Blockchain & ESG – E53

Great to chat with Kim Raath, Founder & CEO of Topl, an ESG tech company building a blockchain to help businesses prove their ethical and sustainable practices! We discussed Topl’s founding story, how blockchain technology has evolved over the last decade, why traceability is now so important to companies, the future of crypto and more!

Download Podcast Here:

Reducing Food Waste With Ripeness Sensors – E35

Fascinating podcast with Katherine co-founder and CEO of Strella Biotechnology, a startup reducing waste across food supply chains with their advanced ripeness sensors! We discussed how Katherine founded Strella while still in university, how they combined molecular biology with IoT sensors to produce such a unique product, their approach to raising capital, how their MVP saved an early user from losing $600K worth of apples, tips on managing employees and more! 

Making “Clean Cooling” Cool – E12

Really interesting conversation with Manik Suri, CEO of CoInspect who build checklist and refrigeration monitoring solutions for food safety and sustainability. We discussed the importance of pivoting to find product market fit, how insight from their software product pointed them to a massive opportunity which they are meeting with their new product Therma, why first generation IoT cooling measurement tools failed, why making “clean cooling” cool is key to scaling decarbonization, where the biggest opportunities to reduce loss are in food supply chains, views on the Checklist Manifesto and more!

Here is the audio. The excerpts below are lightly edited:

MCWALTER: What is CoInspect’s founding story?

SURI:  The original idea came out of work I was doing as a young lawyer. I went to Harvard law school and for a brief stint in my life I thought I might be a lawyer. In my last year of law school, I was going around Boston various inspectors that were using paper and pen and clipboards and carrying around binders of legal code. They were trying to document health and safety issues around public and private infrastructure. As I was doing that work, my fellow law colleagues and myself realized it was super inefficient and ineffective. 

It was very manual data collection and the data was ending up in filing cabinets. And if you wanted to see what kind of issues were coming up, what kinds of trends, is was really hard to get that information. That led me and my co founder, Aaron, to think about inspections more broadly. And we realized that every physical asset gets inspected. We thought there was an opportunity to bring mobile technology to bear on pen and paper workflows. 

MCWALTER: You then started focusing on health and safety?

SURI:   It’s funny, and in hindsight, it feels like a natural evolution. At the time, it felt like a massive pivot. Our first go to market was selling a mobile app for safety management to governments. Our first customer was New York State Department of Health. We literally sold a government contract as our first customer, and we signed up 15 counties across New York. They are still customers! We realized very quickly that selling to the government was not going to be an easy go to market for a number of reasons.

So we ended up positioning the tool as a compliance tool and that was our kind of first pivot from regtech to compliance tech. And initially, it was about all health and safety. But food safety emerged as a big problem organically and we started getting more and more chains to sign up. I think the timing was good. Mobile had just become cheap enough or affordable enough for a restaurant or supermarket chain to afford tablets in their stores. And the Food Safety Modernization Act in the US had just been enacted which put pressure on documentation and on the ability to audit logs. So there was a kind of regulatory tailwind. And I think the combination of those two factors were key. And then lastly, I would say the growth in social media and the growth in a kind of consumer awareness of food safety issues, has just made brands a lot more concerned. It used to be in the olden days, if you had a food safety problem, you could contain it. But in the last couple of years, if you have a food safety problem in one market, very quickly, it’s a global problem because a few people tweeting can spread rapidly. Those are all the factors that lead us into CoInspect’s first product.

MCWALTER:  I believe you have a new product, Therma? 

SURI: The development of Therma developed very naturally, though, at the time we didn’t realize it. In 2019, we were watching customers across thousands of locations using our CoInspect app to do daily safety checks in restaurants and supermarkets. And yet managers kept going in and checking various endpoints four to eight times a day on a mobile app. A lot of those endpoints and food safety had to do with temperature and humidity controls, making sure that the product was kept in the right temperature zone. 

Now CoInspect as a mobile first tool is certainly better than pen and paper but it still requires a person to do the work. And as we were watching users engaging with the app last year, we realized there was a really interesting opportunity around a new type of automation, or IoT based sensor monitoring, that had not been possible. 

The credit for that goes to our CTO Andrew Hager and our engineering team. Andrew had a background in hardware and software development and he’s always been a passionate IoT hobbyist. We saw a new type of IoT protocol emerged called long range radio or LoRa. LoRa lets you send data from inside dense insulation in a way that WiFi and Bluetooth don’t. WiFi and Bluetooth systems can’t send a signal from the inside of a freezer or fridge. So customers like McDonald’s and Domino’s had tried first generation IoT sensors but they couldn’t send a signal. And so the insight we had was that LoRa as a new protocol, could be used to get continuous monitoring out of the inside of these refrigerated spaces. 

And that’s totally shifted the company in the past year as we built out Therma over the fall of 2019. Therma is a price disruptive, reliable 24/7 smart refrigeration monitoring tool. In essence its an alarm system for your refrigeration to give you insights and to ensure that all of your assets, all of your inventory are being protected and avoiding any spoilage or loss events.

But because of this new product, we’ve moved from not just food safety but into sustainability because refrigeration monitoring reduces food waste, energy waste, and refrigerant emissions. And food waste, energy, waste and refrigerants are three of the biggest drivers of warming. And this was all new to us. We were not climate activists or sustainability experts. And so the company has completely changed from being a safety focused to a sustainability focused startup in the process of building Therma.

MCWALTER:  Often when startups add a second product it’s quite tough. What kind of validation internally did you do when deciding between doubling down on your core offering versus adding Therma?

SURI: It was a really tough call. Because we were a software company with 40 people but no hardware engineers. We’d never built hardware. Every friend of mine from Harvard from college and from grad school, and from just entrepreneurial life said hardware is hard. And knew one of the cofounders of Nest personally, and so it was really a difficult decision. But what was exciting was as we were looking at the product roadmap and doing customer discovery last summer, we kept going to our customer base of thousands of restaurants and retailers using CoInspect. So we had an instal base to talk to and every time we would position the idea of Therma and they would say “I would buy that yesterday”. And so at first we didn’t build hardware, rather we partnered with the two biggest OEM equipment manufacturers, and we built a software front end using OEM hardware. 

We took that to our customer base, and within weeks they were seeing loss and spoilage events being avoided. This was a combination of noticing human error, power outage and equipment, malfunction in the compressors or wiring. They were literally catching all kinds of issues in their stores. And they realized they were having a lot more loss events than they actually thought at the corporate level which meant that the ROI driver for Therma was a lot more significant then we initially thought. We were estimating in our marketing materials 1-2 loss events a year but in practice, we were seeing more like two loss events a month. That’s what led us to join the BMW accelerator urbanX and build out our own hardware in Q4. 

When we put that hardware in the market this year, we were putting it in the market at a fraction of the price of wired solutions. A wired solution would cost a business $3-$5,000 and you need a technician to come out and install it. So the only companies that have put wired solutions where the Walmarts and Costcos of the world and even they are only putting it in their big back of store refrigeration. Our hardware, I’m happy to say we’ve been able to build and we build it in America and at a fraction of the cost. 

And so our pricing model is 10 bucks a month. No hardware costs whatsoever. That has gotten the attention of some of the biggest companies in the food, hospitality and restaurant space, because at 10 bucks a month, (and that’s base pricing), this becomes something that makes sense for a fast casual or a fast food quick serve chain. And so we’re getting interest from a whole segment of the cold chain that just never thought monitoring could make sense for them. And that’s the traction that got us excited. Also the data is really interesting. We have an opportunity to take continuous monitoring data of the cold supply chain and optimize how you manage these expensive assets. And that data is interesting to a lot of people, not just to the owner. It’s interesting to the equipment manufacturers. It’s interesting to insurance companies, it’s interesting to third party food safety firms. So we’re seeing an opportunity with this continuous monitoring data to start doing some interesting work with the ecosystem around the cold chain. 

MCWALTER:  Can Therma help large enterprises meet decarbonization pledges? 

SURI:   Absolutely, and its what we’re seeing. In order to win a corporate deal and this become a system wide standard, we think it has to be more than just a margin improvement or profitability tool. So we’re trying to build the case around both profitability and sustainability. This can be something that reduces energy costs and spoilage rates, and also is measurable in terms of metric tonne of co2 reduction. And so we’ve been partnering recently with several leading climate and sustainability organizations, which measures the social impact of venture backed startups. We’re also doing some work with the World Economic Forum and with McKinsey on a white paper on sustainability practice on measuring and saying with actual data and conviction, “hey, if you’re the CEO of a Starbucks, or if you’re the Chief Sustainability Officer of a Whole Foods, you should be taking this type of technology seriously”. Not just because it’s good for business, but also because you have ESG goals and sustainability goals to meet. So I think that is very much the future.

MCWALTER:  There are interesting operational practices that seem obvious in hindsight, like the Checklist Manifesto in medicine; why wasn’t medicine using checklists for the last hundred years? Are there other kinds of easy to improve operational gaps at large companies?

SURI:  You’d be surprised James at the number of low hanging operational fruits. The challenge, I think is how do you align business incentives and priorities with these low hanging fruits. So I know the Checklist Manifesto,  Dr. Gawande taught my wife! And the reality is checklists have been around forever, but they’re still not implemented or accepted. Only a few high-reliability organizations like nuclear power plants or aviation use them. One of the reasons we see checklist adoption being slow is it’s not easy to measure the benefit of a checklist based protocol. And so when you asked a few minutes ago, why and how our second product has seen so much traction more quickly than CoInspect, is that Therma gives you immediate ROI. Within a week or two, you can see a loss event that you would have spent money on because you’re paying for that product out of your pocket. So Therma is a continuous monitoring tool that aligns with the business objective and profitability very clearly; a checklist pace tool doesn’t do that as easily.

MCWALTER: Are there other opportunities to improve the food supply chain?

SURI: I’ll just mention a few because I think the supply chain has huge areas for improvement. One area that’s really clear is there is a lack of consistency and visibility on how a product moves from production to consumption. Many if not most stakeholders are using pen and paper and so it’s really hard to get condition information from the farm to the fork. 

And that kind of visibility matters to buyers and sellers. And there’s opportunity to create economic value for all of those with more consistent data collection, and more transparent data sharing. And we see that consistently. We see that often when we talk to different stakeholders, “if I could only see what my warehouse operators were doing with my product at a granular level, I would pay a premium for that”. Or “If I could see what our products were doing in real time I could avoid expensive visits to our 300 global suppliers”. There’s just a huge amount of inefficiency in how data is stored and shared. 

And from a climate standpoint and a carbon neutral standpoint, that inefficiency often leads to behavior that is not in line with carbon neutrality. It leads to over chilling and to a ton of product loss.The Boston Consulting Group report that came out two years ago on food waste showed that about $50 billion of product gets thrown out because of storage and handling issues alone. That’s an insane amount of product that gets disposed of. And you know, these numbers matter not just because of the economic value, but also the emissions that are driven by this kind of overproduction and waste.

MCWALTER:  Where does most waste in the supply chain happen?

SURI:   So from a food waste or product loss standpoint, there are a few critical pain points where the majority of product loss happens. The academic research on the topic of food waste indicates the majority of waste seems to happen at a few segments specifically, one is a lot of product gets lost or wasted in the process of being moved from the production environment, to the first warehouse. That’s a combination of poor inventory management at the farm, or at the slaughterhouse. So there’s opportunity to provide better technology and better solutions around those use cases as that’s historically been a segment of the food industry that’s pretty tech lagging. They’re not early adopters, generally speaking, though they’re very big companies and very sophisticated about what they do.  There’s another set of loss that often happens in the transportation moving product between one holding environment to another. 

MCWALTER:  Yeah, no, absolutely say the energy waste, both in terms of the, you know, the temperatures maintained weathers on the shop floor and the refrigerators themselves. You also have the choice of energy that you use, right, like the renewable versus not our picture, or any other elements that

SURI:  We’re working with a couple of major warehousing companies with warehouses the size of multiple zip codes. They are using huge amounts of energy to keep products cold and frozen but because they don’t have a real time heat map or monitoring of the space, they’re ending up over cooling the entire space to ensure that the product stays within range for their customers. So to ensure they don’t lose product, they’re over cooling all that inventory. And so what we’re seeing is with Therma as a lightweight, easy to deploy price disruptive wireless sensor you can get a real time visualization of the heat inside the space and get really significant energy savings. And candidly, that’s one of the fastest growing business verticals for us as a company right now. 

MCWALTER:   Is there anything else I should have asked you about?

SURI:   Why aren’t more people thinking about the global cold chain? I mean, I’m shocked, having worked at one of the largest hedge funds, and I worked in the Obama White House as a junior person on the economic policy team and we never spoken about it and I’m just amazed after talking to a number of climate experts recently, how few people are working on the global cold chain.

In our last all hands meeting, we ended the meeting by saying our goal is to make “clean cooling cool”. It’s pretty understandable why refrigeration and cooling is not top of mind for most people. So I think our mission is to make cooling cool again, or cool for the first time.