Great to chat with Louis Potok, Founder and CEO of Recoolit! Recoolit mitigates climate change by preventing refrigerant emissions! We discussed why refrigerants are the worst greenhouse gases, why southeast asia is the epicenter for refrigerant emissions, carbon offsets and more!

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James

The edited podcast transcript is below

James McWalter: Hello, today we’re speaking with Louis Potok, CEO and founder at Recoolit,
welcome to the podcast Louis.

Louis Potok: Thanks James. It’s nice to be here.

James McWalter: Great. To start with, tell us a little bit about Recoolit.

Louis Potok: Recoolit is empowering sustainable cooling around the world. Cooling, which is air
conditioning and refrigeration, are two of the most important inventions of the last 100 years.
It completely changed every aspect of society like how we live, where we live, what we eat and
more. But there’s this huge climate impact that comes from the chemicals inside those devices
called refrigerants. And what Recoolit is doing is partnering with AC technicians around the
world to collect those harmful refrigerants, preventing them from being leaked into the
atmosphere and then destroying them and selling carbon offsets for the avoided emissions. So,
we are the software layer in that process that goes from the source device that’s being
decommissioned into the hands of the AC technician, into a cylinder, into a big oven to burn it
up and then the data that then goes to the offset buyer.

James McWalter: What drove the initial decision to start Recoolit?

Louis Potok: I was happily working as a head of data science in San Francisco at a health tech
startup and felt this, you know, crisis of meaning is a little strong. But looking for something a
little bit more and started reading about climate change, came upon this book called project
drawdown which was a ranking of 100 different climate solutions in order from most
important, biggest impact, to least, and refrigerant management was number one, I had never
heard of it. And so that’s what sort of got me going in this direction originally.

James McWalter: Yeah. It’s interesting you mentioned project drawdown. It actually had quite
a big impact on my own thinking when looking through different startup ideas of various types.

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And I’ve actually been surprised that more founders haven’t mentioned it on the podcast
because I think it definitely has gone into a lot of people’s kind of thought process. But for you, I
guess, why were you drawn specifically to refrigerants?

Louis Potok: Well refrigerants were number one on the list and honestly, I basically stopped
reading. Everything else in the top ten felt familiar, right? Like, I knew about solar, I knew about
wind, and refrigerants — I’d literally never heard of, it was number one. And so I just thought
like, okay, let’s look at some job postings for refrigerant startups and there weren’t any, there
weren’t any job postings because there weren’t any startups, there weren’t any companies
really dealing with it. And so as I kept looking, I just kind of never went back to drawdown
because it became clear so quickly that there was this huge problem that needed to be solved.

James McWalter: So from that point to deciding that you wanted to start a company in that
direction and I believe you’re a solo founder. What was that decision making process like?

Louis Potok: Yeah. So, I spent about six months ramping up, nights and weekends during my
full-time job. And that was sneaking in conversations with people who knew the space, who
had looked at it, researchers, you know people in the industry. Just kind of getting a basic sanity
check; that I wasn’t crazy, that there wasn’t someone else doing it, that my understanding of
the problem was being developed. And at that point I wasn’t sure that starting a company was
the right approach. I mean the question of whether you can build a business based on solving
this problem or whether it’s policy, advocacy or a non-profit — still really unclear. And so then
that brings us to November of 2019, when I quit my job, decided to go full-time for what I
thought would be, somewhere between a few weeks and a few months. Moved to Cambodia
which I thought was going to be like the epicenter of the refrigerant problem, turned out it
wasn’t. But I got deep on the ground, talking to folks, and the AC technicians on the ground
there. And, that’s really when it just became clear that there was this huge problem and my
understanding was at this point richer than almost anybody else because I had sort of done the
high level work in the conversations in the US and been on the ground in the field. So that’s
really when the pieces started getting put together for me that there was a company in the
space that needed to be created.

James McWalter: Why was there such a large discrepancy between what you expected
Cambodia to be this potential large hub versus what turned out to be reality?

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Louis Potok: Yeah. I mean Southeast Asia is definitely the epicenter. In the sun, it’s hot and
humid, people are getting richer, AC’s are the first thing they buy, and the regulations to phase
out these refrigerants are pretty slow. But, what I really was optimizing for initially was how
quickly could I get a visa and like be on the ground somewhere and not be bothered and kind of
wander around and not have to deal with immigration. Cambodia was great for that. Definitely
the right choice there but as I started talking to people who had built businesses in emerging
markets, I kept getting this consistent feedback that Cambodia is ridiculous because it’s just
way too small that your first market size matters a lot because going to the second market is a
lot harder than you’ll expect. So, I ended up starting the company in Indonesia which is the
fourth largest country in the world. Definitely big enough!

James McWalter: So, I guess when I think about refrigerants, I think about the US South. How
the development adoption of that technology changed the course of where people chose to
live. You had this kind of huge flourishing of people moving from the north to the United States
to the south United States. And I think I have a sense that we’re seeing that kind of throughout
the world that as AC, as a technology has spread, it’s changing living patterns and so on. But I
guess how has the history of, what chemicals we’re using in AC affected its climate impact. Are
certain chemicals more dangerous to the climate than others?

Louis Potok: Yeah. So, the history of the refrigerants is super interesting. The original
refrigerants that were used in the early 20 th century were a variety of different compounds. So,
they were using isobutane, ammonia, carbon dioxide even. And those devices were just like,
basically terrible, they were always exploding or catching on fire or corroding or leaking and
poisoning people. And then in the 1920s, this chemist at DuPont invented r12 which was a CFC
and that was sort of the standard refrigerant in use for the next 60 years. Mario Molina then
won a Nobel Prize for discovering that that was destroying the ozone layer. And so in the 80s,
the UN signed the Montreal protocol which phased out CFCs very quickly and led to a new
generation of replacement gases known as HCFCs. Those then got baked into the protocol and
were also phased out; they were no longer ozone destroying but still bad for the climate. So,
we’re now at HFCs. And those are also going to be phased out over the next 30 years around
the world but on very different timelines in different countries. So, the US and the UN are
already moving in that direction and in most of the rest of the world, it’s much slower. The
newest generation of refrigerants, actually interestingly some of them are going back to that
first generation of natural refrigerants, now that we know what we’re doing a little bit more, we
can handle some of those downsides but there are also newer chemicals called HFOs which

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climate impacts allegedly good although there are some questions but in theory should solve
the problem over time as over the next 30 years as these devices are phased out.

James McWalter: So then is the larger issue, the fact that even the developing world is reducing
the overall climate impact of refrigerant; the developing world is counteracting that as it has
growth or as the economic growth of the developing world adds more refrigerant. It’s like
blowing past even the previous baseline provided by the developed world.

Louis Potok: Yeah. So, there’s kind of a race between those two forces. And a lot of it is still to
be determined; part of it depends on how quickly the manufacturers can make cost-effective
versions of these newer gases and devices that can handle them. But what it looks like is going
to happen is, there’s going to be a huge pulse over the next 10 or 15 years of devices produced
with the high global warming potential gases. And we have kind of one chance to capture all
those emissions as they happen. And then hopefully 20 years from now that problem will be
solved and we can all move on to greener pastures.

James McWalter: So, you’re in Cambodia and you realize the market is small. Indonesia is
where it’s at where you have to be. What was the next step?

Louis Potok: Yeah. So, as I was deciding to go, I was back in the US at this point. During the
early days of COVID and trying to raise money to get started sort of had clarified the idea into a
for-profit startup rather than anything else, another vehicle. So, I was looking to raise money,
looking for kind of connections in Indonesia to get started, trying to get my visa in Indonesia
which turned into a much bigger hassle than I had expected and kind of putting all those pieces
together and also starting at the time to work with a potential co-founder who I worked with
for a few months and that didn’t work out in the end.

James McWalter: And so you’re in Indonesia or you’re trying to get into Indonesia and I spent
some a little bit of time there, Jakarta is a chaotic place, super high energy, super great place to
be across a lot of different contexts. But definitely a… maybe a bit of a culture shock. So once
you’re on the ground, what were your steps towards some market validation?

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Louis Potok: Yeah. So, it was kind of interesting. I had a few months where I was waiting for
them to reopen borders and like sitting in an apartment in New York. And just literally
messaged everyone I had ever met asking, hey, have you ever been to Indonesia? Do you know
anyone there? And I found some really great connections in the Indonesian AC industry that
way, which was kind of a surprise to me. So, starting to talk to the H-VAC contractors, people in
the energy efficiency space there, people who worked on environmental policy there… Just
again really basic, here’s my understanding what’s happening. Do you think this makes sense?
What are going to be the obstacles? And some of those later turned into partners for Recoolit,
and some of them, it didn’t. But that was kind of the way to get the way that we got started. I
actually hired the first two members of our Indonesian team from New York before I ever set
from the country. And then once I was there, it was really just more of the same; looking up AC
firms, calling them up, going door to door for the shops, really exploring every segment of the
market as we refined what we were doing and figured out how to explain our partnership
proposal in a way that was appealing to folks there.

James McWalter: And so, there’s definitely this kind of longer term software data plan as you
mentioned. But I guess today where are you up to, if I wanted, I’m in Indonesia; I want to
recycle some refrigerants. What steps would I take?

Louis Potok: Yeah. So, you would have to get in touch with us somehow either through one of
our sort of partners who sign up freelance technicians, we have a couple of those. Or maybe
you work for an H-VAC contractor that’s partnered with us on a corporate level. You register on
our… I hesitate to call it an app, it’s a little misleading, let’s call it an app for now and agree that
that’s a little bit of a fiction. Register on our app, upload your kind of identity verification and
then if you don’t have the equipment that you need to recover the refrigerant from that device,
you schedule a pickup. So, you come to like a branch office which are basically franchises for us,
we don’t run them ourselves. Come pick up some equipment, take it to your job site, fill up a
cylinder with empty gas, and bring the cylinder back, sign back in that equipment. And then
periodically we will come through as Recoolit for now and pick up those full cylinders, leave
empty ones for the franchise, take those full cylinders to our warehouse, consolidate them into
the bigger tanks. And then eventually batch that gas up for destruction and send it to our
destruction facility.

James McWalter: And so from my understanding CO2 is, with the most of CO2 in the
atmosphere that’s having a large climate effect. But other gases like methane can have

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multiple, 70, 80 times the effect of CO2 for the equivalent amount of gas in terms of its climate
change effect. How much more damaging are these refrigerated gases?

Louis Potok: Yeah. So, these gases are anywhere from 1300 to 2000 to up to 10,000 for the
older gases, times worse than CO2. And so from carbon offset or carbon accounting perspective
that gives you a huge amount of leeway. I think I once calculated that we could drive one
kilogram at a time – 30 miles and it would still be under five percent of the total emissions.

James McWalter: So that’s the kind of impact. What is the destruction process like?

Louis Potok: Yeah. So destruction, you’re basically burning it up at a high temperature. And you
sort of lower floor of where you want to be is a thousand degrees Celsius and that can go up to
a million degrees Celsius for some of the plasma arc incinerators that are in use around the
world. What’s really cool about, you know, what’s interesting about this? Is that you can do this
in a wide variety of different places. It doesn’t have really stringent technical requirements, and
it just has to be hot enough and negative pressure. So the gas doesn’t escape before it’s burned
up. And the gas has to sit in at that temperature for a certain time. So, one thing, one neat
thing you can do is you can repurpose a cement kiln and you can pump that gas actually into
the cement oven while the cement is baking; they operate at negative pressure anyway. You
don’t need any extra energy because the process… the cement baking is already so energy
efficient. So, the carbon impact of destroying it, it is actually negligible. And the offset
methodologies tell you that they just say like don’t even worry about the energy that’s being
used there because compared to baking, hundreds and hundreds of tons of cement, you’re not
really changing the requirements…

James McWalter: So then I guess in terms of trying to find a ready supply of these refrigerants
that need to be destroyed from a climate point of view. Are we talking office buildings,
hospitals, residential complexes, things like that…?

Louis Potok: Yeah. We’re still early and we’ve put out feelers in all those segments and we’ve
basically seen success in all of them. So, we have freelance technicians that are going to a home
and dealing with a single mini split unit at a time. We also have the chiller for a hotel. We have
the installation of hundreds of devices and a shopping mall complex. We’ve really dealt up and

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down that spectrum. The question of what’s going to be most efficient for us as we move
forward from a unit economic perspective and tech perspective is to be determined. But, so far
they all look promising.

James McWalter: And so are those installers thinking about this as purely this is like another
revenue line for their business, are they thinking oh actually I do have to destroy this anyways
and this is just a part of my op-ex or they’re also thinking about the climate impact.

Louis Potok: For our partners it’s a mix depending on what segment you’re dealing with. So, the
building owners, especially for things like hotels, shopping malls, office buildings do care about
the sustainability. And we are giving sort of proof of sustainable disposal to the building
owners. For the freelance technicians it really is mostly about the money. Even if they care
about the environment and many do. That alone is not nearly motivating enough to go through
this extra hassle and acquire equipment they don’t have. For the professional H-VAC firms, it’s
somewhere in the middle. They like to be able to tell their clients, who are the building owners
that they’re doing the sustainable thing but they also appreciate the funding that we provide.

James McWalter: So that’s the supply side but on the demand side, I guess, who are the type of
folks who are interested in these types of carbon credits…?

Louis Potok: Yeah. So, carbon credit’s immensely complex. We could spend several hours
digging into that. We are not at this time dealing with compliance market offsets; we’re dealing
only with voluntary markets. And individuals will sometimes buy offsets on the voluntary
market, we’re not really targeting those as buyers, mostly it’s corporations that have made
some kind of carbon neutral or net zero commitment. Historically what they’re looking for is
just stack up as many offsets as they can, regardless of quality. And that’s been a lot of the
criticism of the offset market in the past. Thankfully we’re seeing some early adopters, more
sophisticated companies, especially from the software sector focus really intensely on quality
and be willing to pay more for it. So, we are kind of riding that wave because we believe that
our offsets are as high quality as anything else on the market.

James McWalter: I guess what does quality mean in the context of carbon offsets?

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Louis Potok: Yeah. The key question with carbon offsets is… something called additionality
which is what would have happened in the counterfactual, what happens if you don’t buy my
offset. And so for some categories it’s a little unclear, right? If you, for a lot of avoided
deforestation offsets, a landowner will say hey, I have this patch of forest; I want to cut it down,
if you buy my offsets I won’t cut it down. And it’s kind of impossible to prove what they would
have done otherwise. So that’s where a lot of the more questionable offsets come from. For us,
it’s very clear. Every AC technician in Indonesia vents refrigerant every day, there’s no facility in
the country that is actively collecting or destroying them. 100 percent, if you don’t buy our
offsets that gas is going into the atmosphere, where it’s going to sit and increase the radiative
forcing of the stratosphere. And with a lot of the new carbon removal stuff, you have a similar
story around additionality. We’re not going to turn on our direct air capture machine unless you
pay us. Fair enough. Another aspect of quality that the carbon removal stuff does not stack up
quite as well or where there’s a little bit more science risk is permanence. So, you suck carbon
out of the atmosphere, you collect a bunch of biomass and turn it into some carbon denser
material. Where are you going to put it? And how do you make sure that carbon doesn’t leak
out especially when you’re dealing with natural systems which are in some ways not as well
understood. For us we have very, very clear permanence because the gases get burned up, the
constituent parts get, you know, in some cases baked into the cement or are just not reactive
and they’re not going to recombine and get dealt with as normal waste would. So, no question
for us, 100 percent additionality, 100 percent permanence as good as anything else out there in
terms of quality.

James McWalter: I guess one of the things we’ve seen recently is that, you know, focus on
quality. There’s been a lot of… different types of offsets purchased and things that are more
nature based. Like a forest, there were some high profile cases of forest burning down and so
on. And we absolutely still need those forests to exist and the carbon credits from thoseforests.
I think are still incredibly valuable and important. But it does show that permanence is a bit of
an issue, especially if we’re trying to sequester carbon or prevent these carbon emissions in a
multi-decade kind of time horizon.

Louis Potok: Right, exactly. And I think it’s really an attitude shift from how cheaply can we
offset all of our emissions to how do we make sure we’re getting the best offsets possible and
then what’s the cheapest way we can do that. And I’m really inspired by some of the work
that’s happened. Especially at Stripe, Shopify, Microsoft, to just name a few. To really, really
focus on quality and go above and beyond and publish everything they’re doing and all their
other proposals they receive and things like that.

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James McWalter: Would you say the larger problem is the demand or supply side?

Louis Potok: I think it’s definitely supply constrained. I think there are a lot of companies that
would be happy to jump on board with high quality offsets, if they didn’t have to pay 600
dollars a ton to do it. And so we are hoping to… We’re hoping to help solve that problem. We
don’t charge 600 dollar a ton.

James McWalter: And so to give an audience a better sense. So, typically lower permanent —
lower quality offsets are sub 10 dollars a ton. Whereas at the very, very highest end, director
capture offsets are often 600 to up to a thousand dollars plus a ton. So, I guess, you know,
what’s the kind of range you’re aiming for at Recoolit?

Louis Potok: Yeah. Right now we’re in the 50 to 100 dollar range. I think we could go below that
at scale as we prove out everything we’re doing. But it’s sort of a niche where there’s not really
a lot of other offset of that combination of price and quality. So, hopefully our quality conscious
buyers will continue buying.

James McWalter: So what is the competitive landscape like for this? Has anyone else gone into
project drawdown dinosaurs and said okay, Recoolit is what I’m going to focus on.

Louis Potok: Yeah, I definitely. It’s easy to tell the founding story in a way that makes it seem
like I’m a massive trailblazer on the scene. I didn’t invent any of this technology that, you know,
this is in some ways well-trod ground. I remember when I was just starting out, someone I was
trying to network with, sent me an email saying like, just so, you know, this is well trod ground,
advise you against it. But he was looking at a very small piece of the landscape, which was well
trod ground which we’re not doing, which is CFC collection in the US. So, as all those old
generation of gases were being phased out, there was sort of a wave of people going around,
looking for warehouses full of it, and selling offsets. And that’s great, I’m glad it happened.
There are companies that are still doing that, still finding warehouses full of CFCs. In the US,
sometimes around the world, there are some very charismatic projects. In some cases they get
some good press and we’re happy that’s happening. But in terms of the continuous flow of

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emissions from new devices, targeted at the geographies where we’re looking, really there’s
not much else happening.

James McWalter: And then, because actually I remember there was some podcasts, actually
about a fellow who drives around in the US and picks up and refrigerants. But he doesn’t say
what it’s for because there was like a, you know, he’s picking it up from people who typically
might not be as familiar or appreciative of climate change as a reason from a political point of
view. And so he was like pretending that he was picking up for some other reasons.

Louis Potok: That’s right. That’s right. And I mean there’s no reason to be so secretive. The
company is Tradewater, based out of Chicago, they do a lot of work in the US, they’re great, big
supporters of them, we’re playing in different spaces in some ways. Yeah. So, they definitely
have this, this angle where they’re pretending that they’re not a climate company because the
AC technicians of Southern Illinois do not want to be getting into bed with a climate company.
We don’t have that problem. I mean Jakarta is sinking, Jakarta is flooding, and climate change is
a big topic in Southeast Asia. Our users are really happy to be supporting our mission and happy
that they have a way to get involved. Interestingly the government has sort of put,
governments around the world funded by the UN, have put out kind of training modules on
refrigerant collection and sort of not thought through the next steps of how you actually
incentivize and put the infrastructure in place to make sure that something happens to that
refrigerant where it’s collected. So, in some cases people have showed up to trainings, here’s
how you collect refrigerants, gotten excited about it and then realized that they’re kind of on
their own after that. So, we actually take the next steps and sort of implement the programs
that the UN doesn’t have the capacity or the interest in doing in some ways.

James McWalter: And have you found, I guess then within Indonesia generally, are there policy
elements you have to navigate, are there local governmental regulations you have to navigate
that are somewhat different to maybe what you were used to in previous jurisdictions.

Louis Potok: Yeah. So, I’ve worked in some regulated industries before. So, it’s not my first time
here but regulatory culture in every country is pretty different. I would say that the main kind
of regulatory issues we’ve dealt with are that refrigerants are classed in Indonesia as hazardous
waste. Once they’ve come out of the device which on the face of it does not make a lot of sense
because it’s actually the same gas that was going into the device. So, anyone can go to the store

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and buy some refrigerant, anyone can put it on the back of their motorbike and drive it home
and fill it up themselves. But once you take it out and you have the same gas in the same
cylinder, you actually can’t, you really aren’t supposed to drive it around because it’s now
classified as a hazardous waste because it’s bad for the environment. So, there are some issues
we’ve been working with the regulators there and we’ve gotten some little sandbox to play in
where they want to see what happens with our pilots which has been really great, removed a
lot of uncertainty for us. But, yeah, that’s been the big one on the regulatory side. There’s also
coming down the line a big question for the world of how carbon offsets will be able to be
treated across borders. The UN has a very, very long way to go to figure out that problem but
that will be kind of another interesting regulation to keep an eye on.

James McWalter: Yeah. Another aspect was… so you’ve also just moved, you know. I believe
you now spent a year living in Jakarta. And so, you don’t, I tend not to hear about a lot of kind
of startups based in Jakarta coming out and we do actually have a fair number of founders who
are working in non-US countries, I do often ask what is the kind of difference in terms of
building a company there versus building a company in the United States. But in this case you
weren’t already living there, you actually moved there to start a company in a very specific way.
What has that experience been like?

Louis Potok: Yeah, it’s really interesting. I don’t have a lot of comparisons of other companies
that have been started in quite the same way. So, we are established legally in the US and then
I moved to Indonesia to set up our operations. There our ambitions are to be a global company
with users in Indonesia, Thailand, Vietnam, Nigeria, India, you know… Any hot emerging
markets you can name basically, but with a distinct headquarters in the US. So, thinking from
the start about how to do that is really a challenge because of course this isn’t just quote
emerging markets, each of these countries has its own very distinct business culture, its own
very distinct sort of facts on the ground that need to be dealt with. Not to mention the
coordination challenges of doing the same thing in multiple places. So, from the start being
really clear about what our company culture is going to be and how it might be different from
normal business culture in the places we’re working, has been important. And I’ve probably,
James and I’ve had some conversations about how maybe I’ve underemphasized that relative
to how much I should, but it’s definitely something I’m keeping an eye on. Yeah, I mean, I think I
spent six years working at tech startups in San Francisco and it always felt really natural to me.
The culture there; really high openness, willingness to disagree, willingness to… hash out
disagreements in public and then everybody just goes with the thing that the person who had
the best idea. And as I’ve been working in other countries, I’ve come to appreciate a little more

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how rare that is and how hard you might have to work to instantiate that culture which I value
really highly as you are hiring people who don’t have a background in those same kinds of
companies and cultures.

James McWalter: And I guess there’s like two levers you can pull with that, right? So, the first
lever is around the people you actually hire. So, people who tend to have that mindset or as
close to that mindset kind of going in. And the second is like while in the company, as the
company’s developing, you are making sure that there’s alignment on that kind of cultural
piece. I guess I’ve heard the way between the two, right? How do you think about that weight
between those two ways of coming? You know, building a company culture over time, not just
within Indonesia but I guess anywhere.

Louis Potok: Yeah. I think early on it becomes more important to hire people who are already
aligned with that culture that you want to have. Because one you have sort of fewer peers to
influence someone into the culture that you want to build, it’s already, it’s less nascent, there’s
more new process or new kind of habits that you need to develop. Whereas later on once you
have things more established, people can learn the culture and grow into it, if that’s not
something that they share. I will say one more point on culture, that’s been interesting for me is
that of course we are dealing with local partners in Indonesia who, of course, we’re not going to
change the entire AC industry to operate like a silicon valley startup. So, we have a sort of an
impedance mismatch at our company border between how we want to operate and how our
partners are used to operating. And sometimes it’s actually beneficial for us to bring that
border a little bit internal, hire people who are a little bit more comfortable with that normal
way of doing business and accept that friction internally, so that we have something smoother
with our external partners. And so that’s another trade-off that has to be considered.

James McWalter: Yeah, that makes a ton of sense. I actually was playing around with a startup
idea in the past that was focused on US farmers. And I also come from farmer background. And
you have to speak the language to a certain extent, right? Even if you speak the same literal
language, you have to be able to speak to, you know, the hopes the fears and all those kind of
things of those people involved because if people feel that they’re being talked over or talked in
a way that isn’t like connecting with them directly and not just like one-on-one but like
company messaging, marketing, like all those elements. You can rapidly get into a situation
where there’s just like this kind of vague sense of distrust over your organization.

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Louis Potok: Yeah, for sure. I mean in some ways developers selling to developers is the easiest
game in town because you really like understand your users. And you know what? You know
they value. And in some cases that doesn’t solve the problems, the problems that you care
about.

James McWalter: Absolutely. So, let’s go back a little bit to the carbon marketplace side of
things. And so, I feel a couple years ago when you were kind of just starting out there, just
really wasn’t any carbon, volatile carbon credits, infrastructure at all. And so now you start to
have companies have come along in the last couple years and they’re doing things like trying to
aggregate different levels of supply and demand and all that kind of thing. And it seems
because we’re so supply constrained. You’re seeing some providers of carbon credits, some
companies who are preventing carbon credits try to go their own way versus work with third-
party aggregators of some sort, right? So, you could have a marketplace where your credits are
posted alongside these other, maybe more or less permanent credits. And then they come from
that common pool, they’ll sell to the kind of corporates of the world versus having direct
relationships with the end corporates yourself. How do you think about that balance from like a
long-term business model and defensibility point of view?

Louis Potok: Yeah, it’s a great question. I would first just push back on your sense of the history
here. And I wasn’t involved in this history before 2019 but my understanding of it is that there
was actually a fairly robust carbon offset market in the years leading up to like 2008, 2009 in
the first clean deck bubble. And then sort of this long desert, this crash in the market and a long
desert, until maybe 2016, 2017 things started to pick back up again. And if you look at
transactions of the voluntary carbon market, it’s grown like 70 percent a year on average since
2017 but that’s from a low base compared to where it was 10 years before that. So, I would say,
I think we’re rediscovering a lot of the financialization and business relationships and brokers
that maybe existed 10 years ago. So, hopefully we’re not making all the same mistakes. We can
learn a little bit but we’re also doing some things better.

James McWalter: Sure.

Louis Potok: But then I think you really got to this fundamental tension in the carbon offset
market that is maybe just totally unresolvable which is that everybody wants one ton of carbon
to be the same as another ton of carbon, right? We want them to be commensurable. We want

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to be able to say I didn’t, you know, I emitted this one ton and the ton that I can get from
Recoolit or from anybody else is the exact same thing. And, it’s kind of challenging to say that
because first of all people care about things like co-benefits. So, there are plenty of good
reasons to save rainforests besides the carbon that’s in them, right? Biodiversity, indigenous
land rights so on and so forth. So, there’s already kind of an issue there. There’s already a sense
from the corporate buyer side that what they want is… in some sense more like a story than a
rigorous accounting of tons and you see different approaches that playing out in the market.
So, there are some, you know, there are people who are like in commodities trading who now,
you’re selling a ton of nickel, you’re selling a ton of zinc, now you just move to the carbon
markets and you do exactly the same approach and it’s purely commodified. You also have
really sort of bespoke approaches where you sell to a specific buyer directly from the project,
you give them tons of information about what that project was and you hope that the buyer
values sort of that package over just the number of tons that you can provide and quality really
gets wrapped up in that second approach. So for us it’s really more about that second one. At
least until there’s a shift in the overall market, where quality is valued, where the things that we
do, and the digital audit trail that our software is capturing about this whole process that
proves beyond a shadow of a doubt how additional our offsets are. We want buyers that
appreciate that, that aren’t just letting it getting commodified away and put in a package with a
bunch of forestry offsets that don’t have any of those same evidences behind them.

James McWalter: And I guess we saw an extreme version of that with the rise and I guess nerdy
fall of Klima Dao and some of the other elements and you mentioned a digital traceability and
so on. Which a lot of people have basically translated that to mean a block chain and not a
postgres database with which you said you did a unique identifier column. So how do you think
about the big block chain push in carbon credits, specifically that’s something you guys want to
engage in or run away kind of like.

Louis Potok: Well, I have to say like I’m going to get called; not going to make it on twitter after
this exchange because I really do not think that there’s much of a value. I mean, I think the
block engine, block chain can solve some problems or improve some things in some ways but I
don’t think it’s touching the really fundamental questions. I was sort of skeptical of the web 3
climate stuff for a while and then I spent a week getting really deep in it trying to see if there
was something that I had missed. And I sort of concluded the benefits that people talk about
with block chain applied to carbon credits is democratizing access to carbon finance for the
masses. Like, basically normal people can make money trading derivatives on carbon offsets.
And if that’s what you care about, great, go ahead and do it. That is not something I care about.

15
That is not the problem I want to solve. In block chain world, they talk about the oracle problem
which is that anything that happens on block chain, on a block chain is traceable and verifiable.
But, if you care about some real-world activity, somebody has to put that real-world activity on
the block chain. And how do you do that in a way that makes sure that that real-world activity
happens and is the thing you wanted and that is the core problem of carbon offsets and that is
that problem remains whether you’re trading those carbon offsets in a postgres database or on
the block chain.

James McWalter: Yeah, we’re pretty aligned on that. I do go in my own little cycles of this
where I’ll be like I’m definitely missing something. And I will do a bit of a deep dive. And it’s less
connected to the startup I’m working on day-to-day right now, anyways. But I think that the
financialization, assetization piece is like the key piece. It’s like if you want to slice up some
asset in lots and lots of different ways and trade those or exchanges those in various ways. I
think block chain is quite interesting. And so, I can see if you were trying to create a, you know,
like a mortgage-backed security of carbon where you have different tranches of permanence
and all those kind of things, I think block chain is as good a way of doing that as anything else
but we definitely had MVS like a mortgage back securities, pre-block chain as well. So, like there
are still ways of doing that. But I think the other aspect of the kind of crypto block chain space
and carbon credits. Again, I guess embodied by what could happen with climate and for those
not familiar claim it out is a carbon credits exchange that one point was worth a billion dollars
and it’s lost about 98 percent of value since last August. So, in the last, let’s say seven or eight
months. A lot of that was because they had no supply that wasn’t of high enough quality and so
they had done this incredible job of capturing demand or some sort of demand through… nor
ordinary retail crypto currencies of various types but then we’re figuring out the supply side.
And so I think that aggregation of the demand side on the retail side. I think that is interesting
within the kind of crypto universe – web 3 world but, yeah, to your point the actual underlying
technology doesn’t really solve anything because at the end we do care about what happens in
the real world.

Louis Potok: Yeah. I mean, I can think of ways to apply block chain to climate to carbon offsets
that add a little bit of value. I mean if you think of, you know, going on your mortgage backed
securities analogy, right? If you think about a more structured role for rating agencies to play
and reputation and people being able to buy… yeah, these sort of portfolio of different quality
offsets. Well, in an explicit and legible way. Like, great, that’s fine. But that’s I don’t see that
work happening. And to me that’s fundamentally less important than creating the quality

16
offsets in the first place because it is a supply constrained market. So that’s where I sort of have
landed on that.

James McWalter: And I guess, what’s the next year to two years for Recoolit look like?

Louis Potok: Yeah, so we’ve, you know, where we’ve come so far is we kind of checked off
every box. Once we’ve signed up a bunch of users, we’ve collected a bunch of refrigerant, we’ve
destroyed our first batch or it’s actually scheduled for destruction next week.

James McWalter: Congrats! I know that was a long time coming.

Louis Potok: We can get into that another time… another few hour session. And we’ve sold a
small number of offsets from that first batch as a pre-sale. So, the next year or two are really
about scaling that out within Indonesia. The island of java is a third the size of California and has
four times the population. So, we have a lot of air conditioners to handle, just without going too
far from our office in Jakarta. And hopefully within about 18 months we will be ready to start
looking at that next wave of countries and doing in a way that doesn’t involve me waiting for a
visa for five months but hopefully a little bit more of a scalable approach that uses the software
that we’ve built for Indonesia as a sort of beachhead. And to support all that growth within
Indonesia over the next 18 months, we’re actually fundraising right now.

James McWalter: Very exciting! And I guess because it’s somewhat isolating, I’ve tried to solo
phone for best. You’ve been kind of solo founding now. And again a country where you don’t
have the kind of local language, not only local language but bahasa is just one of like a thousand
languages that you have in java and so on. What have you done to…? I guess stay connected to
startup community other entrepreneurs that kind of thing.

Louis Potok: Yeah. Definitely the most helpful thing has been I have two different kinds of small
group sessions with other climate tech founders obviously. Thank you for the leading question,
James, as one of my comrades in one of those.

17
James McWalter: Yeah, Louis and I know through a climate founder mastermind that we meet
with once a month.

Louis Potok: That’s right. So, yeah, it’s like a great combination of strategic advice coaching
therapy. And I have one for my kind of US climate tech focus and one of Southeast Asia
founders and so that’s been really, really helpful. It’s hard to imagine having really gone
anywhere without those. But a lot of it is just seeking out people who can provide advice. And
you find these people who you look at their LinkedIn and they just seem like anybody else in
the world and then you get on a call with them for some really tactical reason and they are like
fully present, really helpful, give you the emotional support that maybe you need in that
moment. With the sort of emotional aspect I definitely like underrated going into it and has
been a huge component of what it takes to even have come this far.

James McWalter: Yeah. And I think one of the bits that I took from what you just said there is, if
you show some vulnerability, like people are very open to also showing their vulnerability and
you have that kind of shared connection with people. Like, we’re very much in a world where
everybody is, you know, hash tag killing it. But, I think there’s definitely more and more of a…
there are more forums for people to be open about, not just the hard bits but the victories, like
all the little bits. Like, I’m not just saying it’s all a drag because it’s not. Like, there are fantastic
moments every day as well but being kind of that open vulnerability. And more people are
connecting that to just kind of a more positive, some general kind of attitude. And people are
very connected and I think in general the climate is founder space or just kind of… not just
founders but climate startup space in general is incredibly open to helping each other in ways
that is pretty unique to it right now.

Louis Potok: Yeah. I’ve been blown away dozens of times by the immense like generosity and
kindness of people that I’ve only just met, in some of these relationships now stretching out for
years. So, if you are already doing that, great. If you need that in your life, go find it, it’s out
there. It’s a wonderful thing.

James McWalter: Absolutely. Well, Louis, I’ve really enjoyed the conversation. Before we finish,
is there anything I should have asked you about but did not.

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Louis Potok: Yeah, so right. So, you should have asked me what do I need from your listeners,
how can your listeners support our journey to empower sustainable Recoolit.

James McWalter: Yes.

Louis Potok: There are two ways. One is that we are fundraising now. So, if you are in the
climate tech investing scene, would love to talk to any of you, my email is probably in the show
notes but if it’s not, you can search me on Louis, yeah, great. And the second is that we are
starting to get more serious about selling offsets from that first batch of destruction that I
mentioned. So, if you work at a company that is trying to achieve carbon neutral or net zero
claims and you want some super high quality offsets with a really interesting story and a bunch
of photos of AC technicians in the field on a rooftop in Jakarta, you can also hit me up for that.
And I would love to talk to you about how we can help you.

James McWalter: Absolutely. And we’ll add all that to the show notes. Thank you very much.
Thank you for listening, if you enjoyed the podcast, please rate and review us on apple podcast
or the Google play store. I cannot express how appreciated it is and we’ll be back next week
with another episode.

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