you mentioned Saul Griffith and electrify everything. Um I can’t remember the name of the organization. But but he’s got a book and sorry.

James McWalter

On their lab. Ah so Sal Griffa He’s a other lab I believe.

Tim Montague

Well, that is one of the organizations but there’s another one around electrify um that that he is spearheading and and they’re a nonprofit and you know so they’re they’re kind of a think tank and community organizing around. Okay, how do we transition. As fast as possible and he references things like the the world war ii effort right? that the us government made. We turned on a dime we converted our factories to making tanks and bombers instead of you know trucks and trucks and passenger airplanes. And and we did this in a very short period of time and it’s truly astounding that the federal government was able to form this joint partnership with private industry and just completely turn the economy towards defeating Hitler and it worked but it was a massive massive transformation ah transformation of the economy and that’s what we need. To see now in order to net zero the economy which is forty gigatons of co 2 equivalent per year that the economy is you know, spewing into the atmosphere and then we have to figure out how to reduce the eight hundred gigatons that are already up there from the last. You know one hundred and fifty years of industrialization it’s it’s no small feat but it’s totally doable. We have the technology like heat pumps and like solar arrays and wind farms and battery farms and other energy storage technologies. It really is a very a very exciting time.

James McWalter

And absolutely would’d would’d. Love to continue to get into some different parts of the development picture because we’re definitely talking a lot about you know the commercial industrial cni space but 1 of the kind of big developments in the last five years in particular is this idea of community solar and. You know there’s people from all around the country all around the world who may be you know in a jurisdiction that doesn’t really have a community solar program. What is community solar and why is it something that’s having a larger and larger impact on the development landscape. So.

Tim Montague

Community solar is a way to make solar accessible to people who don’t have a sunny roof or don’t own a home. Ah so this is renters and people who can’t afford to put a solar array on their home if they do own a home. Or people that have a shady roof right? which is many many people and um so you build a central array. Maybe a one megawatt to five megawatt solar farm these are say 5 to fifty acre solar farms and then you let. Residents in that geography subscribe to the solar array and thereby buying in directly to a solar project and it’s called community solar there’s subtle nuances and different ways of doing it but the most popular way in the you know United States is you build an array. And then you get subscribers from that territory in that utility territory. So in Illinois we have comet in Northern Illinois and amherin in central and Southern Illinois and then mid american in Western Illinois and in those 3 territories. Community solar is a thing. The state has a law that mandates those utilities these are investorowned utilities which you know covers a huge chunk of the population. Perhaps 70% of Illinois’s population lives in these io territories and now.

Tim Montague

If you’re an ammer and comment or mid american customer. You also have the ability to ah become a subscriber to a community solar project. You get a 10% discount approximately generally speaking. So you’re going to save money and not have a huge cash outlay a solar array costs. You know a residential solar project cost 20000 to $ 30000 it’s like buying a car and so while for some people that’s no big deal for many it is a big deal, especially if you don’t own your home the home right? You’re not going to install a solar array on a house that you rent or if you live in an apartment so community solar is very very important and it got started in Colorado. Ah. Ah, think sunchair was one of the first community solar developers in the Us. But now there’s dozens of community solar developers and there’s a handful of really good states that are driving this forward Illinois happens to be 1 Massachusetts is 1 New York up into Maine Maine has a good community solar program now. New Jersey has a struggling community solar program. But it is happening and California has a nascent community solar program. They really were a late comer. They had something called community choice aggregation which is a cousin to that. But. It really wasn’t this form of modern community solar. So now they’re they’re they’re getting in the game as well.

James McWalter

Yeah, what? what? I love about community. So as a concept is I mean it’s in the name right? It’s the community side of it. You know you are having people who don’t actually know you don’t know the other people in your community necessarily who signed up but I love this idea where you have you know thousands of people in. Couple counties. Let’s say worth of space and together they enabled through their pricing power through their buying decisions. You know a five Megawatts you know groundmounted solar farm you know, maybe 20 minutes drive from them and yeah, the kind of emergence of that kind of shared. Ability and like the way legislation has enabled that I think it’s like this is a really fascinating approach and and honestly it’s kind of ah surprising that it kind of emerge in the United States it’s something that sounds you know very european very irish or german to me, but it’s absolutely fantastic and I really love it. So.

Tim Montague

Yeah I have to say I’m I’m very excited about community solar because it does give such a broad swath of the populace access to solar and I mean I already so I live in urban illinois in central illinois. My city participates in a group purchase program called community choice aggregation and so they get together with a handful of other cities and they do this group by of clean energy. So they’re buying a contract to buy clean electrons from. Energy suppliers and and then the energy suppliers are going out on the open market and securing these large contracts from wind and solar developers for what’s called green tags or rex renewable energy credits and and that’s you know a legit way of buying clean energy. But it’s It’s so much more direct when you can say oh I’m buying power from the solar array on a closed landfill in downtown urbanna which there is a community solar farm on the closed landfill now in downtown Urbannna and it targets in their case, low income low and middle income residents. Of the city of Urbana which is wonderful right? because those people are already stressed financially and now they’re going to save money on their power bill consume local green electrons and it’s ah it’s just a win win.

James McWalter

And those are all the kind of positive sides of the community side but we also you know come across various issues from community objections to certain types of development. Um solar included have you come across any of those.. What are the typical reasons why a community might object to solar being built. Ah, you know at scale in their community and.

And so on the community Side. You know those are all the kind of positive aspects of Community solar. But you know Large-sca solar Definitely also has certain communities that object to it being built in their midst have you ever come across any ah you know projects that are struggling to get through. You know, public meetings and so on where there’s various objections and how have you dealt with that in your kind of own career.

Tim Montague

Well, this is a very important topic getting community buy in for large scale solar and I’m not a large scale solar developer I developed twenty megawatt and down projects. So 1 to Twenty Megawatt projects but even these community solar projects that I’m developing in Illinois are meeting pushback from local communities. So when you bring a change to the land. You know we’re talking about rural landscapes in many parts of the country. That’s where these community solar projects are getting built. It’s not only in rural landscapes some of it is um. On brown fields and and ah you know on the on the edge of of suburbia so to speak. But but here in the Midwest we have gobs and gobs of of flat farm ground and a landowner can triple their income by leasing their land to a solar or wind developer. So it’s compelling for the landowner to consider leasing their their land. So if the if the land is in the right geographic area meaning the right territory the right utility territory and has access to the right kinds of infrastructure meaning substations. And in ah, in my case threephase power lines because I do distributed generation or if you’re a large scale utility developer you want access to um, transmission lines the big power lines and and so when these changes are presented to local communities.

Tim Montague

It can create some pushback and that’s understandable. It is a change you’re going from corn and bean farming to solar farming and yes, you’re putting a structure of you know, steel and glass and silicon onto a field. I’m also an ecologist by training and so I care about the land and I know a lot about about ecology and this is actually really good for the land. So. It’s good for the landowner from an economic perspective. It helps them keep their land keep their family on the land. A lot of next generation. Farmers are you know their children want to go to the city and so farm communities are struggling and they’re struggling economically and so it’s also then creating a tax base for things like schools There are some huge number of taxing bodies in Illinois something like 15 different taxing bodies. So there’s many.

Tim Montague

Ah, institutions that benefit from this type of development. But so one of the biggest challenges is that then there’s neighbors to the facility. So There’s ah a farmhouse a couple doors down from this solar field or this potential solar field. And those landowners sometimes are not properly engaged in the discussion about the project prior to a meeting with a zoning board of appeals. For example, which is one of the permitting bodies that you have to talk about your project with in order to get a permit and. And so neighbors of projects do pushback sometimes and it’s both end. Um sometimes they can be educated and ah you know they come around and they will get behind a project and sometimes they don’t. And so we call this nimbyism in the industry not in my backyard. There’s also gimbyism. Yes in my backyard and and yeah and and and so my message to energy professionals is simply.

James McWalter

I I Proud D be over here. Why Proud I proud in my backyard on on my side. Yes, so.

Tim Montague

We need to up our game. We need to become more professional more proactive. We need to engage all the stakeholders in in the decision making process and and the more proactive we can be the the the smoother the transition is going to be 1 of the one of the risks here James is that. We’re not going to make the the energy transition fast enough to to really slow down climate change. Ah we have as you said the the money now the money’s on our side. There’s just gobs and gobs of finance flowing into wind solar and battery storage. But where where the rubber meets the road. Getting these things permitted and interconnected. So. It’s both the the local stakeholders and we have to be better about communicating the value proposition to local communities and working with local landowners and residents and then also utilities and getting the interconnection. Agreement for these projects and making sure that that is economical is also a major hurdle in some jurisdictions and and some geographies. So. It’s it’s a both end so we have many opportunities and and I say this with 100 % confidence that if you’re. Not in clean energy and you’re looking for a new a new career. Please come to clean energy. We are a nothing but pure growth for the next thirty years industry and then um, if you’re already in the industry.

Tim Montague

I can also help you find your you know your up your game and and find those best of breed companies and opportunities that are out there. So it’s it’s ah it’s a very exciting time.

James McWalter

Um, and I believe you’re also the host of the clean power hour podcast. Um, so yes I would love to hear about that and in particular is there anything surprising that’s come out from the you know the array of interviews that you’ve done with different guests.

Tim Montague

Well I’m never I never ceased to be amazed at how many passionate caring bright and and brilliant individuals. There are in the clean energy industry I um. I just did an interview with a lovely young woman named Kate Collardson who has started a nonprofit called solar recycle. It is a clearinghouse for the recycling and repurposing of used solar panels and while this is a small problem today because our industry is quite young. In the United States it’s going to be a big problem in 20 years we’re going to have to figure out better ways to repurpose and recycle and better ways to manufacture on the front end these products and. Um, create good legislation so that there are buyback programs so that the manufacturers have to take their products back and repurpose them themselves and that way they’re incentivized to create products that can be easily recycled because right now solar panels cannot be easily recycled. They can be recycled. But the the best debreed technology really is to grind them up and and sort them into their their component parts. The glass silicon aluminum etc. Um, so that’s the main thing is just I never cease to be amazed at the at the you know the caring and creativity.

Tim Montague

Of the professionals in our industry and that’s one of the things that I love about being in the solar industry is the vast majority of Professionals care about sustainability. Also right? they are purpose driven entrepreneurs and professionals and and that just is. You know who I prefer to be in relationship with and be colleagues with and do business with.. It’s not that I don’t want to do business with others of course I do business with all kinds of people and I and I welcome that diversity. But I Also want to be part of a tribe. And and that tribe is purpose driven professionals.

James McWalter

I absolutely and I definitely echo that and it’s it’s a great try to be part of very very pleased to be part of it myself as well and but Tim this has been brilliant really enjoyed the conversation. Um, yep before we leave off is there anything I should have asked you about but did not.

Tim Montague

Before I forget I identified the Saul Griffith organization it’s called Rewiring America and that’s the name of the website as well. Rewiringmerica.org check that out. Great book. Great organization. Um. No I don’t think I have anything else check out my podcast at clean powerhour.com I love to hear from my listeners I love to get your ideas for who to bring on to the show I um I love connecting with you if you’re interested in clean energy, bring it on.

James McWalter

I absolutely and we’ll include those links in the show notes. Thank you Tim.

Tim Montague

All right? Thank you James I really appreciate it.

Utility Scale Solar Development – E115

Great to chat with Timothy Kim, CEO at ibV Energy Partners! ibV Energy Partners is leading the clean energy revolution through full-service development of utility-scale solar power plants! We discussed policies toward renewables, challenges in developing solar projects, solar moratorium, grid congestion and more! 

https://carbotnic.com/ibvpartners

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 Timothy Kim founder and Ceo of Ibv Energy Partners welcome with the podcast Timothy.

Timothy Kim

Thank you Jamies! Thank you very much for inviting me to pleasure to be on.

James McWalter

So brilliant to start. Can you tell us a little bit about Ibv Energy Partners you.

Timothy Kim

Yeah, so we are a utility scale solar and storage development and primary investment company and what that really means is that we develop large scale power plants solar power plants. Usually it’s sighted on. Think our average is cited on little over a thousand acres of land these days. Um and we develop and operate them and sell the electricity to various customers from utilities to corporates such as Amazon to Google to power agencies and municipalities. Um. I started the company in June of 2017 with Robin size. Our co-founder who’s also our executive vp and head of development him and I had worked at a previous company in Florida. He was the head of development I was ahead of finance and m and a and we just clicked really well. Our battle rhythm synced and 2017 off we went and it’s been a journey since.

James McWalter

And I guess in 2017 where you were making that initial decision. How did you see the opportunity at that point why why did did it make sense to say okay, we’re going to Robin and I we’re going to get into it together. So.

Timothy Kim

Well if if I’m going to be honest with you. It actually did not make sense. Um, you know in 2017 right so that this was six months after the Trump administration came in and’m not trying to be political I’m just stating facts here and.

James McWalter

That right.

Timothy Kim

The administration and federal policies towards renewables was not Friendly. You know in in the same year. There were significant tariffs imposed specifically on solar panelddles which which make up about 40 to 50% of the the plant’s investment right. And then there were subsequent tariffs on major components that make up a solar power plant including you know the substructure the steel of the substructure as well as semiconductors. Ah you know and the inverters in many cases they were just outright bands actually.

Timothy Kim

So you know in 1 case huawei as many people if you could remember back then it was basically banned from the federal government as well as ah, hooking into any critical infrastructure telecommunications as well as energy. So um, but look you know. Oftentimes when things don’t make sense. You know the contrarian that I am I kind of look at the long term to ask does it make sense for the long term and energy has always made sense in the long term um the the advent the development of energy and especially you technology.

Timothy Kim

And so from that angle you know the story was very robust investors where half in half out you know there are a number of federal legislations that were that we’re about to expire but we found an excellent home with ibfo group which. Is the largest pure solar ipp independent power producer in the world having done some of the major firsts in the world when it comes to developing and operating solar power plants. So you know the challenge back then when when you’re starting. A company. You’re you know, ambitious and you want to get into those big leak tables is and the question I was always obsessed with is how do we go in in this very fluid environment. How do we go from the back of the line you know, just starting up. To the very front of the line without you know, taking these baby steps. But you know giant leaps and I think that’s what really ah occupied our minds in the first 3 to 4 years I would say until covid came along um and and these days. We now ah have yeah we fast forward. You know, five years later we have approximately eight Gigawatt of solar and storage assets in the queue where one of the largest developers of of solar in in in Nevada where the largest developer of solar in Kentucky.

Timothy Kim

And Louisiana and we’re working with a number of power customers. You know both both in in the renewables and the utility space and the oil and gas space. Um, and we we work with over. We were approximately fifty landowners now.

Timothy Kim

To to develop solar on over fifty Thousand acres across the United States so the story is strong the the and I think the fundamentals are strong looking back in 2017 ah, you know we came out of this this. Fiery arena into into something that looks a little bit more stable now. So.

James McWalter

Yeah, know it’s it’s absolutely fascinating. But yeah, the timing right? and you know being a bit too early is completely fine, right? because you know you kind of have to get through those couple of years and then if you hit that market inflection point which were clearlyty and now you get all that benefit of having laid the groundwork and in those kind of tougher years and you also have. I guess a kind of leaner mentality around certain things you know again I guess one of the kind of frameworks you know so we’re talking about utility scale these very large thousand acre plus ah you know projects and there’s a you know few other flavors of course of of development. We’ve seen a big rise with community solar which are typically in the.

Timothy Kim

Exactly.

James McWalter

20 to maybe one hundred or two hundred acre parcel or project size and then of course you have a commercial industrial that go below that let alone you know the kind of roof mountunted direction when you’re kind of weighing up. You know why did utility scale like appeal to your relative to maybe some of these other options.

Timothy Kim

Yeah I mean that’s ah, that’s a great question for us is optimization and efficiency and that’s it. It would be relatively easier to develop a community solar. Yeah I don’t want to say it’s easy at all I mean it’s not No. Fastsetter Development is easy but developing you know with the community as your power customers. Um on Land often. Ah, you know if if not granted to you then directed to you by the community is a lot easier than.

Timothy Kim

You know, developing on a one thousand acre farmland where you know many many folks decry the use of solar as as a as a conditional conditional use. Um, however, with that being said, you know when I started in this field in 2007 the cost of solar was somewhere around $4 a watt. Um, you know you fast forward from 2007 to 2015 and the cost of solar in 2015 was approximately dollar $25 thirty five watt to pre pandemicmic 2019 where it was about ¢85 a watt. Um, you can only achieve that type of efficiency through utility scale solar because just the sheer amount of power that you are placing you are citing in 1 area. The other part of this is optimization as I mentioned you know optimization going forward. Is going to play a large role in the autonomous side of of of solar deployment solar operations. Um, we believe that you know doing things at a bigger scale lends itself to more optimization practices. Then doing things at a much smaller scale where you are often. You know, kind of ah boxed in into your own design. So this is the reason why we went large.

James McWalter

Absolutely but then I guess the the tradeoff so enlarge and for the listener you know we’re talking I guess $100000000 plus projects in a kind of typical deployment for those who are less familiar with with with watts of of various types. But then in terms of the um so the absolutely it makes sense those efficiencies large scale generate generates these efficiencies and it absolutely drives the entire industry forward and gets us to you know a much healthier mix of electricity from renewables point of view. But I guess then what are some of the major challenges when you’re trying to develop a thousand acre plus project for.

Timothy Kim

Well the the there’s 2 challenges in developing projects these days. Um, there used to be 3 challenges. So let me let me just quickly go over those 3 and then tell you why it’s now to prior the 3 challenges was and in this order.

Timothy Kim

Securing power customer or we what we call an offtaker ah to buy your electricity right? Renewable energy is new utilities. Don’t really understand did not in the past you know you’re talking about mid 2000 s did not really understand it. It was not pervasive across the United States and corporates the rise of corporates as clean energy. Ah, procurers had not materialized until about 21018 so that’s one and that’s important because at the end of the day you could have a fantastic project. But if you don’t have revenues. Ah contracted revenue you know to to underpin it then you’re not going to get financing for it. So the project is is likely not to be built second the grid the grid is highly congested. This was not an issue so much in the past because back in two thousand and fifteen seventeen your big size projects were 50 to hundred megawatts I mean if you did a ah hundred Megawatts in two thousand and fifteen sixteen like I did you, you were kind of sitting at the upper echelons of solar development these days that’s kind of the lower end of utility scale to give you an idea our portfolio average size 175 Megawatts and we’re soon to be moving up to two hundred Megawatts or largest project being well over three hundred Megawatts so so you know again, efficiency and optimization going against the power curve reducing the the level like cost levelized cost of solar your electricity all plays a role in that the third is obviously.

Timothy Kim

When you go into a community and the vast majority I would probably say so we’re way above 90% of large scale solar farms. Do not sit in municipal land because there just isn’t you know enough land in the municipality or is so expensive. That it. It just does not make it worthwhile and in you know, largely it. It sits in unincorporated. Um, you know County land so you know where where a lot of people will reside as well. So obviously it has impact on a community and the community you know. Has been some where has been more than some there. There’s been a lot of debates about the use of prime Farmland and I’m proud to say that ivv enage partners we designed everything with dual use meaning that you know we we we add pollinators the sheeps could feed off the grass were feasible. We invite livestock on our site to to have that intune with nature type of aesthetics for our plants but those are the 3 the offtake portion the first one I talked to you about has gone away for the most part that is not as difficult as it once was.

Timothy Kim

So now it is about congestion and community. Um, do just give you an idea you know we’ve we’ve had a series of articles on this, you know our first article you know thanks to Matt has has been how solar development that developers can work with. Communities and could work with landowners and it doesn’t need to be 1 or the other you know, solar will never take over. Um you know? Yeah, even a significant amount of prime farmland and so I think there’s a lot of myths out there but part we we view part of our job as educating as well as informing the public of. Of of what those myths are and how we get around it and how we can work together.

James McWalter

Yeah, as people as listeners on the podcast knows you know I grew up on ah on a sheep farm and so you know agvoltaics and you know being able to have dual use of land I think is something that it’s It’s fantastic Here. You’re doing and a lot of so developers Historically it was kind of an afterthought and As. All the prime areas to build prime boat from a farmland as well as a solar point of view. Um, you know are are being kind of looked at and and landowners and farmers are being asked to kind of consider these different options I think having that dual use and enabling the farmer and the community that the farmers in to say ok we are still you know. Having that engagement with the land right? because is very powerful because you know farmers are very few people you know decide to become a farmer right? It’s It’s usually this kind of very very cultural and and familial um structure that you’re born into and and I think anything that so developers do to kind of you know. Meet the farmer Halfway I think is going to on nesh be a massive benefit to both parties.

Timothy Kim

Right? Exactly there’s 1 more thing to so be said about this though and you know in this country. We we do believe and I firmly personally believe in the rights of the landowner. You know we either. There’s long history about you know. Private use of land and what you can and cannot do as long as that doesn’t hurt. You know the the existing surrounding landowners. You should be able to do what you feel you you need to do with your land the land that you worked so hard and your family worked so hard to. Either put together or inherited and and farmed or tilt or whatnot. Um, you know the interesting part here is that the folks who are against solar development largely are not farmers.

Timothy Kim

It’s ah surprising to hear this because you would think they are but in fact, it is not them at all. They are actually highly encouraging for solar development use. Not only from a financial benefit right? I mean you got thirty five forty forty five years of lease revenue. But. From the point of view that they cobble together a lot of them have cobbled together this land over decade two decades 3 decades or even generations. Ah and they feel that they have worked hard enough. Their family has worked hard and now they want to reap some of the benefits of passive investments. So.

Timothy Kim

It’s a very interesting dynamic that’s taking place in many rural areas of of this country where farmers are actually proponents of solar development and the ones that are not have nothing really to do with their farm. They just don’t like the idea for you know. Xy and z you know.

James McWalter

And and you’re seeing this in the rise of solar moratoriums that are happening at the you know at the subdivision level where you might have a village and then some folks at the village you like oh you know let’s ban solar from our village and incorporate unincorporated surroundings for like the next two years and I think technically there is some voting going on. But ah, you know, local democracy often struggles to actually get everybody in in that locality to actually engage in it and rein the time of what’s going on and if something’s passed that says there’s this little moratorium moratorium and you’re not able to build for the next year and a half two years um you know the I guess the average time owner there is is a bit out of luck.

Timothy Kim

Yeah, the solar moratorium is is is very concerning and and and you know borderline scary because essentially what they are doing is there. There are some communities for example. We are developing a very large two hundred and seventy five Megawatt solar farm in the southern area of Nevada in this within the city of bolder city as a matter of fact, we actually lease the property from the city. That’s one of the very few projects where we actually lease it and where it’s actually in the the municipality. City of boer city generates a lot of money. Ah from the lease of their solar farms. You know they have a number of solar leases out in that area and they’ve structured a program where they’re very careful because they don’t want to expand they don’t want to expand you know? ah you know in population. But so but they have to cover their you know their their expenses with with with some sort of revenue and that revenue is solar. You know the the amount of benefits that solar tax benefits. It’s just hard benefits really that solar provides to county. Is is numerable I mean you’re talking about again generations of of you know tax impact and and you know to to buy new equipment for the schools provide scholarships by you. We equipment in for the fire and and and police department. We see this these are these are actually.

Timothy Kim

Hard benefits and so when there’s a moratorium often the county and the residents are saying that we don’t want these benefits and then they have to find a new source of revenue to cover costs. Everybody knows that infrastructure um is aging that school buildings are aging and we may very well be in a recession a long one next year and you know it is our hope that we work with you know we certainly strive to work with counties to ensure that they understand this. At the end of end of the day like you said James is there is there a choice you know if they propose a solar moratorium then I think they’re just shooting themselves in the foot for the long run.

James McWalter

Yeah I think one of the things that will I think will change because as people are becoming more familiar with the upsides of these projects I think attitudes will change because right now it’s like oh you know I’ve seen. Ah you know something on Tv there might be some solar panels that seems like a net good. But I don’t really know a ton about them I don’t know that those elements around that’s going to positively affect. You know the tax base within my community I think it’s just going to take a little while as these things kind of spread out as more people are exposed to them that because it’s very easy to say no right? It’s it’s often harder to say yes to things. And so seeing those kind of positive reasons you know having conversations like this you know I’m sure the day-to-day work that you and your team do um, reaching out and engaging the community and the landowners and then those landowners then you know I’m sure we’re talking to their neighbors and people are then starting to you know do the heavy you know day-to-day work. Of making ah you know making these things move in more positive direction. But I guess you know with all these considerations right? So you know where is the solar mertarium. You know where’s or less grid congestion. How do you work through all of that these type different types of information to say. Actually you know what. This community with these two thousand acres in this particular part of the country is actually a great place to build versus this other place. You know, ah 1 state away.

Timothy Kim

Yeah that’s another good question. First of all before I answer that let me just say that I don’t want to pin this ah you know. Solar developers. We have not ourselves done a very good job of informing the company informing the communities at large we’re now starting to do this but we should have done this long time. Our industry should have done this long time ago. We should have done. We should have made a push to decouple. Story of solar from the politics of solar or the politics of green energy or clean energy and so we have to we have to understand yeah as an industry we share a lot of that blame. Um, and yeah, if you go to to websites of a lot of solar development companies. They still don’t tell that story. They don’t explain. Why they’re doing what they’re doing and how they’re working with communities. You know we recently revamped our website and we added the first thing we wanted to do was add a community section and then a long faq section both under our project section as well as our community section 200 let landowners and communities and officials and you know people who are opposed to solar understand that listen, we may not agree on everything but we’re going to be very transparent of how we’re coming about this and why we’re doing this and what the benefits are to you so I would um.

Timothy Kim

I’m just going to give a a shameless plug for our website sure. So if you go to our website ivvenergy.com then you ah scroll through it take a look at it and we hope that the website is not just about Obstin but is about you know turning the tide on.

James McWalter

Sure and we we’ll include that in the show notes as well. Definitely those links. So.

Timothy Kim

Informing the public of you know, investments and development in in community initiatives particularly when it comes to solar. Um, the second part of this is to answer your question. Um, we we do? What’s called analytically driven development that’s kind of a fancy phrase right? But ah. You know anytime there a new industry pops up you you could traces all the way you know the oil and gas semiconductor any industry you know area aviation. There’s always this cowboy mentality right? The cowboy mentality is just go fast. Go hard and let’s figure out the rest later. Um. And that happened in our industry. You know when when you know when we when this industry first began in 2006 you know number of developers just went for land grab and they weren’t really thinking and it yeah know even happens today. Um, which which is really unfortunate. We. We don’t do that. We. We engage in annually driven development where we take a pause and say okay, you know we look at everything from the perspective of of an investor and we we answer the hard questions when we spend a lot of time. A lot of resources a lot of money on you know, modeling out. And researching and analyzing points of interconnection making sure that we feel ourselves comfortable that there’s enough capacity a certain substation that the solar farm could be built that there’s no moratorium we meet with County officials beforehand before we weave even touch a single piece of land.

Timothy Kim

Because I think the the industry has also suffered another blight and that is that of a solar cowboy. Yeah, the speculator that comes in Grabs Land makes big promises and doesn’t deliver and we’ve had to yeah it makes everybody’s job hard and we don’t want to do this. That’s not who we are. And I think we we we were at the forefront you know vanguard of where the energy has to where where the industry has to change and we’re certainly leading that charge.

James McWalter

So and speaking of that you know I come from a software background I’m actually working on some projects in this very space right now where would you like to see more innovation you know where could you know? smart folks coming in maybe with more of a software and data background be building. To service you better solve some of your problems get more projects developed and.

Timothy Kim

Well these days you know and there’s I think it was last week you know I never I almost never want to drop the name Elon muskkin anything because he’s so caught but at same time controversial but also so inspirational you know I mean.

James McWalter

I sure.

Timothy Kim

But but he did come up with ah you know, kind of this funny I don’t know if he was joking or not but he he said that you know either tesla or somebody should develop software for developers to engage in more predictive and precise predictive analysis of. Of of grid congestion and the costs associated to plug in the solar power plant to the grid. That’s a number one I would say even more than you know the not in my backyard type of folks congestion is actually the number 1 issue plaguing the industry right now the inability to predict. Your network upgrades. So let’s say that you have a power plant. You already spent $3000000 developing studies. You know engineering you know permitting all that stuff communities great with you. everything looks fine everything looks clean you go through this 4 or 5 sometimes 6 year interconnection study cycle. Where you just have to put more money and more money and more money for every study that you want to advance to and then all of a sudden you put $10000000 at the end and the last study comes back and says that your project is now uneconomical. You just drop $10000000 and do you think that those types of companies are going to come back from that you know. Um, so we need a lot more engagement with the transmission organizations the independent system operators and folks who have the insight but are not willing to open source their information.

Timothy Kim

The betterment of the industry and I hopefully software could plug a lot of that holes in in in bringing that information out from those transmission organizations and utilities into open source and then allowing you know developers such as ours a platform to subscribe to that. Information that would be interesting.

James McWalter

And yet yeah, it’s very interesting because ah, a lot of the space like the incentives are just all not fully aligned in a way that would make these things easier and as easy as they should be right. And so you often have the utility or the grid operator or the operator of the transmission and the Iso. Whatever it may be um, yeah, they’re incentivized to ah you know freerability right? So various types and maybe a couple other incentives that are built into their their model. Whatever it may be. And then you have individual developers like yourselves who are trying to figure out look you know we know we’re going to be building a lot of renewables just tell us where to build right? like at the end of the day if you could just direct us and say hey 10 developers who are bidding into a particular market It’s definitely going to make sense to be along this. You know one hundred mile piece of transmission and then. You know you still have to do the studies and you know so to make make sure that things actually make sense. But at least give some kind of top level direction and I think there are definitely some kind of national initiatives I’ve been reading about I’m researching that I think will help at some of this at the margin. But I do think that ah, until there is just a You know, a very very strong, bidirectional communication between developers and developer trade groups and those who are managing the for mission congestion capacity like yeah I think some yeah I don’t know think ah the the cold war nears to end to a certain extent so that we can eventually get that data revealed and.

James McWalter

Then you know then software people can build on top of that data.

Timothy Kim

yeah yeah I think software has played a very outsized role in our company. You know I was looking at our fiscal year twenty three budget just today and yeah, we’re adding on 4 more software platforms. And these are not cheap by the way right? So um, you know the the question you know as Ceo always has to ask is um where if I have that extra dollar where do I spend it on and it’s more and more coming back on the software piece because just.

James McWalter

Threat.

Timothy Kim

As as this industry matures and becomes far more sophisticated. It’s mimicking that of the oil and gas industry which is already complex right? Um, and you know if if once it goes starts going really starts ramping up that that that. Analytical chain There’s not enough people not enough folks to to keep up with the the fast moving information and its impacts to to your portfolio both from opportunity and risk perspective. So. This is very the software is going to be very very important and I see a lot of ah consolidation in the industry that’s going to take place in the next two or three years that’s my prediction at least.

James McWalter

And yeah, absolutely and I’m also somewhat in this space myself my own company and you know there’s a lot of companies in our size range in the kind of dozen or so people and I agree I think there will be ah quite a few quite a number fewer of us in a couple of years because

James McWalter

Um, there’s a lot of I think duplication and then once you string along some of these functionalities. Um I think then you start to have you know, really powerful software right? Like what is the sales force of development. Um I think that’s that’s a question or the yearp system of development I Think that’s this question that more and more people are going to start asking. But.

Timothy Kim

Yeah, yeah.

James McWalter

It’s a pretty complicated piece of software to your point and I think that is going to take a while to emerge. But when it does emerge I think it probably will be a combination of some of these smaller orgs and I guess one of the you know so we talked about the kind of digital transformation of the space and the other I think big piece that we touched on earlier briefly. But I think I would love to get in your thoughts on is the inflation reduction act. Um, I’ve made this joke before but ah I call it ira because being irish and from Ireland you know calling it the ira for the next decade is is is a bridge too far for me. Um, so I guess you know Ira I think it came out of the blue all of a sudden There was a lot of false stans around you know a climate bill coming out of the current congress.

James McWalter

And finally passed and I think it was a net probably more promising and than I think a lot of people were expecting. Um, how do you think it’s going to I guess directly affect you guys over the next 2 to 3 years right.

Timothy Kim

Well I think the biggest effect here is that it provides confidence to investors. Um, you know, solar developers. We’re optimistic and we have to be by nature right? So the moon where the sun is always up the the glasses always have full regardless what happens. But investors are are of course a different breed sometimes um before the ira there were a number of debates legislation potential legislation that kind of came in and out. Of of both administrations that we’re going to promise everything from the stars to nothing at all, right Um, and I think that made it very difficult for investors to understand how do I plan capital allocation for the next x amount of years and that’s important because the the. The the lifecycle of a development of just a single project right? Just 1 project. Let’s take a hundred megat project anywhere in the United States is approximately four going on to 5 years now. That’s how long it takes for you to conceiv from the time you conceive the project to the time that you you you know, build it. So you need to have this long path of confidence that from the time that you sign up, you know your your option agreements and your lease agreements your land agreements your power agreements and and putting the first million dollars at the door and development capital.

Timothy Kim

To time you bill it. There’s actually going to be yeah, supported legislation and there was not a that before so with with the inflation reduction act. Um, you know more than anything it. It says to investors you know.

Timothy Kim

America is a safe place of investing. It’s a long-term place for your investments. It’s a stable place and we have a renewed interest in seeing clean energy become a dominant form of the energy mix up until at least 2032 or whatever you know? Um, so. You know that that is how I look at it and anytime that you speak to a Ceo you know they’re always worried about their shareholder expectations right? to understand. Okay, well you know there’s only a you know finite amount of capital both in the world and apply to our company. You know where is the best way to use it and when should I use it and the when now is being answered by the the propellant of the ira you’re seeing a number of new projects and initiatives go into the queue and targeting you know, even the manufacturing side. Ah, the bill which you know aims to bring you know panel manufacturing back home back to the United States so of course overall is a good thing. You know. But yeah, if you’re remembering the billback better act the climate change provision of that was something like one point three trillion

Timothy Kim

So the ira is not 370000000000 I mean not just only but it is three seventy billion so it’s it’s one fourth sort of give or take of of what we were trying to achieve we’ll make do we’ll be fine but that also tells me that there’s a lot more to go. And that we could do a lot better as well.

James McWalter

Um, and I think even with that and I fully agree. Um, yeah I think we’re because of that gap between the 1.3 and what? what just shy of 400 that yeah that that came in I think what’s we’re going to be very reliant on is you know.

Timothy Kim

Three seventy yeah

James McWalter

The cost curves for solar and then also some of the operational and digitization elements making things more efficient to bring them the cost to make the deployment and then be very dependent on things like state and local initiatives who are you know making various commitments as well as the corporate commitments of various types another piece that ah. I’ve been kind of chatting to a few folks about is the labor side and talent side. How do you think about? you know the talent mix available to develop the types of projects you work on right? You’re continuing to ramp up develop evermore. Um, you have you know, traditional blue colllar jobs that are you know are deploying the actual assets themselves. We’ve talked about the Analytics. We talked about financing Developers. You know they’re going literally around in trucks to try to get things done. Um. How do you think about how difficult it is Do. We have the right kind of talent mix. Um are there gaps that we should have you know either policy or smart entrepreneurs should be looking at filling those gaps and.

Timothy Kim

Yeah I mean 2 things on this first. Let’s just go back to the Ira it compels developers to use apprentices during the construction phase as well as the operational phase which is very smart because you know you you want you want a catalyst. To build long-term talent in this in this area. That’s first of all the second you know as a subset to that through the ira discussion prevailing wage shops are also going to be a large. Very large part of solar construction moving forward prior to that you know the yeah prevailing wage union jobs were only used when you know it had to be so you’re talking about California type Projects New England you know states where there was no right to work provision. But now you’re talking about high payying wage jobss all throughout the United States specifically tied to deployment of solar and wind and and green hydro and everything else that the that that was kind of snuck under stuck under the Ira Bill so those 2 apprenticeships and prevailing wage are going to drive a lot of interest and movement of human capital towards this industry I firmly believe that um the second part of it is more I would say the white collar jobs. Um.

Timothy Kim

The interesting thing is that we’re now starting to see a number of folks I don’t know whether it’s due the Ira or or is just kind of a bound to happen but a number of folks coming from other into the industries mainly oil and gas and coal. Coming to into the renewable energy industry and bringing their talents and all their experience and sophisticated skills with them. So I think the question of will we have enough talent is really not for renewable energy Industry. It’s really for the oil and gas industry because.

Timothy Kim

These days if you’re a energy major. You know, bachelor’s master’s pc, whatever you are and you you, you’re kind of looking around and you’re saying to yourself where do I want to make my mark in the world. You know. I don’t know I mean oil and gas I don’t get really I don’t really see that see many people going flocking towards that you know the next the generation of folks are graduating. So I think in the five to 10 years. Oil and gas is going to have a talent problem if thunder if they’re not already having 1 right now.

James McWalter

Yeah, absolutely I was actually talking to a canadian oil and gas company who’s actually made quite a ton of money recently with the using. Um you know, getting stuff out of the tar sounds in in Southern Canada and then wait $100 barrel recently and their immediate. Ah, kind of internal initiative is how do we deploy this $4000000000 into renewables because this is like a 1 ne-time like spent like like increase in our net revenue and to try to grow this kind of tiny fledgling renewables group that they have on the side of the business. Um, because that’s where all the upside is and that’s honestly as you said 1 of the ways they can. You know retain talent and and drag talent by saying like oh we actually also have this this piece um said makes a to of sense. Also let’s looking at your your own background and I saw that you spent number of years in the Navy um, how does that kind of influence how you you build and lead a company. So.

Timothy Kim

Yeah, you know I’ve gotten this question a lot and I still haven’t and maybe we’re better from worse. But I don’t have an elevator pitch answer to that I think it’s affected me greatly. This is first.

James McWalter

So.

Timothy Kim

So yeah I would probably say has been the main driver of the way that I manage the company and the visions the thoughts that I have and how I bring that and materialize that to execution stage. Um, maybe one of these days I’ll figure it out with ah with a good psychologist.

Timothy Kim

How exactly you know it’s impacted me but I think it’s impacted me in in very soft ways that have accumulated into very you know hard approaches and to executable approaches into my personality look I mean anybody who’s served in the military or served with folks. You know the military is a very can do attitude right? It actually and I still I’m still involved in a lot of national security and and military initiatives and I was reading one. Um journal in the naval law. Publication call proceedings where that Cando attitude is actually starting to become poisonous because nobody’s actually speaking truth to power anymore. They’re just saying yes, yes, yes, we can do it and if won’t find out. You cannot um.

Timothy Kim

But I think that’s one of the things 1 of the aspects main aspects that has affected me that there is no such thing as a no there’s no such thing as you can’t get that done and then you kind of flank that with with different skills set like project management leadership organizational et cetera etc. Um. And then you come up with kind of this talent ecosystem which I think is very ripe for leaning of organization such as the one we are in today. Um I will say that in the early stages as I spoke about 2017 18 nineteen when this industry was going through some very difficult times. Um, you know that to me I think was an interesting moment. Interesting 3 years and even during covid because I also think that another think that the military brings is adaptability the ability to just. Really think about analytically think about something and adapt to it right? So it had been a lot easy probably to for me to have a bunch of nervous breakdowns. You know we’re just starting. We’re just getting on. But I think being you know, having been in many situations.

James McWalter

Sure I.

Timothy Kim

Where I had to adapt to very quick and volatile change year over year over year in the service led me to pretty much chill out and calm down and think about what was really important and think about the long game. Rather than having knee trick reactions all the time.

James McWalter

Yeah, absolutely and I echo that you know it’s it’s Gris decision- making you know a lot of the qualities. These are exactly what people who found companies. Um, you know show in spades. Um, but timothy. This’s been absolutely brilliant. Really enjoyed the conversation. Before we break off is there anything I should have asked you about but did not.

Timothy Kim

Know Um, a couple of things. Maybe you know we we are hiring Again. You know we we hire very very selectively but we are hiring in a number of areas from analytics to development. Into Investments. So if folks are interested. Please take a look at our and look at our website feel free to apply to those roles and you know I always want to end these podcasts on a very optimistic note because again we are optimistic by.

Timothy Kim

Nature. So I think what I want to also leave folks with is that we are on a very good track. We are on. We have hit the reset button with the inflation reduction act and the industry has lifted all barriers to achieving the. The the most high schools that we have set for ourselves and so if you’re not part of this industry and you’re interested. You know set your Google’s news news alert and you know follow follow the industry follow law or a company and I think you will be pleasantingly surprised and you know maybe it’s not too much to say hopefully. But. Will restore your trust in humanity as to yeah in the in this age where people are you know you know passing on a lot of misinformation that there’s this very bright spot with renewable energy professionals plowing through plowing ahead. And ensuring that we have the right generation mix the right resiliency you know the the clean energy for future generations to come.

James McWalter

I A about are they? um yeah, it’s the people doing the work. Those are the ones that both have their own optimism and then drive optimism and in the rest of us. Um, thank you so much. It’s been brilliant.

Timothy Kim

Thank you, thank you very much James.

Title: Utility Scale Solar Development – E115

Great to chat with Timothy Kim, CEO at ibV Energy Partners! ibV Energy Partners is leading the clean energy revolution through full-service development of utility-scale solar power plants! We discussed policies toward renewables, challenges in developing solar projects, solar moratorium, grid congestion and more! 

https://carbotnic.com/ibvpartners

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 Timothy Kim founder and Ceo of Ibv Energy Partners welcome with the podcast Timothy.

Timothy Kim

Thank you Jamies! Thank you very much for inviting me to pleasure to be on.

James McWalter

So brilliant to start. Can you tell us a little bit about Ibv Energy Partners you.

Timothy Kim

Yeah, so we are a utility scale solar and storage development and primary investment company and what that really means is that we develop large scale power plants solar power plants. Usually it’s sighted on. Think our average is cited on little over a thousand acres of land these days. Um and we develop and operate them and sell the electricity to various customers from utilities to corporates such as Amazon to Google to power agencies and municipalities. Um. I started the company in June of 2017 with Robin size. Our co-founder who’s also our executive vp and head of development him and I had worked at a previous company in Florida. He was the head of development I was ahead of finance and m and a and we just clicked really well. Our battle rhythm synced and 2017 off we went and it’s been a journey since.

James McWalter

And I guess in 2017 where you were making that initial decision. How did you see the opportunity at that point why why did did it make sense to say okay, we’re going to Robin and I we’re going to get into it together. So.

Timothy Kim

Well if if I’m going to be honest with you. It actually did not make sense. Um, you know in 2017 right so that this was six months after the Trump administration came in and’m not trying to be political I’m just stating facts here and.

James McWalter

That right.

Timothy Kim

The administration and federal policies towards renewables was not Friendly. You know in in the same year. There were significant tariffs imposed specifically on solar panelddles which which make up about 40 to 50% of the the plant’s investment right. And then there were subsequent tariffs on major components that make up a solar power plant including you know the substructure the steel of the substructure as well as semiconductors. Ah you know and the inverters in many cases they were just outright bands actually.

Timothy Kim

So you know in 1 case huawei as many people if you could remember back then it was basically banned from the federal government as well as ah, hooking into any critical infrastructure telecommunications as well as energy. So um, but look you know. Oftentimes when things don’t make sense. You know the contrarian that I am I kind of look at the long term to ask does it make sense for the long term and energy has always made sense in the long term um the the advent the development of energy and especially you technology.

Timothy Kim

And so from that angle you know the story was very robust investors where half in half out you know there are a number of federal legislations that were that we’re about to expire but we found an excellent home with ibfo group which. Is the largest pure solar ipp independent power producer in the world having done some of the major firsts in the world when it comes to developing and operating solar power plants. So you know the challenge back then when when you’re starting. A company. You’re you know, ambitious and you want to get into those big leak tables is and the question I was always obsessed with is how do we go in in this very fluid environment. How do we go from the back of the line you know, just starting up. To the very front of the line without you know, taking these baby steps. But you know giant leaps and I think that’s what really ah occupied our minds in the first 3 to 4 years I would say until covid came along um and and these days. We now ah have yeah we fast forward. You know, five years later we have approximately eight Gigawatt of solar and storage assets in the queue where one of the largest developers of of solar in in in Nevada where the largest developer of solar in Kentucky.

Timothy Kim

And Louisiana and we’re working with a number of power customers. You know both both in in the renewables and the utility space and the oil and gas space. Um, and we we work with over. We were approximately fifty landowners now.

Timothy Kim

To to develop solar on over fifty Thousand acres across the United States so the story is strong the the and I think the fundamentals are strong looking back in 2017 ah, you know we came out of this this. Fiery arena into into something that looks a little bit more stable now. So.

James McWalter

Yeah, know it’s it’s absolutely fascinating. But yeah, the timing right? and you know being a bit too early is completely fine, right? because you know you kind of have to get through those couple of years and then if you hit that market inflection point which were clearlyty and now you get all that benefit of having laid the groundwork and in those kind of tougher years and you also have. I guess a kind of leaner mentality around certain things you know again I guess one of the kind of frameworks you know so we’re talking about utility scale these very large thousand acre plus ah you know projects and there’s a you know few other flavors of course of of development. We’ve seen a big rise with community solar which are typically in the.

Timothy Kim

Exactly.

James McWalter

20 to maybe one hundred or two hundred acre parcel or project size and then of course you have a commercial industrial that go below that let alone you know the kind of roof mountunted direction when you’re kind of weighing up. You know why did utility scale like appeal to your relative to maybe some of these other options.

Timothy Kim

Yeah I mean that’s ah, that’s a great question for us is optimization and efficiency and that’s it. It would be relatively easier to develop a community solar. Yeah I don’t want to say it’s easy at all I mean it’s not No. Fastsetter Development is easy but developing you know with the community as your power customers. Um on Land often. Ah, you know if if not granted to you then directed to you by the community is a lot easier than.

Timothy Kim

You know, developing on a one thousand acre farmland where you know many many folks decry the use of solar as as a as a conditional conditional use. Um, however, with that being said, you know when I started in this field in 2007 the cost of solar was somewhere around $4 a watt. Um, you know you fast forward from 2007 to 2015 and the cost of solar in 2015 was approximately dollar $25 thirty five watt to pre pandemicmic 2019 where it was about ¢85 a watt. Um, you can only achieve that type of efficiency through utility scale solar because just the sheer amount of power that you are placing you are citing in 1 area. The other part of this is optimization as I mentioned you know optimization going forward. Is going to play a large role in the autonomous side of of of solar deployment solar operations. Um, we believe that you know doing things at a bigger scale lends itself to more optimization practices. Then doing things at a much smaller scale where you are often. You know, kind of ah boxed in into your own design. So this is the reason why we went large.

James McWalter

Absolutely but then I guess the the tradeoff so enlarge and for the listener you know we’re talking I guess $100000000 plus projects in a kind of typical deployment for those who are less familiar with with with watts of of various types. But then in terms of the um so the absolutely it makes sense those efficiencies large scale generate generates these efficiencies and it absolutely drives the entire industry forward and gets us to you know a much healthier mix of electricity from renewables point of view. But I guess then what are some of the major challenges when you’re trying to develop a thousand acre plus project for.

Timothy Kim

Well the the there’s 2 challenges in developing projects these days. Um, there used to be 3 challenges. So let me let me just quickly go over those 3 and then tell you why it’s now to prior the 3 challenges was and in this order.

Timothy Kim

Securing power customer or we what we call an offtaker ah to buy your electricity right? Renewable energy is new utilities. Don’t really understand did not in the past you know you’re talking about mid 2000 s did not really understand it. It was not pervasive across the United States and corporates the rise of corporates as clean energy. Ah, procurers had not materialized until about 21018 so that’s one and that’s important because at the end of the day you could have a fantastic project. But if you don’t have revenues. Ah contracted revenue you know to to underpin it then you’re not going to get financing for it. So the project is is likely not to be built second the grid the grid is highly congested. This was not an issue so much in the past because back in two thousand and fifteen seventeen your big size projects were 50 to hundred megawatts I mean if you did a ah hundred Megawatts in two thousand and fifteen sixteen like I did you, you were kind of sitting at the upper echelons of solar development these days that’s kind of the lower end of utility scale to give you an idea our portfolio average size 175 Megawatts and we’re soon to be moving up to two hundred Megawatts or largest project being well over three hundred Megawatts so so you know again, efficiency and optimization going against the power curve reducing the the level like cost levelized cost of solar your electricity all plays a role in that the third is obviously.

Timothy Kim

When you go into a community and the vast majority I would probably say so we’re way above 90% of large scale solar farms. Do not sit in municipal land because there just isn’t you know enough land in the municipality or is so expensive. That it. It just does not make it worthwhile and in you know, largely it. It sits in unincorporated. Um, you know County land so you know where where a lot of people will reside as well. So obviously it has impact on a community and the community you know. Has been some where has been more than some there. There’s been a lot of debates about the use of prime Farmland and I’m proud to say that ivv enage partners we designed everything with dual use meaning that you know we we we add pollinators the sheeps could feed off the grass were feasible. We invite livestock on our site to to have that intune with nature type of aesthetics for our plants but those are the 3 the offtake portion the first one I talked to you about has gone away for the most part that is not as difficult as it once was.

Timothy Kim

So now it is about congestion and community. Um, do just give you an idea you know we’ve we’ve had a series of articles on this, you know our first article you know thanks to Matt has has been how solar development that developers can work with. Communities and could work with landowners and it doesn’t need to be 1 or the other you know, solar will never take over. Um you know? Yeah, even a significant amount of prime farmland and so I think there’s a lot of myths out there but part we we view part of our job as educating as well as informing the public of. Of of what those myths are and how we get around it and how we can work together.

James McWalter

Yeah, as people as listeners on the podcast knows you know I grew up on ah on a sheep farm and so you know agvoltaics and you know being able to have dual use of land I think is something that it’s It’s fantastic Here. You’re doing and a lot of so developers Historically it was kind of an afterthought and As. All the prime areas to build prime boat from a farmland as well as a solar point of view. Um, you know are are being kind of looked at and and landowners and farmers are being asked to kind of consider these different options I think having that dual use and enabling the farmer and the community that the farmers in to say ok we are still you know. Having that engagement with the land right? because is very powerful because you know farmers are very few people you know decide to become a farmer right? It’s It’s usually this kind of very very cultural and and familial um structure that you’re born into and and I think anything that so developers do to kind of you know. Meet the farmer Halfway I think is going to on nesh be a massive benefit to both parties.

Timothy Kim

Right? Exactly there’s 1 more thing to so be said about this though and you know in this country. We we do believe and I firmly personally believe in the rights of the landowner. You know we either. There’s long history about you know. Private use of land and what you can and cannot do as long as that doesn’t hurt. You know the the existing surrounding landowners. You should be able to do what you feel you you need to do with your land the land that you worked so hard and your family worked so hard to. Either put together or inherited and and farmed or tilt or whatnot. Um, you know the interesting part here is that the folks who are against solar development largely are not farmers.

Timothy Kim

It’s ah surprising to hear this because you would think they are but in fact, it is not them at all. They are actually highly encouraging for solar development use. Not only from a financial benefit right? I mean you got thirty five forty forty five years of lease revenue. But. From the point of view that they cobble together a lot of them have cobbled together this land over decade two decades 3 decades or even generations. Ah and they feel that they have worked hard enough. Their family has worked hard and now they want to reap some of the benefits of passive investments. So.

Timothy Kim

It’s a very interesting dynamic that’s taking place in many rural areas of of this country where farmers are actually proponents of solar development and the ones that are not have nothing really to do with their farm. They just don’t like the idea for you know. Xy and z you know.

James McWalter

And and you’re seeing this in the rise of solar moratoriums that are happening at the you know at the subdivision level where you might have a village and then some folks at the village you like oh you know let’s ban solar from our village and incorporate unincorporated surroundings for like the next two years and I think technically there is some voting going on. But ah, you know, local democracy often struggles to actually get everybody in in that locality to actually engage in it and rein the time of what’s going on and if something’s passed that says there’s this little moratorium moratorium and you’re not able to build for the next year and a half two years um you know the I guess the average time owner there is is a bit out of luck.

Timothy Kim

Yeah, the solar moratorium is is is very concerning and and and you know borderline scary because essentially what they are doing is there. There are some communities for example. We are developing a very large two hundred and seventy five Megawatt solar farm in the southern area of Nevada in this within the city of bolder city as a matter of fact, we actually lease the property from the city. That’s one of the very few projects where we actually lease it and where it’s actually in the the municipality. City of boer city generates a lot of money. Ah from the lease of their solar farms. You know they have a number of solar leases out in that area and they’ve structured a program where they’re very careful because they don’t want to expand they don’t want to expand you know? ah you know in population. But so but they have to cover their you know their their expenses with with with some sort of revenue and that revenue is solar. You know the the amount of benefits that solar tax benefits. It’s just hard benefits really that solar provides to county. Is is numerable I mean you’re talking about again generations of of you know tax impact and and you know to to buy new equipment for the schools provide scholarships by you. We equipment in for the fire and and and police department. We see this these are these are actually.

Timothy Kim

Hard benefits and so when there’s a moratorium often the county and the residents are saying that we don’t want these benefits and then they have to find a new source of revenue to cover costs. Everybody knows that infrastructure um is aging that school buildings are aging and we may very well be in a recession a long one next year and you know it is our hope that we work with you know we certainly strive to work with counties to ensure that they understand this. At the end of end of the day like you said James is there is there a choice you know if they propose a solar moratorium then I think they’re just shooting themselves in the foot for the long run.

James McWalter

Yeah I think one of the things that will I think will change because as people are becoming more familiar with the upsides of these projects I think attitudes will change because right now it’s like oh you know I’ve seen. Ah you know something on Tv there might be some solar panels that seems like a net good. But I don’t really know a ton about them I don’t know that those elements around that’s going to positively affect. You know the tax base within my community I think it’s just going to take a little while as these things kind of spread out as more people are exposed to them that because it’s very easy to say no right? It’s it’s often harder to say yes to things. And so seeing those kind of positive reasons you know having conversations like this you know I’m sure the day-to-day work that you and your team do um, reaching out and engaging the community and the landowners and then those landowners then you know I’m sure we’re talking to their neighbors and people are then starting to you know do the heavy you know day-to-day work. Of making ah you know making these things move in more positive direction. But I guess you know with all these considerations right? So you know where is the solar mertarium. You know where’s or less grid congestion. How do you work through all of that these type different types of information to say. Actually you know what. This community with these two thousand acres in this particular part of the country is actually a great place to build versus this other place. You know, ah 1 state away.

Timothy Kim

Yeah that’s another good question. First of all before I answer that let me just say that I don’t want to pin this ah you know. Solar developers. We have not ourselves done a very good job of informing the company informing the communities at large we’re now starting to do this but we should have done this long time. Our industry should have done this long time ago. We should have done. We should have made a push to decouple. Story of solar from the politics of solar or the politics of green energy or clean energy and so we have to we have to understand yeah as an industry we share a lot of that blame. Um, and yeah, if you go to to websites of a lot of solar development companies. They still don’t tell that story. They don’t explain. Why they’re doing what they’re doing and how they’re working with communities. You know we recently revamped our website and we added the first thing we wanted to do was add a community section and then a long faq section both under our project section as well as our community section 200 let landowners and communities and officials and you know people who are opposed to solar understand that listen, we may not agree on everything but we’re going to be very transparent of how we’re coming about this and why we’re doing this and what the benefits are to you so I would um.

Timothy Kim

I’m just going to give a a shameless plug for our website sure. So if you go to our website ivvenergy.com then you ah scroll through it take a look at it and we hope that the website is not just about Obstin but is about you know turning the tide on.

James McWalter

Sure and we we’ll include that in the show notes as well. Definitely those links. So.

Timothy Kim

Informing the public of you know, investments and development in in community initiatives particularly when it comes to solar. Um, the second part of this is to answer your question. Um, we we do? What’s called analytically driven development that’s kind of a fancy phrase right? But ah. You know anytime there a new industry pops up you you could traces all the way you know the oil and gas semiconductor any industry you know area aviation. There’s always this cowboy mentality right? The cowboy mentality is just go fast. Go hard and let’s figure out the rest later. Um. And that happened in our industry. You know when when you know when we when this industry first began in 2006 you know number of developers just went for land grab and they weren’t really thinking and it yeah know even happens today. Um, which which is really unfortunate. We. We don’t do that. We. We engage in annually driven development where we take a pause and say okay, you know we look at everything from the perspective of of an investor and we we answer the hard questions when we spend a lot of time. A lot of resources a lot of money on you know, modeling out. And researching and analyzing points of interconnection making sure that we feel ourselves comfortable that there’s enough capacity a certain substation that the solar farm could be built that there’s no moratorium we meet with County officials beforehand before we weave even touch a single piece of land.

Timothy Kim

Because I think the the industry has also suffered another blight and that is that of a solar cowboy. Yeah, the speculator that comes in Grabs Land makes big promises and doesn’t deliver and we’ve had to yeah it makes everybody’s job hard and we don’t want to do this. That’s not who we are. And I think we we we were at the forefront you know vanguard of where the energy has to where where the industry has to change and we’re certainly leading that charge.

James McWalter

So and speaking of that you know I come from a software background I’m actually working on some projects in this very space right now where would you like to see more innovation you know where could you know? smart folks coming in maybe with more of a software and data background be building. To service you better solve some of your problems get more projects developed and.

Timothy Kim

Well these days you know and there’s I think it was last week you know I never I almost never want to drop the name Elon muskkin anything because he’s so caught but at same time controversial but also so inspirational you know I mean.

James McWalter

I sure.

Timothy Kim

But but he did come up with ah you know, kind of this funny I don’t know if he was joking or not but he he said that you know either tesla or somebody should develop software for developers to engage in more predictive and precise predictive analysis of. Of of grid congestion and the costs associated to plug in the solar power plant to the grid. That’s a number one I would say even more than you know the not in my backyard type of folks congestion is actually the number 1 issue plaguing the industry right now the inability to predict. Your network upgrades. So let’s say that you have a power plant. You already spent $3000000 developing studies. You know engineering you know permitting all that stuff communities great with you. everything looks fine everything looks clean you go through this 4 or 5 sometimes 6 year interconnection study cycle. Where you just have to put more money and more money and more money for every study that you want to advance to and then all of a sudden you put $10000000 at the end and the last study comes back and says that your project is now uneconomical. You just drop $10000000 and do you think that those types of companies are going to come back from that you know. Um, so we need a lot more engagement with the transmission organizations the independent system operators and folks who have the insight but are not willing to open source their information.

Timothy Kim

The betterment of the industry and I hopefully software could plug a lot of that holes in in in bringing that information out from those transmission organizations and utilities into open source and then allowing you know developers such as ours a platform to subscribe to that. Information that would be interesting.

James McWalter

And yet yeah, it’s very interesting because ah, a lot of the space like the incentives are just all not fully aligned in a way that would make these things easier and as easy as they should be right. And so you often have the utility or the grid operator or the operator of the transmission and the Iso. Whatever it may be um, yeah, they’re incentivized to ah you know freerability right? So various types and maybe a couple other incentives that are built into their their model. Whatever it may be. And then you have individual developers like yourselves who are trying to figure out look you know we know we’re going to be building a lot of renewables just tell us where to build right? like at the end of the day if you could just direct us and say hey 10 developers who are bidding into a particular market It’s definitely going to make sense to be along this. You know one hundred mile piece of transmission and then. You know you still have to do the studies and you know so to make make sure that things actually make sense. But at least give some kind of top level direction and I think there are definitely some kind of national initiatives I’ve been reading about I’m researching that I think will help at some of this at the margin. But I do think that ah, until there is just a You know, a very very strong, bidirectional communication between developers and developer trade groups and those who are managing the for mission congestion capacity like yeah I think some yeah I don’t know think ah the the cold war nears to end to a certain extent so that we can eventually get that data revealed and.

James McWalter

Then you know then software people can build on top of that data.

Timothy Kim

yeah yeah I think software has played a very outsized role in our company. You know I was looking at our fiscal year twenty three budget just today and yeah, we’re adding on 4 more software platforms. And these are not cheap by the way right? So um, you know the the question you know as Ceo always has to ask is um where if I have that extra dollar where do I spend it on and it’s more and more coming back on the software piece because just.

James McWalter

Threat.

Timothy Kim

As as this industry matures and becomes far more sophisticated. It’s mimicking that of the oil and gas industry which is already complex right? Um, and you know if if once it goes starts going really starts ramping up that that that. Analytical chain There’s not enough people not enough folks to to keep up with the the fast moving information and its impacts to to your portfolio both from opportunity and risk perspective. So. This is very the software is going to be very very important and I see a lot of ah consolidation in the industry that’s going to take place in the next two or three years that’s my prediction at least.

James McWalter

And yeah, absolutely and I’m also somewhat in this space myself my own company and you know there’s a lot of companies in our size range in the kind of dozen or so people and I agree I think there will be ah quite a few quite a number fewer of us in a couple of years because

James McWalter

Um, there’s a lot of I think duplication and then once you string along some of these functionalities. Um I think then you start to have you know, really powerful software right? Like what is the sales force of development. Um I think that’s that’s a question or the yearp system of development I Think that’s this question that more and more people are going to start asking. But.

Timothy Kim

Yeah, yeah.

James McWalter

It’s a pretty complicated piece of software to your point and I think that is going to take a while to emerge. But when it does emerge I think it probably will be a combination of some of these smaller orgs and I guess one of the you know so we talked about the kind of digital transformation of the space and the other I think big piece that we touched on earlier briefly. But I think I would love to get in your thoughts on is the inflation reduction act. Um, I’ve made this joke before but ah I call it ira because being irish and from Ireland you know calling it the ira for the next decade is is is a bridge too far for me. Um, so I guess you know Ira I think it came out of the blue all of a sudden There was a lot of false stans around you know a climate bill coming out of the current congress.

James McWalter

And finally passed and I think it was a net probably more promising and than I think a lot of people were expecting. Um, how do you think it’s going to I guess directly affect you guys over the next 2 to 3 years right.

Timothy Kim

Well I think the biggest effect here is that it provides confidence to investors. Um, you know, solar developers. We’re optimistic and we have to be by nature right? So the moon where the sun is always up the the glasses always have full regardless what happens. But investors are are of course a different breed sometimes um before the ira there were a number of debates legislation potential legislation that kind of came in and out. Of of both administrations that we’re going to promise everything from the stars to nothing at all, right Um, and I think that made it very difficult for investors to understand how do I plan capital allocation for the next x amount of years and that’s important because the the. The the lifecycle of a development of just a single project right? Just 1 project. Let’s take a hundred megat project anywhere in the United States is approximately four going on to 5 years now. That’s how long it takes for you to conceiv from the time you conceive the project to the time that you you you know, build it. So you need to have this long path of confidence that from the time that you sign up, you know your your option agreements and your lease agreements your land agreements your power agreements and and putting the first million dollars at the door and development capital.

Timothy Kim

To time you bill it. There’s actually going to be yeah, supported legislation and there was not a that before so with with the inflation reduction act. Um, you know more than anything it. It says to investors you know.

Timothy Kim

America is a safe place of investing. It’s a long-term place for your investments. It’s a stable place and we have a renewed interest in seeing clean energy become a dominant form of the energy mix up until at least 2032 or whatever you know? Um, so. You know that that is how I look at it and anytime that you speak to a Ceo you know they’re always worried about their shareholder expectations right? to understand. Okay, well you know there’s only a you know finite amount of capital both in the world and apply to our company. You know where is the best way to use it and when should I use it and the when now is being answered by the the propellant of the ira you’re seeing a number of new projects and initiatives go into the queue and targeting you know, even the manufacturing side. Ah, the bill which you know aims to bring you know panel manufacturing back home back to the United States so of course overall is a good thing. You know. But yeah, if you’re remembering the billback better act the climate change provision of that was something like one point three trillion

Timothy Kim

So the ira is not 370000000000 I mean not just only but it is three seventy billion so it’s it’s one fourth sort of give or take of of what we were trying to achieve we’ll make do we’ll be fine but that also tells me that there’s a lot more to go. And that we could do a lot better as well.

James McWalter

Um, and I think even with that and I fully agree. Um, yeah I think we’re because of that gap between the 1.3 and what? what just shy of 400 that yeah that that came in I think what’s we’re going to be very reliant on is you know.

Timothy Kim

Three seventy yeah

James McWalter

The cost curves for solar and then also some of the operational and digitization elements making things more efficient to bring them the cost to make the deployment and then be very dependent on things like state and local initiatives who are you know making various commitments as well as the corporate commitments of various types another piece that ah. I’ve been kind of chatting to a few folks about is the labor side and talent side. How do you think about? you know the talent mix available to develop the types of projects you work on right? You’re continuing to ramp up develop evermore. Um, you have you know, traditional blue colllar jobs that are you know are deploying the actual assets themselves. We’ve talked about the Analytics. We talked about financing Developers. You know they’re going literally around in trucks to try to get things done. Um. How do you think about how difficult it is Do. We have the right kind of talent mix. Um are there gaps that we should have you know either policy or smart entrepreneurs should be looking at filling those gaps and.

Timothy Kim

Yeah I mean 2 things on this first. Let’s just go back to the Ira it compels developers to use apprentices during the construction phase as well as the operational phase which is very smart because you know you you want you want a catalyst. To build long-term talent in this in this area. That’s first of all the second you know as a subset to that through the ira discussion prevailing wage shops are also going to be a large. Very large part of solar construction moving forward prior to that you know the yeah prevailing wage union jobs were only used when you know it had to be so you’re talking about California type Projects New England you know states where there was no right to work provision. But now you’re talking about high payying wage jobss all throughout the United States specifically tied to deployment of solar and wind and and green hydro and everything else that the that that was kind of snuck under stuck under the Ira Bill so those 2 apprenticeships and prevailing wage are going to drive a lot of interest and movement of human capital towards this industry I firmly believe that um the second part of it is more I would say the white collar jobs. Um.

Timothy Kim

The interesting thing is that we’re now starting to see a number of folks I don’t know whether it’s due the Ira or or is just kind of a bound to happen but a number of folks coming from other into the industries mainly oil and gas and coal. Coming to into the renewable energy industry and bringing their talents and all their experience and sophisticated skills with them. So I think the question of will we have enough talent is really not for renewable energy Industry. It’s really for the oil and gas industry because.

Timothy Kim

These days if you’re a energy major. You know, bachelor’s master’s pc, whatever you are and you you, you’re kind of looking around and you’re saying to yourself where do I want to make my mark in the world. You know. I don’t know I mean oil and gas I don’t get really I don’t really see that see many people going flocking towards that you know the next the generation of folks are graduating. So I think in the five to 10 years. Oil and gas is going to have a talent problem if thunder if they’re not already having 1 right now.

James McWalter

Yeah, absolutely I was actually talking to a canadian oil and gas company who’s actually made quite a ton of money recently with the using. Um you know, getting stuff out of the tar sounds in in Southern Canada and then wait $100 barrel recently and their immediate. Ah, kind of internal initiative is how do we deploy this $4000000000 into renewables because this is like a 1 ne-time like spent like like increase in our net revenue and to try to grow this kind of tiny fledgling renewables group that they have on the side of the business. Um, because that’s where all the upside is and that’s honestly as you said 1 of the ways they can. You know retain talent and and drag talent by saying like oh we actually also have this this piece um said makes a to of sense. Also let’s looking at your your own background and I saw that you spent number of years in the Navy um, how does that kind of influence how you you build and lead a company. So.

Timothy Kim

Yeah, you know I’ve gotten this question a lot and I still haven’t and maybe we’re better from worse. But I don’t have an elevator pitch answer to that I think it’s affected me greatly. This is first.

James McWalter

So.

Timothy Kim

So yeah I would probably say has been the main driver of the way that I manage the company and the visions the thoughts that I have and how I bring that and materialize that to execution stage. Um, maybe one of these days I’ll figure it out with ah with a good psychologist.

Timothy Kim

How exactly you know it’s impacted me but I think it’s impacted me in in very soft ways that have accumulated into very you know hard approaches and to executable approaches into my personality look I mean anybody who’s served in the military or served with folks. You know the military is a very can do attitude right? It actually and I still I’m still involved in a lot of national security and and military initiatives and I was reading one. Um journal in the naval law. Publication call proceedings where that Cando attitude is actually starting to become poisonous because nobody’s actually speaking truth to power anymore. They’re just saying yes, yes, yes, we can do it and if won’t find out. You cannot um.

Timothy Kim

But I think that’s one of the things 1 of the aspects main aspects that has affected me that there is no such thing as a no there’s no such thing as you can’t get that done and then you kind of flank that with with different skills set like project management leadership organizational et cetera etc. Um. And then you come up with kind of this talent ecosystem which I think is very ripe for leaning of organization such as the one we are in today. Um I will say that in the early stages as I spoke about 2017 18 nineteen when this industry was going through some very difficult times. Um, you know that to me I think was an interesting moment. Interesting 3 years and even during covid because I also think that another think that the military brings is adaptability the ability to just. Really think about analytically think about something and adapt to it right? So it had been a lot easy probably to for me to have a bunch of nervous breakdowns. You know we’re just starting. We’re just getting on. But I think being you know, having been in many situations.

James McWalter

Sure I.

Timothy Kim

Where I had to adapt to very quick and volatile change year over year over year in the service led me to pretty much chill out and calm down and think about what was really important and think about the long game. Rather than having knee trick reactions all the time.

James McWalter

Yeah, absolutely and I echo that you know it’s it’s Gris decision- making you know a lot of the qualities. These are exactly what people who found companies. Um, you know show in spades. Um, but timothy. This’s been absolutely brilliant. Really enjoyed the conversation. Before we break off is there anything I should have asked you about but did not.

Timothy Kim

Know Um, a couple of things. Maybe you know we we are hiring Again. You know we we hire very very selectively but we are hiring in a number of areas from analytics to development. Into Investments. So if folks are interested. Please take a look at our and look at our website feel free to apply to those roles and you know I always want to end these podcasts on a very optimistic note because again we are optimistic by.

Timothy Kim

Nature. So I think what I want to also leave folks with is that we are on a very good track. We are on. We have hit the reset button with the inflation reduction act and the industry has lifted all barriers to achieving the. The the most high schools that we have set for ourselves and so if you’re not part of this industry and you’re interested. You know set your Google’s news news alert and you know follow follow the industry follow law or a company and I think you will be pleasantingly surprised and you know maybe it’s not too much to say hopefully. But. Will restore your trust in humanity as to yeah in the in this age where people are you know you know passing on a lot of misinformation that there’s this very bright spot with renewable energy professionals plowing through plowing ahead. And ensuring that we have the right generation mix the right resiliency you know the the clean energy for future generations to come.

James McWalter

I A about are they? um yeah, it’s the people doing the work. Those are the ones that both have their own optimism and then drive optimism and in the rest of us. Um, thank you so much. It’s been brilliant.

Timothy Kim

Thank you, thank you very much James.

Financial Carbon Accounting – E114

Great to chat with Jonathan Nwosu, Co-Founder and CEO at ClimaView, software that analyzes financed emissions and enable sustainable finance products! We discussed measuring bank emissions, the Mom Test, how to make early enterprise sales, the difficulties of gathering clean data and more!

https://carbotnic.com/climaview

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

To contact Jonathan about their fundraising, please email him here

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 Jonathan Nwosu founder at Climaview. welcome to podcast dot Jonathan Nwosuathan.

Jonathan Nwosu

Hey James yeah, really glad to be on the podcast. Thanks for having me really excited to get things going.

James McWalter

Bridge at the start. Can you tell us a little bit about Climaview. 

Jonathan Nwosu

Yeah, absolutely so clean of you is a software platform and essentially what we do is we help banks measure their emissions and their finance emissions which then enables them to build green sustainable financial products.

James McWalter

And what drove that initial decision to start Clima View.

Jonathan Nwosu

Yeah that’s a great question and it’s a question that we think about a lot. So what the reason we decided to build clean view was because um, me and my co-founders. We knew we wanted to work in the climate space. We looked at all the challenges that were going on in the world and we realized that climate was. Um, one of the biggest challenges that humanity faces over the next ten or twenty years so this is a space that we decided to focus on. But even though we knew we wanted to focus on climate. We didn’t quite know which space in climate to focus on and this is where we started with customer discovery so in about. Span of about 6 to eight months we started interviewing over 150 people I those people included esg analysts industry experts investors climate operators pretty much anyone that you can think of that’s working in the esg in climate space. Um, and then we started to see some common themes and some common patterns and one of the challenges that we saw was that banks and financial institutions really struggled to measure their finance emissions and as a result they really struggled to build green financial products. And I can dive into more detail as to what that actually means.

James McWalter

Yeah, and I guess those 150 people and I think it’s a really good lesson for anybody thinking about starting a company. You know you do have to talk to a lot of potential users reinsend the problem. How do you find those people.

Jonathan Nwosu

So yeah, another great question so we um, we found those people through ah various means um one was just our extended network. So we sort of leveraged our existing network. Um, and so we just randomly hit up people on Linkedin. We sent lots of messages. We sent lots of cold messages. Um, we had lots of warm introductions and we sent lots of emails. Ah but we also ah all met at Oxford University which is where we all studied and therefore we had access to quite a wide range of professors and climate experts from our university. Um, and we really leveraged that um connection that we had to the university to go back to speak to some of our old professors and to speak to some ah professors in the climate school there as well. Um, but it was just mainly a lot of hustling and really just a lot of work. But.

James McWalter

And you mentioned your cofounders you all went to University together I Guess you know how were you kind of previously friends were you working on projects together were you studying the same things. You know how did that kind of cofounder relationship develop.

Jonathan Nwosu

Yeah I think with any sort of great Businesses. We All did start off as friends so men was actually on my course so I was doing software engineering. Um and we also met tech shesh as well Who was studying climate physics. Um, and we did start off as friends initially we were just all super passionate. Super ambitious and. We really knew we wanted to make a change in the world as Cliche as that may sounds but we knew we wanted to have lasting impact. Um, and we realized we could have lasting impact within the climate space and that’s why we chose to focus specifically on this climates on this climate challenge. Um, but.

Jonathan Nwosu

We knew that one of the key ways that we could have impact was through starting a business and that’s exactly what we chose to do I think um, we had this kind of common understanding that entrepreneurship was a way ah for us to create the change that we wanted to see out into the world. Um, and we knew that the only way we could kind of create this change was by starting a business. Um, so it became pretty obvious really early on that it was right for us to so start a business.. There was great team synergy at the very beginning we were all friends as I mentioned um and we were all passionate about this space Now we have um, individual reasons as to why we’re tackling Climate. Ah, but we all had this kind of common gold and common vision um of trying to leave the earth in a better condition than I guess where we found it.

James McWalter

So yeah, one of the ways I kind of think about it is is a lot of these kind of big levers that individuals and organizations can can use to combat climateish and governmental is like 1 obviously big lever activism ah, you know, very very large corporates have various levers. They can pull. But obviously you know the the emets of this startup and like the community that that I’m part of and and that you’re part of is the lever around you know, early stage fast moving startups that try to have a very very large impact and a very very short amount of time and I think all these levers are necessary. We basically have to get you know. A a to a plus decisions and motion across all lers to really you know combat to the level that we need to um, but that makes some of sense right? because you can’t do all them right? I think the people who are like oh I’m going to be governmental and also doing the startup thing on the side. Um, that never works you have to kind of be really really full in on one of these directions. And then that’s how you have the greatest impact and you know as you were kind of going through. You know the process of like talking to people listening to different problems and ideas that would have a potential climate impact was there ever were there any other kind of ideas that you came close to moving forward with that. You decided against so.

Jonathan Nwosu

And yeah I would I guess I’m going to start that off by saying I completely agree. There’s um, on your previous statement that is um, there’s a lot of things that we could have done and there’s more than one way to sort of um, be a catalyst for change right? We looked our our existing skill set and we. Essentially a group of physicists and and engineers and we thought we’re really good with technology and therefore we decided to take a tech first approach and um in trying to solve this problem but you’re right in saying that there’s um, other ways to solve the climate challenge such as activism and obviously um, working in politics and fruit of the regulatory lens as well.

Jonathan Nwosu

But just to answer your second question. Yeah, there’s a ton of really bad ideas that we worked on initially um and I think um as we were interviewing 150 people ah we actually started um, putting out theories. Um, and start we started putting out assumptions right? And these assumptions were basically startup ideas.

James McWalter

I absolutely.

Jonathan Nwosu

Um, one of the ideas that we had really early on was ah we wanted to introduce carbon neutral meals to restaurants. Um, so anytime and you would go to a restaurant. You’d basically pay a little bit extra to basically make your ah meal carbon neutral and to offset um your meal. Um, and we thought that this was like the best idea that had ever been created. But I think in hindsight it. It was a pretty terrible idea but it’s one of the ideas that we had really early On. We didn’t pursue it much further I think we did a lot of validation and we spoke to a lot of people and we realized that this is something that a lot of like restaurants don’t Need. Um.

James McWalter

And.

Jonathan Nwosu

You know I think you’re probably well aware James that ah most small businesses. They’re really really um, struggling to just survive and they’re struggling to meet to make ends meet. Um, so the last thing that they’re sort of thinking about is introducing more expensive pricing for their customers. Um, but. And yeah, it just wasn’t it wasn’t a great idea for that’s only of the ideas that we had and I’m pretty sure we had plenty more um but then after 150 interviews you do get a a good grasp of what some of the key challenges are in certain sectors and that’s how we kind of stumbled upon. Um. The idea that claim if he’s working on now.

James McWalter

Yeah, yeah, a lot of investors will use the kind of terminology of is it a vitamin or you know like a pain color right? something that it’s nice to have or or need to have I don’t personally the the the thing because sometimes you know like a vitamin gets you you know, preventative and all these kind of things.

Jonathan Nwosu

Interactive and seconding.

James McWalter

But I actually had my own. Um, pretty arguably bad idea. Although anybody listening things feel free to try it themselves which was sms ah chatbots aimed at farmers to prompt them into more climate friend. Friendly decisions based on their specific farm right? because it would do some geo-occation on on you know where the farmers receiving it. And and yeah I grew up on a farm and it is just hard to sell to farmers and so the tech was actually pretty easy in that case like we you know myself and a couple of friends we we spun something up pretty quickly but trying to get users is always you know nearly always the major challenge with startups right? Usually it’s market risk more than technical risk and so as you’re kind of thinking through then.

James McWalter

You know you have ah an idea you’ve tried a few different ideas like okay this specific idea which became clean of you. That’s the one we’re moving forward with from that point what was the kind of next step was it building an Mvp was it trying to sign up some you know early waitlist users like what what would those next couple of months look like.

Jonathan Nwosu

I yeah, it’s a great question. Um I was going to say though James that doesn’t actually sound like a bad idea the farmer in the sms chap but I was just like I’m really sure that will be actually pretty useful. Um night three.

James McWalter

But if if if the farmer the but for the farmer right? It’s not yet a pain Killer right? So if the farmer was feeling the pressure to have the climate friendly impact. Um you know, but but similar to you you in the conversation we’re having about the restaurant idea like the margins are so thin that until you have either regulatory pressure or some other.

Jonathan Nwosu

Um, exactly.

James McWalter

Lever that actually pushes them I think maybe it’s just too early. But yeah, you know so but somebody should try it. Yeah.

Jonathan Nwosu

Yeah, yeah, exactly? Um, but I guess just won’t see your question in terms of how we further developed the idea. So I guess we developed the idea in 3 kind of core stages one was just. Um, the first part was just that we did a lot of customer discovery right? So as I mentioned for like 6 to eight months we built nothing. There was no code, no nothing, no product, no demo nothing like that we were just having conversations and I think what that did was it helped us really understand the space better than most people out there and. Just by intensely focusing on this space for 6 to eight months where we just we read. We listened to podcasts. Um, we read books we spoke to industry experts. We were able to learn really really quickly and we were able to learn at a really accelerated pace. Um. And then we identified one problem and 1 of the core challenges was that banks and financial institutions um have a hard time in measuring their scope three finance emissions and I’ll dive into what that actually means um so let’s take a bank like Jp Morgan or Hsbc. Um, if one of these large banks gives maybe a billion dollars to um x on mobile and Exxon Mobile um carries out oil exploration work with that and that leads to further emissions. Um those emissions that are created are actually part of Jp Morgans or Hsbc’s wider emissions and these are known as finance emissions.

Jonathan Nwosu

So even though J P Morgan and Hsbc were not directly relevant to the contribution of these emissions. Um, it’s actually still um, a duty for the bank to report on these emissions. Um, and it turns out that they really struggle to figure out what that quantifiable number is. Um, and that’s what we’re helping these banks and financial institutions really do Um, and so what we did was we created a bunch of demos we showed it to some of these banks and we were like hey if we actually build out a fully fledged solution would you pay for it. Um, and it turns out that some of them will um and some of them have um so that’s. That sort of leads us into the the third and final part which is um, we’re sort of now in the process of creating a paid pilot with one of the largest banks here in the u k so some really really exciting times and we sort of approach this whole startup journey in a really methodical way and we read this book called that disciplined entrepreneur which is. Fantastic and I would highly recommend it to anyone building out a business because it really forces you to think about business from like first principles and it really forces you to think about um business from a very methodical and logical process and we made very few assumptions that.

James McWalter

Yeah I love that and other kind of similar books that tackle kind of similar approaches things like the mom test and a few others where you have to presume very little. Um, you just have to you know, be incredibly humble about the problem space and then you can be you know, very very innovative on the on the solution side right.

Jonathan Nwosu

Oh yeah.

Jonathan Nwosu

Um, exactly.

James McWalter

But but you know we are you know quotequote the idiots right? Even if it’s a problem you yourself have had you’re like Okay, what is the user. How are they solving it. You know how are they solving it from a time and money point of view and so on and and and this kind of progress and I think it’s it’s ah also this very common problem that a lot of startups. Get.

Jonathan Nwosu

Yes.

Jonathan Nwosu

Exactly spot on.

James McWalter

Caught up it and in previous startups to to one I’m working on now I also did that where you are either over build before you validate really the market demand and there’s nearly nothing worse than building too early because you’ve now built something and you’re looking for customers for your product rather than um, ah building a product for your customers and all of a sudden. Yeah, once something exists that you put hours into or days or weeks or months it’s like you know you’re nearly naturally going to be somewhat defensive of that effort and then if users don’t want it. It’s like okay well the users are wrong. Let’s go find some users who actually want to use our product and so many startups get caught up in that and again I’ve I’ve also had that issue in the past. Whereas if you go and you just have mockups and you try to you know, ideally, try to sign some letters of intent even if they’re nonbinding um, and again as you said that you can start with free or free demos and and kind of start moving into paid pilots from there. You just start to move along this kind of. Trust. You know this trust process and then you’re also iterating right? It’s a lot easier to iterate on a deck than it is to iterate you know with code um and so I think you know the kind of approach you’ve taken so far makes a ton of sense and so now that you are starting to work with this. You know this first kind of cornerstone. Um potential customer for the paid pilot. You know how are you thinking about like you know the the onboarding of that when we talk about scope 3 emissions like these are near Toby definition. Very very hard to measure and so what’s the kind of methodology that you’re taking to a problem right.

Jonathan Nwosu

And yeah, that’s a great question I’m so glad you mentioned the mum test because that’s a book that we heavily relied upon in the early days it is a goldm mine. Um, it’s such a good book if you’re thinking of starting a business or in a or in a process of starting 1 I would definitely definitely recommend it. Um.

James McWalter

Yeah, it’s it’s ah it’s a mom test in America mom tests and in the U K and mam test in Ireland you know.

Jonathan Nwosu

I love that yeah actually spent some quite some time in in Ireland I used to live in I and I see you also grew up in island um, which is pretty cool. Um, yeah in terms of how we’re thinking about integrating um and onboarding and you know just diving deeper into how the technology works.

James McWalter

Yeah.

Jonathan Nwosu

Um, so a lot of our calculations or we figure out scope 3 finance emissions ah based on transactions data. Um, so we’re quite lucky that we’re really just focused of banks and financial institutions. Um, and banks have a lot of transactions data. So basically going back to the example that I gave before of. Ah, Jpmorgan Chase giving out loans to oil companies. We’re lucky that. Um we would be able to access. Um, you know Exon’s Mobile’s transactions data through the bank. Um, and we’d be able to accurately assess their emissions based on transactions data right? So and if they are. Buying um a million pounds worth of ah pumps or something um to pump oil from one region of Texas to another. We’d be able to basically assess what the emissions were um that are attributed to that ah oil moving from one part of the Us to another part. And we’d be able to attribute the cost of the pump and the materials associated with the pump simply by looking at transactions data and what we’re trying to do is build um, a really large database of emissions factors. Um, where we’re basically scraping online journals and scientific journals as well as using existing. Um. Global standards for emissions factors and we’re compiling a proprietary database where we’ll be able to use transactions data to look at a company’s emissions. Um, and this will help ah banks measure their portfolio emissions just because like in the example that I gave jp Morgan Chase will be able to assess the emissions of Exxon Mobile

Jonathan Nwosu

And by looking at x on mobile scope one and 2 emissions. We’ll be able to help Jpmorgan Chase um figure out their scope three emissions so we just do it through transactions data.

James McWalter

So if you take take let’s say I think this is a really interesting example. So just some understanding is this a top-down or a bottom-up calculation. So the case of x andmobi there I’m sure for any large public company like that there are some sort of like top line. Ah. You know number data. So you know one hundred units of of carbon emitted by that particular company and then if you look at all of that company’s expenditure that you could potentially tie a dollar of expenditure to that topline number and so a dollar of Expenditure x on mobilebiil is 2 units of carbon where is a dollar of expenditure. Um, or or loans or whatever maybe be by ah you know I Don know Apple is you know, zero point two five dollars of expenditure are are of emissions ah units of emissions or are you looking at? Okay, um, diving into exonmobile’s specific. Loan for a pipeline which will be causing. Yeah let’s say ah oil pipeline which will cause way more emissions than excel mobile you know, maybe renting some office space which be lower I guess how are you thinking about the balance of that top-down versus bottom-up approach.

Jonathan Nwosu

exactly exactly I’m so glad that you mentioned that because we are taking a bottoms up approach as opposed to a top down approach with a top down approach There’s a lot of assumptions that you can make um whoever toppped out with ah a bottoms up approach. We’re looking at you know how is the loan actually being used. What specific material is being used um with that loan. What purchases are being made with that loan. So we’re able to introduce a lot more accuracy than if we took a top down approach. Um, so you’re spot on in saying that we don’t make you know high level assumptions. We don’t look at their sort of global emissions and we don’t say. You know, um, there’s x amount of co 2 being produced because we know that you know Xl mogul is responsible for x number of emissions. We really take ah a granular approach where we look at the exact transactions data and we look at the nature of the transactions and this is where a lot of the machine learning capabilities that we use come in. We’ll be able to identify the activity from the transactions data and then assign the relevant emissions factor to come to the relevant emissions for that particular activity. So our calculations are very very granular. They’re very very accurate. Um, and we notice that a lot of our competitors are taking a top-down approach as opposed to a bottoms up approach. And this is where we introduce more accuracy into these calculations and and these emissions.

James McWalter

It Yeah I Really like that as a kind of point of differentiation compared to the the the top-down approach I Guess the difficulty though is the data right? and with the difficulty with with with the data in general and um, you know I think a lot of companies in a lot of startups. Are you know.

Jonathan Nwosu

Um, hundred percent yeah

James McWalter

Those who are kind of built on or have a kind of machine learning as core to their approach either. They’ll try to use publicly available data to run their models and and and label and build their models where to a certain extent. The the startup is in control of their own destiny from ah at least from a data point of view Now. It does definitely lower the ah moat right? because. If it’s publicly available data. Anybody can also get it and so in those worlds I think startups very very much rely on their modeling capability on the other side. It’s like okay, our customers actually have all the data. Um, but we have to actually navigate. You know the byzantine. Um, internal like you know data structures and so on of these very very large organizations. But once you do that you have access to data that no other competitor has access to and you can start having value in a way that um is very very hard and you know for somebody else to get over that Moat. Um, and so it sounds like it’s more the latter kind of approach and with. That and you know with that being the case how you approaching you know building the relationships you know and kind of moving through these organizations to get the data that you need to run your models and.

Jonathan Nwosu

Yeah that’s a really interesting point and it actually hasn’t been easy James. It hasn’t been easy at all. Um I think um, getting access to some of this data is is is quite difficult depending on the size of the bank. Um, and we know that banks have different ways of storing their data. Um, you think you may think I’m joking when I say this but some banks actually store a lot of their data on premise um, so they have actual physical services. Um, and I actually hadn’t seen the physical server in in quite some time. Um, but it’s quite shocking to see that some of these financial institutions still have.

Jonathan Nwosu

Um, onsite ah servers which I think makes sense from a security standpoint. It may not make sense to have everything on the Cloud which is completely fine, but then it does make our job of maybe getting some of that data a little bit harder. Um, but we’re lucky that we’re working with some institutions. Where a lot of the data that they have especially the transactions data of their end clients is stored in the Cloud Um, and therefore we’re able to kind of access that data and integrate to that data fairly easily I think it’s also important for me to note that um you know we actually don’t have access to the transactions data Of. Ah, these banks and of the of the bank’s portfolio. Um, it’s encrypted so we don’t actually see the name of the real companies nor do we actually see the transactions data from our end. Um now the banks can see this data because they have contracts with their customers and therefore they’re able to see their customers transactions. So an Esg analyst working at a bank will be able to view this data but actually even as the founders we have no access to a lot of this data and by the time it comes to our end. A lot of this data is encrypted um and um, we we can’t see any company name or transaction. Um, and all examples. You know that I mentioned obviously during the podcast were just examples. We’re not actually working with those with those specific entities. Yeah, exactly someday exactly I Love that? yeah.

James McWalter

Yeah, no, Absolutely so someday someday. It’ll be um, okay that that makes sense and I think it is definitely anything that touches the financial space does have ah you know data security considerations that are definitely tougher than in other areas where. You know a some manufacturing company might be just so it’s a lot easier potentially from a data security point of view at least to have read and even sometimes write access to some of their databases whereas Yes, it makes complete sense to me that in the financial space. Um, you know you would not have the relationship with. The the actual um bank Customer. Um, and you’d have to have their buy-in and that would make the data collection problem even greater. But then I guess like if some of the data is encrypted. There is I’d imagine specific attributes you need at a minimum in order to actually go into your model. So um, yeah I Guess how how do you think about Like. What does good enough look like um from the kind of input and you know some of this I’m sure is Ip but yes, just on at its high level. Um, what are the kind of things you look for that might make a ah data set look good for you.

Jonathan Nwosu

I yeah I think one of the biggest challenges is always like clean data right? and um, as surprising as this may sound there is no um, standard for transactions data right? So like um, a lot of transactions data obviously comes with a specific amount ah see the amount of the purchase sometimes it may come with the location of the purchase which is helpful. Oftentimes. It doesn’t it might come of a purchase description but oftentimes these descriptions are very vague. Um, and they actually don’t describe the specific activity right? So if we see. Ah, description coming in and someone has spent $10 at a Starbucks in New York city um then that’s really easy to see because we can see the the amount we can see the location. We know the um, it’s the the coffees come from Starbucks and we know that it’s coffee as well and therefore we can track where the coffee beans have come from. Ah, we can kind of assume that they’re based um that the coffee beans have come from Brazil and therefore you know maybe we can attribute 3 or four kilograms of co 2 for that sort of coffee that was that was purchased but oftentimes transactions data can be very messy sometimes it doesn’t come with a location sometimes the descriptions don’t make much sense. It could just be as vague as and someone spending $10 at Starbucks and we don’t know what that purchase was for but maybe we can assume they bought a cross on or maybe you’re a coffee. Um, and that’s where things get really difficult. Um, so ideally in an ideal world. We’ll have really clean transactions data.

Jonathan Nwosu

In reality we know that we’re dealing with data that is oftentimes messy but here’s where the really interesting part comes in James because we’re building models that will be able to um, assess the accuracy. Um, so if we are making more assumptions than is necessary. We will flag those with the bank because we believe in being fully transparent and we’ll actually ah sign ourselves an accuracy score. Um, so if for instance, um, we notice that we’re making a lot of assumptions. We can’t get the descriptions required for the relevant transactions. Then we’ll be like hey you know for this particular item that was purchased. It’s a big item and we don’t quite know what the emissions are that us are associated with this particular item and will be fully transparent and we will flag that with the banks as well and the institutions that we’re working with um, but yeah. The data can be very messy sometimes it’s clean sometimes it’s not there isn’t a global standard for transactions data. Um, but um, yeah, that’s just some of the problems that we encounter as a startup.

James McWalter

Yeah, yeah, absolutely and I think some of the related elements are selling into very large enterprises you know, financial institutions and banks. These are some of the largest corporations in the world. Um, and they clearly have this you know a problem to be so.

Jonathan Nwosu

Yeah, exactly.

James McWalter

Solve so that I’m sure they’re seeking seeking solutions and yeah, clearly you’ve had folks, you know, taking your calls and and moving through you know a sales process. Um, but you know as a small you know, emergent company. How do you think about? you know sales into these types of large enterprises. Um any things you’ve kind of learned in the in the kind of early days so far right.

Jonathan Nwosu

Yeah I think some really that’s a really interesting problem actually of in in question, interesting question and something that we’ve actually been thinking about significantly over these past few weeks specifically um, enterprises are very difficult to sell to right? You know that sales cycles are oftentimes very long. Hard to identify who the decision maker is. It’s hard to identify who the person that’s going to be using. The product is um and it’s a very long and tedious process. Um, so we’ve actually moved to ah trying to kind of work with more of the midmarket segment right? where the banks are large enough to um. Know that they should be reporting on their finance emissions. Um, but that they’re small enough where we can still approach them and the sales cycles are in the months and not years. Um, so one of the tricks that we’ve done is just we’ve gone downmark basically and we’ve sort of targeted the midmarket segment um and you’d be surprised by how many midmarket size banks. There are James there. Um. I think we’re all kind of accustomed to the big names and you know the wells fargos and the Jp Morgans and um all the other sort of large financial institutions but there’s a lot of midsized market banks that are looking for solutions like this and that’s who are really targeting but oftentimes one of the tricks that we’ve learned is that if we are targeting some of these larger enterprises. It all always makes sense to um, approach their innovations and partnerships team because we know that this team has a high propensity to work with startups. Um, and um, they are actively looking for startups to partner with um and startups to kind of collaborate with.

Jonathan Nwosu

Um, and they’re always looking for new solutions because as you know it’s very difficult for these large financial institutions to um, create new engineering products themselves or to create. Um the capabilities required for them to accurately assess their financeissions. Um, it would maybe require them to hire a team of anywhere between 12 to 50 yeah esg analysts data engineers and software engineers. Um to basically build what we’re doing um and instead of hiring 50 people. It makes sense to just use our solution to help um, figure out their financedmis. Um, but yeah, when selling to these large institutions. There’s yeah 2 kind of key tricks. We’ve realized which is one going to the midmarket segment as sales cycles are just a little bit easier and faster and 2 if we are approaching enterprise customers. It always makes sense to get your foot in the door with their innovations and partnerships team as this team is um. Always kind of open to having conversations with new interesting startups.

James McWalter

Yeah I think that’s a lot of very interesting elements in there. Yeah first you know coming any organization and I think everybody on this call has been sold to right? We’ve all received lots of cold emails and all this kind of thing you know if you are basically just competing. Yeah, 1 to 1 against like within the kind of volume of noise that everybody’s dealing with it becomes very very difficult and so having those kind of internal like venture focus groups or new innovation focus groups that gives you the potential for this warm intro that absolutely is is kind of a way to kind of kind of move into it. Also think that a lot of startups make this mistake especially selling to large enterprises of trying to pretend. They’re larger than they are and it’s a mistake. Yeah, but it’s a mistake in 2 ways, right? So First of all um, you know because you’re not. You actually can’t do all the things right? You’re not going to be sucked too compliant and you’re not going to have all the.

Jonathan Nwosu

I Read exactly.

James McWalter

From bells and whistles all these kind of things and so first of all if people if the customer is expecting those things they’re going to immediately be disappointed and second of all, you actually want the organization and the people at the organization to self-select into being the types of people who are early adopters the kinds of people who got super excited. By you know this 3 person startup who are trying to make a massive difference and are going to dramatically solve our problem and all those kind of things and you also get the you know one of the kind of rare occasions where a sometimes junior level employee or a mid-level employee is talking to. You know the Ceo and the cto and the Ceo right on a regular basis and like. They might never get that chance again and it’s very you know or you say startup you know we’re obviously try to be as humble as possible but like there’s a lot of power in being a founder and there’s a lot of power in like having that relationship with people who you know lot of work is kind of boring and drudgery and so on. But it might honestly be the best part of their month talking to a company like yours and so I think you know at some point that shifts right? like once you have the initial early adopters then startups often try to seem bigger than they are and like actually I think that’s probably a good move right? You start to you know, have different layers and you have different types of you know sales. Segmentation and all that kind of thing but in the early days like that kind of founder to customer relationship is honestly nearly the only thing you have going and to hide that like a lot of startups do um is a massive mistake and so I’d love to hear that you guys are.

James McWalter

Kind of like really kind of leading with that and you know building those relationships from the ground up.

Jonathan Nwosu

Yeah, no I think you’ve touched upon some really great points that actually really really sort of great points I think being small in the early days can really be an advantage right? like I think a lot of founders as you mentioned try and appear to be bigger than they are and actually I think the reason we were partnering with such a large institution is because. We were the exact opposite of them. We were a free person team. They’re like a 15000 person company and so they’re not looking to partner with a another large company that’s going to move slowly. They want to partner with a small so scrappy startup um with a bunch of you know, very very young founders that are able to bring in. Really innovative solutions to their company and actually James would love to kind of throw this back at you and say you’ve obviously had ah quite some strong traction with paces. Um and would love to kind of understand a little bit more about your sales techniques and um, how you’re taking your product to market and what it’s been like for you as. Um, as someone who’s previously done sales as well in selling to other businesses and.

James McWalter

I yeah happy to give you whatever little kind of bits that we’ve done but I think like the number 1 thing is founder led sales is just very core and actually is in her book I’ll put into the show notes I think it’s literally called founder sales. It’s a free ebook on online that that people can kind of download. A lot of companies, especially Saas B 2 b saas or you know similar type companies will try to hire. You know, 2 3 salespeople when they just get a little bit of traction but it’s genuinely like a massive mistake because the founder or whatever number of founders are responsible for getting people in the door. They need to be there more than anybody else just because they need to hear the problems they need to hear you know what is compelling. Um every demo is an opportunity for some iteration you know like a lot of things obviously are on Zoom if you can get in a room. It’s even more powerful but it’s like you know I mentioned this word and they perked up. Are they a fear or hope-based buyer right? like there’s a lot of these different elements that you know people kind of read about but really, it’s about the the rapid iteration and you know having just such a high level of curiosity about how the potential buyer or the potential user like perceives you and just constant experimentation. So I would say that you know that’s one piece just on the on the kind of higher level like prospecting thing I mean it’s kind of similar to you guys finding? um you know, ah folks via user research. Um a lot of what we did for the first you know six to nine months trying to just get initial people is like hey I’m the founder of paces. Um I’m just looking for a user research interview which genuinely was right.

James McWalter

And then we would try to spend you know 30 minutes or a 20 minute call like 90% of it on their problems listening and so on and nearly inevitably. They’re like so so what do you? What? what? are you guys built like you know and like I would genuinely be like trying to make it all about them and they’re like no no, no show me something like I’m I’m really excited to see something and so you have this kind of little bit of pent up.

Jonathan Nwosu

Yeah.

James McWalter

Demand and then you show it to them and they’re like oh I really want to see a proper demo of that and then you schedule that or trial whatever it may be the last piece and I think this is something that we’re still iterating on and you know our cell cycles are are definitely shorter than you know you guys and ah the midmarket you know like this is this phrase. Rabbit steers elephants right? The deers are the the kind of midmarket. The midmarket for your segment is probably larger than the elephants in my segment just because the nature of these different different industries. Um, so our sales cycles are weeks and you know maybe a month or 2 at the max. Um, but I mean more for an elephant like very very large customer whereas most of our midmarke we try to close within you know within a calendar month.

James McWalter

I think the big thing we’re I guess still trying to iterate on and struggle with and and you know and we definitely haven’t solved is we have a trial they find value. They’re really interested in moving forward and it still might take 2 to three weeks of the contract back and forth to get it closed and we have very very customer friendly contract terms. Um. Outside of it being a twelve month contract and I think that’s the thing that we’re still trying to figure out and say okay, um, can we you know? can we get the contract start negotiations starting the day of the trial that’s something we’ve tried can we get? Um, you know if they are large enough to have like a few rounds of legal. Can we get those and these are things that. Just can’t see iterating on and it’s always a struggle but I think the big thing is a no or rejection is a form you know is something to be curious about and not feel like defeated by because you’re just going to get a lot of them right? Um, so I don’t know if any of that ah is is compelling at all.

Jonathan Nwosu

And yeah, no I think we really resonate with a lot of a lot of what you said, especially with the founder led approach. You know I think in the early days. It’s I think it’s vital I think it’s really crucial for one of the founders to be really selling. Um and in the early days. It might even make sense to have all the founders. Ah, maybe sitting on on the chords and maybe not actively saying anything but but the listening is really the most important part and I think you touched upon this changes and it’s a really good point and I want to hone in on it. But ideally you do want to be focused on your customers and their problems and they may actually switch it back to you and say hey you know what are you building? You know we’re really curious to find out. And actually the same thing happened to us quite a few times. So ah I’m definitely not surprised that that you that you mentioned it. Um I’d say we’re probably definitely at at an earlier stage where um, we are only working with 1 or 2 kind of customers at the moment. Um, and you know just because of. Time I am just focused on the fundraising aspect and I haven’t sort of gone back to the selling part. Um, but I think yeah I think you’ve mentioned some really great points into um in terms of sort of prospecting and negotiating and having really friendly terms as well. Um, and I’m quite curious to see how the twelve month kind of contracts. Landing with your customers. You think you’re getting any pushback from that would they prefer shorter contracts. Um, and who exactly ah is it that you’re sort of selling to because I actually imagined also that you’d be selling to enterprises and large customers who are looking to do these infrastructure projects. Okay.

James McWalter

Yeah, so we’re typically selling to what’s called the project developer so largesca solar project developer or battery project developer and what’s interesting about product developers is that at least in the United States they might only be a 15 to 20 person team but they’re often working on $100000000 projects

James McWalter

That’s not their entire. You know there’s a lot of other organizations that get involved at various points but the ones who are actually getting the project from an idea to you know what’s called notice to proceed or like the stage right before it being built these tend to often be like reasonably small organizations. Um, it’s. Pretty large dumbbell effects or barbell effect where you have very very large organizations. Not a lot of middle market to be honest and then a lot of kind of small entities who are still working on large projects. Um in terms of the twelve month contract so one of the things actually this is something I didn’t mention which might be beneficial to you guys and then other people listening is none of our contracts look the same. And we tie product enhancements to our contracts and so we will literally say okay, um, we you know you found value in the in the in the in the trial and the pilot. Um, but in our case, a lot of it is data breath. It’s like okay you started with 3 or 4 us states. Actually want 7 states that you want to look at data for we will not bill you the entire. You know we’ll ramp over the course of a month to the full billing. Um and we commit to hitting adding those 3 states within the next three weeks and we’ve done that for pretty much every customer. Well every customer we’ve had has ramped the contract so we’d still have a twelve month contract but they might not pay this the full monthly price. Um that we invoiceed them for a couple of months while we ramp and we always have very very aggressive times to ship the product and we’ve never missed a day and usually we try to like you know? Yeah basically over promise and then overde deliver right on everything.

James McWalter

Um, and then and then kind of go with that way because I think like there’s a lot of tradeoffs to make but I think having twelve month contracts has become very important to us our first 3 contracts were monthly um, but having twelve months is really valuable because you know we’ll hit our series a stage at some point and we’re not trying to lock people in just for the sake of locking them in. But does allow us to you know have a bit more security around saying that we’re truly at at ar versus an um mrr and if you have like lower you know a lot of transactions monthly transactions and Mr might might make more sense particularly if you’re a more s and b focus but I think for large enterprises twelve month contracts are new, a necessity. And honestly like if I was like working with banks. Um, within six months I’d be trying to target 2 to 3 year to contracts with some of these folks as well. But I think at the early days twelve months I think is ah is a good hard but achievable kind of contract length.

Jonathan Nwosu

I yeah um, some really interesting points actually and I want to dive into them a little bit deeper. Um, so the idea of having um, really flexible on drags and having bespoke contracts is really new to us and is actually something we’ll be using moving forward. So that’s a really really. Really great suggestion. Um, and I guess I’ve never really quite heard of the idea of over promising and and over deliververing I usually hear people saying that they under promise and overdeli but actually um I guess your job as a salesperson is to sell a vision and to sell dreams and it’s your responsibility as a team to sort of. Make that vision come true. So it’s great that you’re selling these long term these sort of twelve month contracts and um, having expectations of where to ship the product on and and quickly shipping the product to meet some of these contracts expectations. Um, so that’s like yeah.

James McWalter

And and just just just and just real quick on that like to be clear. The timelines is something my cofounder you know who is a Cto and the technical person like he tells me so I never say okay guys we’re going to deliver this in two weeks and then ah and then like engineering is like oh my god it’s impossible like I always ask him I’m like.

Jonathan Nwosu

Yeah, so.

James McWalter

Could we ship this? What is ah what is a tough but reasonable time and he’ll be like one week two weeks seven weeks whatever it may be and that is the number because I think like I yeah had engineering and sales often clash because of ah misaligned expectations and and pressure and in this case were fully aligned.

Jonathan Nwosu

Yeah, yeah, Nice I Love that? Yeah I Love that I Love the kind of cohesion that you and your co-founders. Um, really show. That’s that’s fantastic. But yeah, really really Interested. Um, on the idea of the sort of the flexible contracts and ramping up and stuff I thought that was. A really really great point and I think it’s something myself and my co-founders can kind of go back with and and really learn from and actually any other entrepreneur out there I think all of the stuff that you were mentioning is really of high value to any sort of B Two B sass player out there. So um, yeah, some really great advice. There. That’s that’s. Pretty helpful.

James McWalter

And again, none of this you know this is all from reading making a lot of mistakes. Yeah know organizations like Ycombinator or sasster.com these are all places that like have a ton of like great insights and so um, but but a lot of it’s just like making the mistakes right? because you know we’ve all read the advice and that we still do the. Thing and there’s like oh now I reallyund understand why the advice exists. Um, and that’s just the kind of nature of these things. Um I also believe you guys are are doing a little bit of fundraising as you talk to investors. What are some of the kind of elements of the pitch that people are finding most compelling right.

Jonathan Nwosu

In back of.

Jonathan Nwosu

Yeah that’s a great question. Um, so actually people and so part of the thing that I didn’t mention that I probably should have mentioned earlier on was that um we aren’t just calculating portfolio emissions or finance emissions for the sake of it. Ah, banks are actually using something with this information. Um, and what they’re doing with this information is something really really cool. They’re creating these new green financial products. Basically um so it’s expected that at least in the U K and Europe um, this could be ah, a new revenue stream for a lot of these banks and financial institutions. But it’s also a way for these banks and financial institutions. To get their portfolio customers to net zero and so let’s take a bank like hsbc or any other example or any other bank and again this is just an example, it’s it’s all hypothetical and so any large sort of bank in the Uk will maybe give out um a million or two billion pounds worth of green loans. And these green loans for these companies that are accepting these loans are going to be used for. Maybe um, green infrastructure projects that will make the business a lot more sustainable. So if hsbc is providing loans to a manufacturing company and a manufacturing company wants to use this money to acquire new suppliers or Greener suppliers. Um, then this is how these loans will be used and it’s in a way. It’s good for both the bank and the business the business um is able to sort of leverage this money and use this money to become a greener and it’s great for the bank as well because the bank is helping their customers um reduce their emissions which actually.

Jonathan Nwosu

Affects the bank’s emissions as well. So It’s almost like this Win-win situation. Um, and this is the part of the pitch that has really drawn investors because this is something that’s unique and um, something that we’re working on that nobody else is really working on at the moment. Um or at least not at the scale as to which we’re sort of doing it. Um, so as well as you know providing banks with the information. Um, so on top of the information that we’re Providing. We’re also helping these banks and financial institutions create these green products. Um and very similarly to how ah businesses have a credit score now. Um, in the future lending decisions will be based on things like the credit score which we have at the moment and your emissions score as Well. Um, So if you’re a high emitter. It may be that you get loans at a less favorable rate than someone else in your industry that is a low emitter. Um, so. Yeah, these are things that are really interesting and things that are really drawing in Investors. Um, and we basically allow and enable these banks to create these financial products because of the data that we give them in terms of helping them assess the emissions score of their portfolio businesses.

James McWalter

I brilliantant no I love that and I could definite see you know the the tan the totally addressable market of of that kind of part really being attractive to to investors but John and this has beenryant really enjoyed the conversation before we leave off is there anything I should have asked you about. But did not.

Jonathan Nwosu

Cool I’ll say 2 things 1 is just ah, a point that I wanted to say and then I’ll say a call to action if that works cool cool. Yeah I think there’s there’s 2 things I think um one is just maybe about the team I’m happy to kind of dive into the team a little bit. Um and just to say that.

James McWalter

So perfect.

Jonathan Nwosu

Ah, super grateful for the team that I have and my co-founders. They’re incredible. We’ve got deck shesh and men um men’s focus is focused on the technology side and deck shesh is doing some amazing work on the science side. So very very grateful for my team and very grateful for the work that they’re doing I think we’re doing some really groundbreaking stuff here. Um. I think the second thing that I did want to mention was we are actively fundraising at the moment so we are raising our preced round and we’ve seen some good traction and some good interest quite early on so we’ve been pretty lucky with that and we’ve had some commitment from some angels and some prominent angels in the industry. Um some Sas operators as well. Um, and some people from the banking and financial industry as well. So we’ve been pretty lucky with that but our fundraising efforts will continue and um, yeah, we’re currently fundraising at the moment. So definitely and feel free to reach out to myself if you’re interested in investing in um, a climate tech startup that’s focused on. Helping the financial service transition to net zero.

James McWalter

So absolutely and we’ll include your contact details and the other bits that we mentioned in the show notes. Thank you Jonathan Nwosuathan.

Jonathan Nwosu

Thanks James pleasure speaking.

Investing in Climate Tech – E113

Great to chat with Matt Ward, partner at 4WARDVC and host at The Startup Tank Climate Investor Pitch Show! 4WARD.VC invests in mission-driven pre-seed and seed-stage climate startups moving the world forward! ! We discussed climate economics, getting the timing right when starting a climate company, what makes a good pitch, the important of team, tam and timing in investing and more! 

https://carbotnic.com/4WRDVC

The Ultimate Climate Investor VC Database

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 Matt Ward partner at 4WRDVC and host the startup tank climate investor pitch, welcome to podcast match brilliant to start would could you tell us a little bit about forward. Vc.

Matt Ward

Hey James thanks for having me.

Matt Ward

I Will I wish I had that awesome accent to make it sound better. So an early-stage climate Syndicate I E a group of Investors Lps Family offices, rich doctors around the world who want their money to do more than just be in a bank account or focused on stock. So we invest in.

Matt Ward

The most promising climate companies preseed and seed in Europe North america and Israel with a focus on the sci-fiesque startups that are changing the world in big ways and founders that something about them. You would bet on them regardless of what they’re doing. This is the kind of person that you say. This is an absolute winner doing massive things and they’re they’re going to succeed because venture is a game of exponential outliers and we we try to not only find those exponential outliers but also be a little of the of the steroids so to speak that make them a success. So. Since since starting forward a big part of my my mission was to do something that truly mattered I’d done so much in the past on ecommerce d to cbtwo b things that just didn’t feel that impactful so I worked on connecting with that over the course of the last year Seven hundred and eighty is actually the number I just published the new database today climate funds incubators accelerators corporate vcs trying to become super well connected in the space and that’s kind of how we how we use our syndicate we invest in companies. But we say we’re not going to be the biggest check at the table but we’re going to be. The biggest hustler we’re going to be the one who introduces you to twenty thirty Forty investors a bunch of clients etc so that we help you succeed. And yeah, that’s kind of us.

James McWalter

So Yeah, and I’d love to dig in more than into the founding story. So yeah, you believe you’re entrepreneur you were working on these other these other companies projects and so on and so when you’re trying to think through ways of Impact. Why did venture seem so appealing relative to potentially other options that were available to you and.

Matt Ward

So I I actually wrote a blog post about it 1 time and it was ah why I wanted to I wanted to make an f ton of money so I could be a good person and the the concept was and what I always had in my head tried to have a bunch of money so that I can focus on.

James McWalter

And character.

Matt Ward

Using those money that money that resources and my time on things that truly mattered if I want to make an impact for instance in Africa I could go and build houses and then I’m one hammer or I could go and sell the hammers helping people build houses and then it’s more hammers or I could create a company that’s. Building houses in Africa and then I’ve got a certain multiplier or I could have the company that’s helping other companies create house building ah or architect firms or I could be the one who’s lending the money and helping and you just get that exponential return the farther up that stack that you get and that’s why I was always interested in venture. So. Rewind a few years I I ran a podcast the syndicate which was my way of hacking myself into the scene of venture and startups I interviewed 10050 vcs and climate invest not climate investors sorry investors that were focused on early stage with the goal of starting a syndicate and ultimately a fund. Things were things were going pretty well that had kind of been on my radar for a while I ran another podcast the disruptors which was a long form Ted. All things exponential technology which was meant to be the deal flow and then my plan was to start getting into this and doing what I’m doing now but just several years ago things fell through on a. Earn out basis some Trump put his tariffs in place between the us and China the guy that bought my business ran a trade company between the us and China my business was an e-commerce business between the us and China so then I got back to working with ah working with startups on started gene growth.

James McWalter

Sure.

James McWalter

And then um, you know as you were kind of thinking through the I Love this analogy of yeah ways of having leverage right from the individual person hitting the hammer or building the hammer all the way through to like these high leverage kind of ideas around deploying the hammers and. Basically being picks and shovels if you will to kind of slightly change the metaphor when you’re kind of thinking through that. Ah, how do you think through like ah the emergence of an investment thesis. You know you talked about outlier individuals um working on know expenditure technology. Um, but ah, you know I think a lot of yeah feces will so say something similar. And so how do you think through the the different options around developing a specific thesis that you know suited or had the impact on the world that you wanted to have.

Matt Ward

Absolutely so I’d I’d spoken with a lot of investors at the time or and throughout that time and spoken with a lot of people in the climate impact space as well as well as scientists politicians startup founders probably. Probably interviewed about a thousand founders from previous podcasts. So I got a bit of a a bit of a framework there but the framework I like when it comes to venture evaluating something as a venture return or not I like the three t so teamamm timing. So Tam is this a massive massive market. So think multimalbillions. And either growing very quickly or incredibly outdated and right for disruption that’s check 1 check to the timing. Why is this something that’s possible now but wasn’t possible. 1 2 3 years ago because if it was possible three years ago why aren’t there other people doing it t number 3 the most important team. So. As I said in venture it’s ah it’s a game of venture is a game of winners and everybody else and that’s just how it works out because there is so much artificial fuel that gets pumped into it. You have the massive outcomes the hundred the thousand the ten Thousand x’s and then you have a lot of subpar performances. Unfortunately so you’ve got to have. Those outlier returns the other 2 kind of categories or ways I think about things are what’s the defensibility is there ipnetwork effects business moats, etc. What allows you to build this and then have this be something successful that not everybody knocks off within the next couple of years and going along the lines of that.

Matt Ward

There’s got to be a bit of crazy if it’s a if it’s a good idea quote unquote and everyone thinks it’s a good idea. It means it’s a terrible idea because if there’s going to be either a ton of competition or there already is there’ll be lots of funding and you’ll never be able to make any money so just on a venture side of things. That’s how I think about things now when it comes to an impact side of things that. A lot of vcs have different frameworks on how they think about things so some say okay carbon emission reduction some say carbon capture some say amounts of waste reduced etc in my opinion having a metric like that is actually the wrong approach because it very much limits you on what you can focus on a and b and more importantly. When was the last time you started a startup came up with the numbers and everything went according to plan the the lcas all the numbers are made up and going to be wrong and then you’re going to pivot in 2 years and things are going to be different and at the end you’re also cutting out ah a huge portion of companies where oh they’re not mitigating. Ah.

James McWalter

Sure.

Matt Ward

Gigaton They’re mitigating half a gigaton I Guess they’re not worth investing in and that just that just seems absurd to me So the the framework I have is what I like to call climate Economics I Actually just wrote a post about this if you guys want to check it out forward dot Vc so number fourward.vc investing in companies that move the world forward. That’s our little kicked phrase. But. Climate Economics What I How I think about it is there’s unit Economics. So for every for every um bagel that I sell or sandwich or box or service or new client or new etc. What how much are you making margins wise if it’s net positive then you’re making money. Well I have climate economics a similar concept for every product you sell for every new service. New client etc. Are you having proportionally positive and um improvements or benefits on the world in the climate if you are, you’re a climate company that checks the box. That’s my. Back at the envelope math because it means as you grow and Scale. You’re making the world a better place if it’s not something where it’s proportional and it kind of tailors off then there’s ah, there’s a questionableness to it.

James McWalter

I Yeah, it’s very interesting I actually have ah a friend who is a climate founder and he basically has a similar framework around what you call climate economics but he’s a bit harsher. He’s like there’s real climate companies. There’s fake climate companies right? and it like real climate companies is their business model impacts climate in a positive way.

Matt Ward

Ah, no I Totally I Totally agree.

James McWalter

Right? Or or has’t necessarily just climate but to your point like this kind of larger framework of sustainability because you know one of the struggles is like if you’re a company that’s figuring out how to you know conserve water at scale through better monitoring of you know water pipelines something along those lines that doesn’t really have like a direct carbon impact. But. I Think there’d be very few people who say wouldn’t say that that’s a massive neck good for the world for the you know for the environment and so on Um, and so I think it’s but it it all again. Depends does the business model actually tie to that upside impact.

Matt Ward

Exactly because if it doesn’t tie to the upside impact either while it scales. It’s no longer going to create the same type of impact or while it scales the the most beautiful model for any um government or land in the world is ah. Is the kind of happy. But um, what there’s a term for it. Beneficial dictator. What’s the benevolent dictator. The problem is you don’t know what the benevolent dictator son or daughter is going to be and that’s the problem when you have companies that don’t have this in their core Dna and business model is once you. Ah once you transition from.

James McWalter

And.

Matt Ward

Doing good. Well maybe you bring in the next Ceo who is doing good. But if we’re if we’re public and we’ve got these different incentives and suddenly we need to change thing a little bit eventually Google erases that don’t be evil thing from there from their corporate motto so to speak and then it’s all downhill from there.

James McWalter

Right? And and you can get obviously in Google is quite big and as you were talking I was thinking about the Google example before you mentioned it and yeah and I think there is definitely a you know an an inflection point that happens later in a company’s ah history and you know I actually think about in the Karmo Creditd space in particular. There’s a lot of I think understandable choices that certain companies will make where they want to be the measurement of the carbon as well as the marketplace of the carbon which when you’re like a pre-series c company makes a ton of sense right? These are small emergent markets. Measuring carbon is very very difficult, especially for some specific methodology right? like carbon and trees or carbon and soil. You know these kind of um, you know naturebased solutions type carbon measurements. These are you know, emergent industries and so getting a business model to sit just from measurement is quite difficult so a lot of them become maripas as well. And that flies I think at a certain size but equally when you get large enough. It’s like you don’t want the company doing the the measurements and the ratings be the company that sets the price and I think we’re going to also as company small they get ah not get away in a like a negative way like again people are just trying to figure out how to build markets in the first place. But as some of these industries grow larger. There will have to be I think segmentation in order to actually for that type of ah the legitimacy of these markets to get to that next level and so you do have these kind of balances like it’s easier to be ethical when you’re smaller. Um, but as you get larger, you know there’s more scrutiny and you have to be ah able to respond to that.

Matt Ward

Ethical or under the radar you mean Amazon shouldn’t pe out to own the marketplace and the products they sell and let other people sell and I totally agree. We’re not huge on carbon credit and carbon marketplace business models just because it feels like more of a.

James McWalter

I Call me crazy but probably not right at at some point. Yeah yeah.

Matt Ward

Ah, vitamin or ah or ah this was it feels like you’re relying on better nature to make things happen and at the same time We all know how to lose weight and not be obese and yet the majority of the world has a problem with that. So Sometimes I think you need to forcibly make change for for us though or for how I would think about it if you’re building a carbon monitoring solution instead of building the platform just be the referral engine for the other marketplaces. So Then you’re getting paid as a service provider and you’re getting paid for The. The the commissions or the referrals to a different marketplace then you don’t have to build both misses Models. You don’t have the conflict of interest and you don’t need to have 2 different teams.

James McWalter

I yeah and that makes a ton of sense to me I’d love to go through this teamtown timing and a bit more depth in each of those um because I actually think in the climate space. There. Some really interesting you know elements that are kind of difficult boat on the you know founder side as well as the investor side and. Want to start with Tam so every time I talk to climate founders. Ah you know, particularly those are fundraising. There’s always this you know I have a tam problem this comes up quite a lot because you have these 2 ideas in mind first if we truly take a you know full societal. You know all guns blazing. Ah. Approach to mitigating the worst effects of climate change tam should not be a problem as long as you’re taking a nice slice of the world economy right? because the world economy will be a climate- focusedcused. Ah you know approach at some point on the other hand a lot of these things are completely emergent right? You know whether you’re talking about. Ah you know, certain types of advanced materials. What you’re talking about. Even. You know, solar and and wind which are probably as you know mainstream as any of these technologies but are still combined in the United States less than 12% of total electricity generation. Ah you know there’s kind of the sense of like okay these things can and should be massive. But maybe today they’re so emergent or so small. You really have to kind of squint to try to identify like what an actual tam might look like how do you think about? you know, balancing. Ah you know the types of things that would have to be true for the time to be large enough to be venture backable versus you know what it actually might be right today.

Matt Ward

It’s the tam and it’s also the timing. So the only thing that’s worse than being ah wrong is being right? but with the wrong timing and that’s that’s one of the big problems with Vc you’re either if you’re too early you fail if you’re too late you fail you’ve got to get the timing right.

James McWalter

And.

Matt Ward

Um, that’s ah, that’s a great great question I think looking at like the Cr so the annualized compounded growth how that’s scaling can be 1 way to see if things are starting to take off. You can also part of it’s going to just have to be got instinct to be honest, so. People may have thought that augmented reality or get whatever the technology was ready at x stage and then five years later it’s still at the same place Ray Kurzweil has been telling us for at least 20 years that a I will be here in 20 years um I think for how I think about it. I try to look at where I see the intersections with other technologies coming into into play where you see the incentives so a lot of times with climate tech in particular incentives play a big role so are there carbon taxes coming or are there carbon monitoring requirements coming or are. Eu grants and other things pushing these things forward and if they are does it feel like there’s enough forward momentum to make that stick at the same time they’ve got to have a large enough market now to attack. But it in venture the better. The question shouldn’t be what happens if it goes wrong or. Is this the right wrong timing or but it should be what happens if it goes right? and that’s that’s kind of the that’s kind of the caveat. So having those different filters in place helps you weed out winners and losers. But then like I said with forward Vc.

Matt Ward

Ah I’ve spent the last year trying to connect with all the all the big players in the space. The corporates the vcs the investors the incubators everyone so that even if it isn’t necessarily perfect. We push. Ah, we push our companies into positions where suddenly they have that. Perfect irregardless because everything comes down to everything comes down to execution and connections. But that one step can make a big difference if you suddenly had a conversation earlier with with Honda’s um cvc unit and suddenly if we’re able to introduce them to the it. Battery company. We just invested in and Honda decides to go forward. That’s like a hundred steps forward for a on the battery company despite it only being one small little deal which can ah which can help with things like timing and help with things like acceleration so they can get to scale.

James McWalter

Yeah, and actually that that does raise. Um, so one of the things just because you mentioned it before I want to get on to the team. But this is kind of very interesting situation around lps. So for the audience limited partners. Um, the folks who basically invest into the. You know the funders syndicate and are typically you know at ah like ah not directly interacting with the entrepreneur but a lot of lps are you know might be experts in a given domain that might have an impact and upside impacts from to what you mentioned. You know, maybe they’re you’re in the energy space and a large energy company or anewable energy company is an lp of a fund that might invest in yeah, it’s been actually quite surprising to me having gone through a couple of fundraisers of my own in the last year and and you know close and have great. Ah great investors and so on that there’s a lot of talk. Of of how lps can help portfolio companies but not just from my own experience but like talking to a lot of founders who in the climate space generally the lps have not really come to fruition in the way that I think that both the investors hoped as well as the entrepreneurs hoped. How do you think about that balance of you know, actually. You know, getting a better connection between lps who in theory right? Or in the domain could be that first customer or seventh customer that has a big impact or even just on the advice side. Um, versus maybe the status quo isn’t quite there in terms of the lp you know, accelerating the growth of an individual startup. So.

Matt Ward

I Think it really depends So a lot of our lps are individual Angels or operators and generally they like to be hands-on value ad where possible because they’ve been in that Boat. They’re involved and they want to see their investments grow then there’s the larger Scale Lps. Where you’re talking primarily Corporate is what it sounds like the questions leaning towards I think then you have to have some type of urgency in the in the offer so to speak so I was at a climate meetup last night and randomly on the way home before hopping into the tram I bumped into the the head of innovation with donone um or done.

James McWalter

I yeah.

Matt Ward

Dano and I’m not sure how it’s pronounced one of the the top ah food companies in the world and I’m advising a company now called climate crop in Israel they’ve discovered a protein that increases yields 20 to 90% in all crops and say it’s not native to the to the crop.

James McWalter

Oh.

Matt Ward

And it increases carbon capture it doubles the carbon capture. So the approach I’ve I’ve kind of suggested to them and the approach I brought up last night as well as look we um, we’ve got technology for food companies to half their carbon footprint and we’re looking to Crown winners in different ah in different sectors.

Matt Ward

That winner can be denona or it can be kelloggs and we’re trying to figure out who we should work with should we have a serious conversation kind of thing and I think founders can do similar things as well where if there are other players involved and look I can either go to poorsche or I can go to Bmw. Um.

Matt Ward

Where do where do you think this would be more valuable or we’d like to go to porsche because my dad had a porsche or whatever The reason is that you need to have to get that conversation going because the last thing that they want is to fall behind their competition.

James McWalter

I yeah, that makes a ton of sense and I just side note um as you mentioned danon so I was the english tutor of a the known executive in Genoa Italy in the summer of 2006 Very very long time ago just that’s my major impact with the known. Um, it’s just kind of random thing. 1 of 1 of those kind of weird jobs. Um, and yeah, at that time we would just talk about the the strategy that they were working on because he was just trying to learn english to or improve his english to talk strategy and so I I was probably told things yeah very out of date at this point but in 2006 I was like oh I know all the about the Knowns. Ah. European expansion plans at that time. Yeah they’re they’re doing great and they’re moving into the you know the alternative dairy and and so on and in this very interesting way. Um, love to get then onto the team side of things so you know I guess when I think about like a classic you know Silicon Valley type

Matt Ward

They seem to have gone very well.

James McWalter

Founding team. You know you’re talking 2 founders 1 may be more businessorientated one maybe more technical often boat or technical but just one you know focuses more on the fundraising and the customer acquisition. Um, they are typically coming from a mixture of other startups potentially or even big tech and. They’re very kind of software driven when I think about the climate space because we are have really any effect right? We are trying to change atoms. You know we we are trying to do something with Carven levels. We’re trying to do some different elements with the built environment. Whatever it may be you start to see. Okay, how do we actually get maybe the. People on the technical side who are maybe not coming directly from software background but often are coming from more academic backgrounds where the cutting edge science often is when you’re looking at like teams. How do you think about what a good mix of team members are are there particular attributes. You’re looking for and how important I guess is domain knowledge in the climate space relative to. You know more generalist founders who can just move fast and and like us break things even though that phrase has obviously been broken. Um by by Facebook’s shenanigans

Matt Ward

I think it depends I like to see even even more so I just my my my feeling and what I’ve learned and seen in the space is winners win and everybody else comes in second. And that’s just kind of Ben been the experience. That’s what I’ve learned from other investors as well when we evaluate teams. We I mean we love to see great universities. Um, incredible expertise people that have experience in the space serial founders. Well-connected.

Matt Ward

But it also has to be that person where where you talk to them. You get that? Holy shit feeling like there’s something special about this person. Maybe you get the Goose bumps. They’re an incredible salesperson. They’re incredibly charismatic. Those aren’t. As much as we don’t want those to be important things those are incredibly important when it comes to being successful in this space because you have to attract funding you have to attract talent you have to be able to sell to customers. You have to have something tangible about that about you that gets people to say yes, excuse me so we definitely look for. Those type of characteristics will do reference checks as well on founders to see what other folks have to say about them as a person as a leader as an employee one of the checks I like to ask as well is would you would you leave your current job to go work for them or would you invest in their company now. Ah, that can be incredibly valuable and then the dynamic between the 2 partners how well do they know each other where do they know each other from why did they come together. Do they have complementary skill sets have they had and do can they have hard discussions. Those are those are some of the things that I think about. As well as we work with a lot of accelerators. So as I said ah we’ve reached out to a lot of climate funds and accelerators. We’ve actually got a full vc database on our website for anybody interested. It’s just four ward dot vc vc database with all those now funds accelerators, etc. Filterable by stage sector geography check size.

Matt Ward

But with that there’s some that we really like and know so we’ll we’ll rely on other funds other accelerators etc for help on the due diligence on the tech side but also on the people side of things so company like I can’t really announce that one yet, but that we’re investing in now went through. Ah, prominent accelerator that we know really well and has a couple of lead investors in the round that we know really well and every single person said about this founder that ah she’s an absolute machine and just performance an incredible leader the kind of person you absolutely want to invest in and that was. Ah, hundred percent my experience when when dealing with her and that’s why we’re investing in the company alongside incredible tech that is circular and world changing. It’s the people that know this person believe completely in this person and that conviction is pretty strong. And it’s a pretty strong indicator of success.

James McWalter

I yeah, it’s it’s really interesting. Um, because you know again I’d love to kind of bring in some of my and recent experience fundraising yeah know and we we’re very lucky. We were quite successful in our in both of our fundraises this year and previous I had tried to raise things and never gotten anywhere and so you know I’ve seen both sides of it. And I think what’s really interesting about what what was shocking to me is how quick a investor will move after that first call um like of our you know nearly 3000000 invested I would say more than 70% were on the basis of a total of maybe two and a half to 3 hours of calls across all investors like of those investors that invested. Um, you know often. It’s a 30 minute call there’s yeah I’m I’m sure there’s a ton. Obviously that goes on behind the scenes but in terms of the founder’s own time with the investor. It’s.

Matt Ward

The half.

James McWalter

Been quite low and it’s just been very very so you know interesting to me about how these large 7 figure decisions get made. Um you know? and yeah I come from a farming background where yeah these numbers are you know, kind of extraordinary. Um, and so you know when you kind of think about. Yeah you kind of went through. You know, especially if they’re connecting to other investors and like that that kind of shared due diligence and you know it sounds like you’re new to getting a specific vibe off them in the first 10 or 15 minutes um you know I guess how do you kind of think through after the fact, right? because some some people are ah you know, just ah has.

Matt Ward

Adam Newman yeah

James McWalter

Yeah, exactly. Um, we actually I was at the the Yc and the batch event last week and one of the talks was how to identify high functioning sociopaths was part of it was like oh they very they interview very very well and so yeah I guess how do you think through? Um, you know when. I guess like warning signs because you absolutely as a venture you know, somebody who’s looking for outside returns are looking to to say yes, right? rather than say no and in many cases. But yeah I guess how do you balance that aspect of okay I’m only going to be talking to this person for you know an hour before I put in 6 or 7 figures into them.

Matt Ward

I would say the high functioning sociopath isn’t necessarily a bad thing if you were to look at public market ceos I want to say 20% of them at the very least are categorized as um, is it sociopath or narcissist. It’s one of the other.

Matt Ward

But there there is something about that personality trait that does lead to massive desires for success and massive abilities to recruit and build Now. That’s not to say this is good or bad. It’s just that’s kind of how the how the stats spoil out What what we look for or what I look for is. At the same time trying to have the the doubt in the gotchas of trying to avoid getting tricked by something doing the due diligence of making sure the text solid making sure the people are solid with reference checks. But it’s um, yeah I won’t lie and Say. It’s It’s a challenge and we try to build up relationships over time with founders. But that’s not always possible. Sometimes we’ll come in once there’s already a larger vc in the round and we’ll just be doing a smaller Check. Sometimes it’s worth incredibly convinced by the founder and then we’ll go out and actively scout our network For. Intros of these are the investors we want to be involved and bring them and try to bring them into the round.. That’s that’s a little bit more of how how we operate.

James McWalter

And because I know you have ah your the startup tank climate investor Pitch show. Um, which I’ve watched some you know, many a video of and yeah, sounds quite inspired by by Shark Tank and what’s interesting actually about Shark Tank which I’ve yeah watched for many years which. My wife and you know is that they generally are looking for reasons to say no right? So It’s like slightly different to like the typical kind of venture approach but thinking through what makes a good pitch from your perspective right.

Matt Ward

I would say even in venture they’re looking for reasons to say no because if you’re looking to for reasons to say yes, you’ll find too many of those reasons. So I think that’s an important caveat but what makes a good pitch well on the on the startup tank. Um founders get 5 minutes to pitch. But what I like to say is you really need to nail the who what? where why? And why now of the pitch so who are who are you selling to what are you doing and what’s the massive problem that you’re tackling why is your solution better. Having something involved in there with the the traction of what you’ve got to date that kind of don’t miss out why now. So why this hasn’t been done and why this is the perfect one and why you are the perfect one to do this and then of course in Vc it all comes down to how big so make sure you share. How big and where this can really get to.

James McWalter

Yeah, it makes a ton of sense and I think that something that a lot of first -time founders and particularly founders who I think in climate tech tend to be from more diverse backgrounds than you know, a kind of classic software and tech background. You got to pitch a lot. Like it’s like anything else. You’re not going to be good for a while like I feel like when I was doing pitches you know and and sometimes you’d have nine back-to-back calls with investors and I definitely wasn’t as good as my 8 to 8 as I were you know in my yeah, the first first ou have to warm up but like second third and fourth where you definitely were better. Um, you just get tired all those kind of elements. But getting into a specific rhythm right? How you’re actually nailing that and I did find that as you get more experienced. It goes from being a formal pitch to something more conversational and relationship building and I think that does change at the post-s series a stage where it’s much more about the numbers. But I think in the kind of seed to precede. Stage and you wrote up series a um, you can just you know I think getting into a cadence and into a conversational element with the investor is something that I think a lot of startup founders who aren’t used to it. Um, kind of make a mistake which how how do you think about that.

Matt Ward

I would agree. But I think you need to be able to grab their attention. So the most important thing about the first meeting is getting the second meeting and the most important thing about the second meeting is getting the third meeting generally and your email just has to get a meeting. So.

Matt Ward

In terms of how you pitch or get people excited. You really have 30 to 60 seconds to really grab someone’s attention at the beginning and that’s what you need to hammer home and then after that once you’ve got someone’s interest peaked then I think you can play it how you want to play it.

James McWalter

Yeah, that makes a ton of sense subject lines and emails are very important to put put your traction there ah put something that is very if you have traction or probably something that is you know eye catching because you may only get the subject line especially if it’s cold.

Matt Ward

Yeah.

Matt Ward

And to have that have that traction and eye catching this also at the last slide of the pitch deck because you want people to remember you and take action and not just next.

James McWalter

Yeah, and actually on that. Um there’s actually a lot of you know I guess conflicting advice on decks. Some folks are you know you need to have this beautiful stylized deck I think we’re moving more and more into that place I’ve heard what I would probably call like not the. Ideal waste of money although people have argued to me that spending $5000 on designers to make a perfect deck foree is a good idea. But um, you know I feel you can figure out with some template something. That’s that’s kind of cheaper. But how do you think about the impact of deck because I will say that and I know this the stamp of approval from ah. And incubator like Yc which which helps but weisc’s very much like spend 20 minutes on your deck. They’re like it shouldn’t look pretty It should just literally be sentence number sentence number on each slide and then you’re done. Um, which I think is is quite extreme and. Was advice that pretty much everybody that I’ve ever spoken to I see is conflicted against. Um, so yeah, how how do you think about like the the time the effort you know where where’s the highest leverage part of a deck that an individual startup founder should look at right.

Matt Ward

a Harvard a Harvard Education is worthless but a Harvard degree is priceless. It’s some type of filter. So Yc has that filter built in of oh you got into Yc I got to take this seriously. But for other for other founders once that aren’t going through super prestigious programs. If you see 2 pitch decks and 1 looks nice and professional and one doesn’t who do you think is getting the meeting and the funding it kind of comes down to that I don’t think you should be spending $5000 on a pitch deck that’s nuts if you guys actually um, we’ve got. We’ve got a pretty good pitch deck designer if you go to forward Vc. We’ve got an offers page on there that. And there’s ah, a guy on fiverr I found who’s pretty good. He’s done a bunch of pitch decks see something like twenty thirty forty bucks to make your pitch deck look nice I would recommend doing something like that once you’ve put all the awesome information in there to get someone to kind of spruce it up a little bit but don’t waste 5 grand on a pitch deck.

James McWalter

I Fully agree fully agree. Um and thinking then thinking about like where where are you seeing like the biggest opportunities like what parts. Ah you know of the I Guess the kind of larger climate sustainability. Base. Are you most excited by you said carbon credits are maybe kind of less interesting to you guys. But yeah, what’s getting you most excited right now. Yeah.

Matt Ward

There’s a lot of really interesting things circular economy companies that actually have a business model that works so generally some type of product and then some secondary monetization behind it like the one we were talking about. We’re investing in a company now. That’s.

Matt Ward

Decarbonizing plastic and decarbonizing large industry is where I see massive opportunity because it’s boring old outdated and it’s a massive input on the um overall economy size massive input on the overall carbon and emissions problem perspective. And if you just have a ah product that’s better than everything else, price and performance or environment wise you can have I mean you’re not talking about small contracts. You’re talking about Tens of millions of tons or whatever it ends up being It’s it’s very serious impact. We’re not so hot on the. The imobility or ev space outside of um, potentially batteryies so chart charging I think is pretty competitive. It’s kind of going to be a race to the bottom as um, uber was and other things in terms of ride sharing anything that’s a massive land grab is generally something. We don’t like to play in. We’re pretty big on. Let’s see what are what are some of the other interesting areas. We’re seeing a lot in terms of carbon capture not a lot in terms of effective carbon capture or carbon capture in the field but I think that will be an interesting space reducing packaging find fascinating things that increase.

Matt Ward

Energy production. So we’re looking at ah a company in the wind space now I’m advising another company that’s turning rooftop panels they’re adding cogeneration and rotating axes maxen m x un so that they can generate. 3.5 times as much solar energy I told you about climate crop things that are making large industries a decent percentage better have very large impacts and things that aren’t necessarily sexy so construction Ag Tech biotech we’re seeing a lot of very cool stuff. That’s a little bit tougher because we need to really have help on the due diligent side of things. Overall I would say there’s just a massive explosion Europe Israel north america our primary sector our primary focuses. And those are kind of the primary strengths what we see when it comes to the clean tech space.

James McWalter

Yeah I love a lot of those myself. Um, as I’ve jokingly said on on this podcast in the past that if you’re interested in starting climate tech company and you don’t have much expertise in some of the errors you mentioned start reading advanced materials articles on Google scholar. And find ones that were published in the last three years and then like start making some phone calls so as academics and saying if they want to start companies because the disruption of you know, plastic concrete steel. Ah you know the material side I think is really fascinating and then you get to the higher order industrial processes in general and that’s even I think more fascinating and yeah.

Matt Ward

Earth.

James McWalter

You know these companies um are using excel they’re like at best right? like even just thinking about the software side of things. Let alone the actual processes and materials themselves and so yeah I think that because they’re so difficult to decarbonize There’s been a little bit of delay right? We’ve had a large focus on energy transportation. Um, this kind of flourishing around carbon credits and voluntary markets which I agree I think is not going to be I think what a lot of people were betting on a year or two ago um and then people are you know, basically going through that emissions pie chart and just saying okay, what’s next and I do think a lot of the things you talked about are very exciting. Although the. Ah, time to yeah $100000000 revenue might be longer than I think what a traditional kind of Vc vehicle might expect.

Matt Ward

I think that’s both excuse me I think that’s both true and false it depends on how quickly you’re able to get those large scale customers. So on some of those industrials on some of those construction corporates, etc. That’s kind of the relationships that we’re building with forward Vc where we can connect the dots and suddenly you go from a pilot to twenty thirty fifty million in revenue over anight when you scale across these type of companies. So while there is often a long sale cycle if you can shortcut that cell cycle. Then there’s massive upside for the for the companies on on both sides really.

James McWalter

I yeah i. So absolutely yeah, and the course of like a multi-i-year startup a 6 to nine month sales cycle is actually not that long, especially if the upside is as large as what we’re talking about um, wanted to before we finish off I wanted to get your take on. Some of the big policy changes so ira um, which I’m trying to get people to use Ira instead of the ira because it’s going to be a real struggle as an irish person saying the ira for the next decade. Um, so yeah, you heard it here. People say ira please.

James McWalter

Um, but yeah, Ira obviously has a ton of incentives for a lot of different types of clean technologies. You know hydrogen there’s ton of on the energy side. There’s you know, carbon sequestration and capture and. I think that historically there have been definitely been some startups who tried to use regulatory arbitrage and you know we’ll go deep into bills to try to figure out. You know how will it. You know how will there be this kind of leverage that they can apply to their own. Go-to-market their own products and so on. But there’s also ah obviously ah, nearly by definition a huge amount of distortion when you have these bills. How do you think about the best way that startups can kind of interact with these large policy changes to you know to to build a better startup. Yeah.

Matt Ward

If your business doesn’t work without without the funding then you’re setting yourself up for trouble I think they should look at it as icing on the top and a way to hack their way into fast growth but you never know how long those how long those incentives are going to be there as a caveat though. And terms of businesses not being businesses without incentives. We wouldn’t really have farming or fossil fuels either then because there’s so much in terms of subsidies that go into both of those and yet those subsidies even the fossil fuels 1 have been continued to today so I would say take advantage of. All of the subsidies that you can. It shouldn’t be the core of your business. However, and I think there’s probably a lot of services and possible service providers or even software providers that just unlocking that type of funding for these type of clean tech startups could be ah could be pretty game changing.

James McWalter

Yeah, yeah, the the main street for Ira is I’ve had 2 different individuals mentioned that to me as startup ideas literally in the last week and I fully agree you know at at a minimum look at the exploration date of these incentives and if it’s honestly less than 10 years. Um, you know I guess buyer Beware kind of thing. Um. But math. This has been absolutely brilliant before we finish up is there anything I should have asked you about but did not please.

Matt Ward

So here’s the here’s the plug part then I guess so if anyone’s interested if you’re running an awesome climate company and you want to pitch on the startup tank. It’s just the startup tank dot com you can find us on all major podcasting platforms. You can apply to pitch. We run that twice a month in front of top vcs like. Lower carbon and capital future energy ventures zero carbon capital luber morgan etc. The companies that pitch. It’s really getting network effects now. It’s actually pretty cool. The companies that are pitching are getting a bunch of investors afterwards literally reaching out to them by applying there. You’re applying to to and for our syndicate to invest as well. Speaking of the syndicate none of this is a solicitation. But if you happen to be accredited or like investing in startups. You can find out about more and about us and what we do at for ward so the number 4 wards.vc/syndicate we invest in companies that move the world forward. We’d love to have you. Look at what we’re doing. Of course we’re not inviting you to join. But if you were to join. We’re doing some pretty awesome companies now and then in terms of maybe one last one last call to action. So for founders out there for investors out there if you’re looking to find your ideal investor. You’re looking to find other coinvestors. You’re looking to get a better overview of the space. Like I said we published our now. It’s 780 plus climate funds incubators accelerators cvcs. It’s on our website as well. Just forward dot vc you’ll see it on there. You can use all of that filter by stage sector geography check size to find the exact right? investor co-invesctor etc for you.

Matt Ward

We’ve got slack communities on there as well for founders and investors and would just yeah, love to connect with anyone who’s listening in on this and wants to put and play a big role in the climate space Run Team planet together I say so that’s why I publish the database information wants to be free. So let’s do this thing together.

James McWalter

Yeah, absolutely and we’ll include those links in the show notes. Thank you Matt has been amazing.

Matt Ward

Awesome! Thanks so much as well. James it’s been fun.

Paces demo day- E112

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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.