Very enjoyable chat with John Jung, former CEO and Co-founder of Greensmith energy a long term energy storage company, and currently an operating partner at Cota Capital.. We discussed the investment picture for cleantech and green energy, Greensmith Energy’s acquisition by Wärtsilä, the massive opportunity of energy storage, why India and China are the countries to watch for the future of cleantech, how fresh eyes on an industry can bring about the most radical innovation and more!
Here is the audio. The excerpts below are lightly edited:
MCWALTER: What is your perspective on raising money for renewable energy, green technology, clean tech companies from VC?
JUNG: I can speak to that as an entrepreneur that’s gone out and raised money for different ventures, where the goal was actually to raise the least amount of money. Not the most. Sometimes you hear about Silicon Valley CEOs and how they go out and raise as much as they can. The problem with that mindset is that, although you may need a certain amount of money, you have to really be deliberate about the trade offs that you create, which basically means you have to say no to a lot of ideas that engineers and developers develop. It also really kind of forces you to make strategic choices of what it is you want to be when you grow up?
But from my experience of the venture capital community with, with energy and clean energy in particular, I gotta be honest with you over the last 20-30 years, it hasn’t been very good. Having said that, I think very much like the railroad where, maybe 1.0 doesn’t quite kind of get there in terms of all the people that invest their infrastructure. it usually takes a 2.0 or 3.0 infrastructure, it requires critical mass which we are now getting to.
MCWALTER: Your views on the state of the battery market?
JUNG: It’s really good to be agnostic as much as possible. A good example of what I mean strategically about that is if you are a battery company, let’s say your battery is the best battery. But batteries are very much like car engines. In that you’ve got a reason for a Ferrari engine, you’ve got a different reason for a Volkswagen engine. And it’s not to say one is good or one is bad, you just have different horses for courses needs for. And batteries are no different, not just in terms of duration, and density, but all the different cycling.
MCWALTER: I’d like to understand the business model a little bit better? Was it like a subscription pricing model or more milestone based? What was the actual kind of monetization strategy of Greensmith?
JUNG: Yeah, I think that’s that’s another excellent question. Because I think this is where a lot of entrepreneurs get wrong, quite frankly. I think it is good to start with something, right. It could be an idea. It could be a model, it could be a material. It could be data, it could be anything. But ultimately, when you’re building a company it’s essential to get an understanding of who’s gonna pay for something that you provide…
MCWALTER: One of the things that I’ve noticed is, the US has resisted a carbon tax so far, while we’ve seen other countries move forward with them including some states in the US having carbon regulations of various types. On the other hand, you have corporations like Microsoft, and even McDonald’s making very strong decarbonization commitments, which ends up having a lot of downward pressure on their supply chains to decarbonize. In your view, which will have the larger impact in the US specifically on decarbonization, government regulation from the top or these kinds of sustainability commitments moving through corporate supply chains?
JUNG: I think there is a lot of traction and with some of those household names people and people pay attention, right? When Apple does this with their new building or, Google and Microsoft does that, it gets a lot of attention. Having said that, I think the big shifts that are happening are regulatory. But it’s being caused by other bigger shifts that are also very positive in the market. And that is associated with this phenomenon that people called the Henderson curve. What I’m basically saying is, it’s not just that solar energy generation, power generation is hitting the parity line. And the numbers just speak for themselves in terms of new assets, new generation assets that are being deployed around the world, but they’re not stopping there. They’re gonna continue getting cheap. And there’s two reasons behind that. One is the sun and the wind is free, approximately free. The second reason is that I think the heat rate or the efficiency of an internal combustion engine is around 40% maybe. But solar and wind just gets cheaper, the more you produce it. So the last time I read any kind of academic research on the new curve for solar, it was like every time you double the production of a module, whether it’s thin, or crystalline, or what have you, it improves in unit cost by a not insignificant amount and we’re still only scratching the surface on solar penetration around the world.
MCWALTER: What is your view of the Canadian tech scene?
JUNG: One of the things that I think is kind of nice about starting companies in Canada, is that in Canada, in particular, is that I think the values are very similar to the US when it comes to entrepreneurs and business. And number two, I believe, for a while Waterloo graduated more software engineers that Microsoft hired than any other school in the world, so the talent is there, right? The economy is super stable, startups usually are created or sometimes created in places where you feel free, you don’t have to worry about this and that you can kind of focus on, how this cloud computing platform is going to disrupt, medical services or whatever you’re thinking about. And then the final thing is, I think it’s got enough critical mass of stuff going on in multiple sectors, because one of the things that startups really benefit from is stakeholders that are along for the ride in some way.
MCWALTER: You’ve seen kind of clean tech applied in a lot of different countries, which country is most on track to overachieve in terms of their decarbonization?
JUNG: They tend to be some of the biggest economies in the world, one is India, and one is China. China’s pretty simple. for all the good and the bad of any country in the world, when they decide to put their mind to something they do it and they do it for a really long time. And they do it with basically half the supply chain of the world. So when you look at the statistics on solar deployment, or when deployment or storage or manufacturing capacity, you can kind of take that number, cut it in half, and basically argue that half of that is China. That’s how massive it moves needles, right? Many, many different needles. So, and I think people who are operating in the renewable industry have to be thankful for that, regardless of how they feel about different governments.
The other one is India.There are some very aggressive business people, developers that are operating in that country and unlike Western Europe and the United States, they are bringing clean energy to some of the poorest people in the world, and I just love that. If you take a look at the electricity prices that a poor farmer pays for, in Southeast Asia, they are as high if not higher than Western European, and the United States and North America. And part of the reason is inefficiency, and all these things that I think are a great opportunity to improve on. But ultimately the eye on the prize there is bringing clean, affordable electricity to people.
MCWALTER: Is there anything I should have asked you about but did not?
JUNG:The only thing that I would like to add about the energy industry is that sometimes it kind of feels impenetrable.That’s why entrepreneurs like to do B2C type startups where they are working on a thermostat or something that they can relate to like an electric bicycle. I would not shy away from getting into stuff that you don’t know. And seeing if there’s an opportunity to apply the things that you do know, to those and energy is a very good example. When I was hired, I was a hired gun type CEO, brought in by the VCs. I’m not an engineer, but you don’t have to be an engineer to have ideas. So I wouldn’t let the confusion, the noise, the complexity associated with the energy industry and how it’s run and managed, prevent you from finding out more. And we also live in a golden age of not only computers but information and data. So anything you want to know you can basically look up and you can educate yourself, It is really a renaissance for learning as well. So the only thing I would encourage listeners to do is do something very, very different. I kind of wonder if some of the ideas that I had and some of my colleagues who also did not come from the power industry had, were because we were willing to ask stupid questions in an industry where you don’t want to sound stupid, right? So don’t be afraid to sound stupid.