In this episode of Energy Matters, Claire and Dan take a candid look at what separates successful climate tech startups from the ones that never make it past the prototype. Drawing from decades of experience in both business and science, they unpack real stories from companies like Enphase, CleanCapital, MiaSolé, and Ada Energy—exploring what great leadership, realistic market sizing, and sound unit economics look like in practice. From visionary founders and ego-free C-suites to flawed go-to-market strategies and overestimated demand, Claire and Dan reveal the patterns that determine whether a climate innovation scales or stalls. This conversation bridges the gap between the lab and the boardroom—and sets the stage for part two, next week, of their deep dive into startup culture. Hosts: Claire Broido Johnson and Dan Kammen
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00:00:03 --> 00:00:06 Climate tech startups, what works and what doesn't.
00:00:06 --> 00:00:08 This is energy matters with Claire
00:00:08 --> 00:00:09 and Dan.
00:00:17 --> 00:00:18 Thanks for joining us today.
00:00:18 --> 00:00:23 In my research and work and in Dan's research and work, we
00:00:23 --> 00:00:26 have been involved with a lot of different startups over the years.
00:00:27 --> 00:00:32 And we've seen a lot of trends across those startups, some really good
00:00:32 --> 00:00:35 examples of what people have done, and some really bad examples of what
00:00:35 --> 00:00:40 people have done in order to scale their companies operationally and beyond.
00:00:41 --> 00:00:43 So we're gonna try to address.
00:00:44 --> 00:00:49 Some of the things that we think are continual trends that have
00:00:50 --> 00:00:54 either helped startups or hurt startups, and we'll probably end
00:00:54 --> 00:00:55 up doing this in two episodes.
00:00:56 --> 00:01:00 The things that we're gonna talk about in today's episode have to do with
00:01:00 --> 00:01:07 leadership and culture, market sizing, and go-to market strategy, product velocity
00:01:07 --> 00:01:10 and direction, and unit economics.
00:01:10 --> 00:01:16 So Dan, I know that you had thought about Endphase as being a company
00:01:16 --> 00:01:18 with great leadership and culture.
00:01:18 --> 00:01:23 Um, tell me why those leaders had a great culture.
00:01:25 --> 00:01:29 So I, I love to say that, um, but I do have to say first that if
00:01:29 --> 00:01:33 there's ever an episode where you should listen to Claire and give a
00:01:33 --> 00:01:35 skeptical eye to Dan, this is it.
00:01:35 --> 00:01:42 Because as everyone who knows me, knows, I do not have a vision head for
00:01:42 --> 00:01:44 whatever you want to call it, business.
00:01:44 --> 00:01:46 So I feel like I am the happiest.
00:01:47 --> 00:01:52 Passenger cheerleader, router for my students and friends as
00:01:52 --> 00:01:56 they do startups, but I am pretty blanking, blanking, clueless.
00:01:56 --> 00:02:00 And so my experiences are super fun.
00:02:00 --> 00:02:04 I've been involved in quite a few startups, but always somebody else
00:02:04 --> 00:02:06 had to carry the heavy lifting.
00:02:06 --> 00:02:09 So with that kind of disclaimer, we'll talk about Endphase.
00:02:09 --> 00:02:12 It's a company I was involved with in the beginning.
00:02:12 --> 00:02:15 I am not involved now, so there's no.
00:02:15 --> 00:02:18 Advocacy, stock kickback, blah, blah, blah.
00:02:18 --> 00:02:24 So for me, the Endphase story has a really simple and really powerful starting point.
00:02:24 --> 00:02:29 Two guys came into my office one day very much unannounced, and they said, Hey,
00:02:29 --> 00:02:31 we have an idea for an energy company.
00:02:31 --> 00:02:35 And without getting into the technical details at this point,
00:02:35 --> 00:02:38 they basically said, why are people in the solar field so stupid?
00:02:39 --> 00:02:43 And then my eyes got really large and they said, we have an idea
00:02:43 --> 00:02:48 for a far better product to make alternating current AC power out.
00:02:48 --> 00:02:53 I won't go into the details of what it was, but they said, we can do this
00:02:53 --> 00:02:59 in a way that as better resilience, better redundancy, doesn't have some
00:02:59 --> 00:03:01 of the faults in current systems.
00:03:01 --> 00:03:05 And we are just curious why this hasn't happened before.
00:03:05 --> 00:03:08 And I've looked at them and said, well, sounds good to me, but I don't
00:03:08 --> 00:03:09 know why it has happened before.
00:03:10 --> 00:03:12 You tell me how your idea's gonna work.
00:03:12 --> 00:03:18 And what they did was to upset the apple cart in a really good way.
00:03:18 --> 00:03:20 They stuck to their guns.
00:03:21 --> 00:03:26 They hired people who filled in areas where they didn't do things well.
00:03:26 --> 00:03:30 They rode out some very, very lean years.
00:03:30 --> 00:03:34 Uh, something that, uh, I think is pretty standard and they just.
00:03:35 --> 00:03:41 Rode out the challenges because they were committed to both getting it done, but
00:03:41 --> 00:03:48 also supporting the people inside their company that brought new ways of thinking
00:03:48 --> 00:03:50 that made the overall plan better.
00:03:51 --> 00:03:51 And so I think what you're
00:03:51 --> 00:03:54 saying is that they've had, you know, clear roles, there was
00:03:54 --> 00:03:59 accountability, there was mutual trust, all of those things and more.
00:03:59 --> 00:03:59 Right.
00:03:59 --> 00:03:59 I
00:03:59 --> 00:04:00 think that's there.
00:04:00 --> 00:04:03 I mean, there were some times when there seemed like at least.
00:04:04 --> 00:04:06 To me as the science advisor.
00:04:06 --> 00:04:10 There was some overlaps in roles, but I think it was also at a point when
00:04:10 --> 00:04:14 they were really getting buffeted from the outside and because one of them
00:04:14 --> 00:04:18 was more on the marketing side and one of them was more on the hardware side.
00:04:18 --> 00:04:24 They not only bounced off each other well, but then they brought in a real technical
00:04:24 --> 00:04:28 guru who, who drove the lab team.
00:04:28 --> 00:04:32 In a way that was needed, but also was not belittling.
00:04:32 --> 00:04:38 They really supported their employees as they brought new ideas to the table.
00:04:38 --> 00:04:43 Yeah, and I think I, I'd add that the companies that I've been a part of
00:04:43 --> 00:04:48 where they've been the most successful ha are companies where the CEO.
00:04:48 --> 00:04:49 Doesn't have a huge ego.
00:04:49 --> 00:04:52 So from a leadership and is that possible culture perspective?
00:04:52 --> 00:04:54 Well, it's hard, but it's possible.
00:04:54 --> 00:04:57 What, I think it's really important for any, anybody in the C-suite to
00:04:57 --> 00:05:00 understand what they're good at and what they're not good at, and to have.
00:05:00 --> 00:05:01 And what's a
00:05:01 --> 00:05:01 C-Suite?
00:05:01 --> 00:05:02 Just just to be clear.
00:05:02 --> 00:05:06 Uh, the CEO, which is the chief executive officer, the COO Chief
00:05:06 --> 00:05:09 Operating Officer, anybody that's in a senior management role.
00:05:09 --> 00:05:13 The folks that I know in my, in our field that have been the most
00:05:13 --> 00:05:18 successful, don't have a huge ego and have agreed to understand this is what
00:05:18 --> 00:05:21 I do know and this is what I don't know, and I'm gonna hire smart people
00:05:21 --> 00:05:23 around me who know better than I.
00:05:24 --> 00:05:27 I would also argue Clean Capital has great leadership in John Powers
00:05:27 --> 00:05:30 and Tom Byrne, um, friends of ours.
00:05:30 --> 00:05:33 And I think that they have a great culture.
00:05:33 --> 00:05:35 They nurture the founding team's values.
00:05:35 --> 00:05:37 They are clear about roles.
00:05:37 --> 00:05:40 They have a lot of accountability, and there's mutual trust.
00:05:40 --> 00:05:42 So that's the first one in our list.
00:05:42 --> 00:05:45 But tell me what they do so that the audience kind of hears not just their
00:05:45 --> 00:05:48 need people, but what is it that.
00:05:49 --> 00:05:54 Their product needed and that their personalities or styles supported.
00:05:54 --> 00:05:55 Sure.
00:05:55 --> 00:05:58 So clean capital, finances, solar and storage all over the country.
00:05:58 --> 00:06:04 They have financing from a big insurance company, Manulife, and they have
00:06:04 --> 00:06:07 been doing large utility scale solar.
00:06:07 --> 00:06:11 And actually, you know, full disclosure, they're, they're financing the work
00:06:11 --> 00:06:14 of Sunrock distributed generation, which we're doing smaller, messy,
00:06:14 --> 00:06:17 middle, sort of 150 kilowatt to five megawatt installations.
00:06:18 --> 00:06:25 But they've been around for over 10 years and they've been focused on
00:06:25 --> 00:06:31 serving a part of the market where you can take funding from an entity that
00:06:31 --> 00:06:36 has very little risk tolerance and manulife and getting to a point where
00:06:36 --> 00:06:40 an IT huge, big insurance company can get comfortable with financing solar.
00:06:41 --> 00:06:44 So I'm gonna jump in for a second because I think this might be one of
00:06:44 --> 00:06:47 the points that our perspectives on.
00:06:48 --> 00:06:51 Climate tech startups differ and I'm hoping that'll come out here
00:06:52 --> 00:06:57 and that is the companies that approach me or we think about and
00:06:57 --> 00:07:03 incubate in my lab are almost always companies where there is some clear.
00:07:04 --> 00:07:09 Data science or technological innovation that we're pushing.
00:07:09 --> 00:07:13 But what I hear you talking about here for clean capital is they're
00:07:13 --> 00:07:16 just good operators in a space that needs it, and they know how
00:07:16 --> 00:07:18 to move money to the problem.
00:07:18 --> 00:07:19 Is that fair or too simple?
00:07:19 --> 00:07:20 Too simple.
00:07:20 --> 00:07:24 Um, I mean it's financial strategies and finding financial solutions
00:07:24 --> 00:07:25 that nobody else has used before.
00:07:25 --> 00:07:27 So no, they're not creating.
00:07:27 --> 00:07:27 But is
00:07:27 --> 00:07:29 there, is there, is there a unique thing they're doing differently
00:07:29 --> 00:07:32 or are they just doing better in a space that needs good actors?
00:07:33 --> 00:07:35 They are certainly doing the latter.
00:07:35 --> 00:07:35 They have.
00:07:36 --> 00:07:41 Been meeting the energy needs of businesses and schools and nonprofits.
00:07:41 --> 00:07:46 They have expertise in what they call small scale solar and energy
00:07:46 --> 00:07:51 storage, and they've garnered a huge energy portfolio over time.
00:07:52 --> 00:07:56 Um, they've invested more than 1.5 billion and they have more than
00:07:56 --> 00:07:58 450 megawatts under management.
00:07:59 --> 00:08:03 But they have not created any widget, so to say, as you, as you've, but
00:08:03 --> 00:08:07 they've created financial innovation and frankly, almost every company I've
00:08:07 --> 00:08:09 been a part of is a financial innovator.
00:08:09 --> 00:08:11 They're not necessarily technology innovators.
00:08:11 --> 00:08:11 Got it.
00:08:12 --> 00:08:15 I think geeks are roughs on my end of the equation here, so
00:08:15 --> 00:08:16 I'm always looking for that.
00:08:16 --> 00:08:17 Yeah.
00:08:17 --> 00:08:22 So maybe that would be a good segue into product velocity and direction.
00:08:22 --> 00:08:26 So when I, when I say that if, I don't mean to be business school jargony, but
00:08:26 --> 00:08:28 basically what I mean by that is products.
00:08:28 --> 00:08:33 Almost always take longer to develop than the path to revenue can support, right?
00:08:33 --> 00:08:37 So you're, you're spending a whole lot of time in the lab trying to
00:08:37 --> 00:08:42 create something, or you're spending a whole, whole lot of time developing
00:08:42 --> 00:08:46 a, a group of people that can support the financial innovation.
00:08:47 --> 00:08:51 Almost all companies underestimate the cost and time needed
00:08:51 --> 00:08:52 to reach commercial scale.
00:08:52 --> 00:08:56 Um, you know, product roadmaps lack the necessary sequence
00:08:56 --> 00:08:58 of steps to product progress.
00:08:58 --> 00:09:03 Logically, um, they don't, haven't figured out how to stage roadmap.
00:09:05 --> 00:09:06 Changes.
00:09:06 --> 00:09:10 You know, there's scalability issues.
00:09:10 --> 00:09:13 Like even if you are able to produce something, are
00:09:13 --> 00:09:15 you able to service it well?
00:09:15 --> 00:09:18 Do you have any examples from that perspective, from
00:09:18 --> 00:09:19 the technology perspective?
00:09:20 --> 00:09:20 Boy, I'd like to,
00:09:20 --> 00:09:22 but it's a failed one.
00:09:22 --> 00:09:25 So maybe some of the lessons down the line are less positive, so.
00:09:26 --> 00:09:32 I was visiting friends over on the peninsula near Stanford and they said,
00:09:32 --> 00:09:36 you really gotta go through and talk to this company that no longer exists.
00:09:36 --> 00:09:37 So that's a clear one.
00:09:37 --> 00:09:38 And it's called Mia Sole.
00:09:39 --> 00:09:42 And Mia Soleil was a thin film.
00:09:42 --> 00:09:47 Solar meaning their idea was, why do we need to have a thick piece of glass?
00:09:47 --> 00:09:53 Our solar stuff leads, connectors, wires, then metal on the back, et cetera.
00:09:53 --> 00:09:56 It's a big thick sandwich when you only need a really thin bit,
00:09:57 --> 00:10:03 and their innovation was very low cost, so-called real to reel.
00:10:03 --> 00:10:08 Basically like a big movie projector that could roll these things out.
00:10:08 --> 00:10:11 And they had a great product.
00:10:11 --> 00:10:13 I actually have a few samples lying around.
00:10:13 --> 00:10:16 I'll, we'll put a picture of one of the ones I still have
00:10:16 --> 00:10:17 in my home on the website.
00:10:17 --> 00:10:23 And they kept saying, well, we've got a neat product today.
00:10:23 --> 00:10:24 And I'd say, oh, this is so cool.
00:10:24 --> 00:10:31 Let's build it into a roofing tiles, or let's put it on the skin of a car.
00:10:31 --> 00:10:34 And they kept saying, no, Dan, you're just too.
00:10:34 --> 00:10:36 Impetuous to impatient.
00:10:36 --> 00:10:37 We have a core product.
00:10:37 --> 00:10:42 We want to be able to roll this out for large amounts of roofing
00:10:42 --> 00:10:44 material specifically for warehouses.
00:10:45 --> 00:10:47 And they stuck to their guns and stuck to their guns.
00:10:47 --> 00:10:52 And I'll never know if they were right or wrong because what happened is the
00:10:52 --> 00:10:54 end, they actually got bought out by a.
00:10:55 --> 00:11:00 Chinese company that closed them down to eliminate a competitor.
00:11:00 --> 00:11:05 So we don't know the final answer, but I felt like in each step of the way.
00:11:05 --> 00:11:07 They stuck with their guns.
00:11:07 --> 00:11:10 I wish their guns had been successful, but they really said,
00:11:10 --> 00:11:12 we're gonna make one product.
00:11:12 --> 00:11:15 We're not gonna get diverted by flashy sidekicks.
00:11:15 --> 00:11:21 And I think that they viewed my enthusiasm is good, but my willingness to go down
00:11:21 --> 00:11:25 these side paths as someone who was not disciplined enough to run their company.
00:11:26 --> 00:11:27 Oh, that's interesting.
00:11:27 --> 00:11:31 Well, so that, that gets back to the CEO and ego of it does senior management.
00:11:31 --> 00:11:32 Absolutely.
00:11:33 --> 00:11:37 The next one I wanna share is sort of market sizing and go to market strategy.
00:11:37 --> 00:11:39 So those I, those i I link.
00:11:39 --> 00:11:46 So either a company starts and there isn't enough demand for what they're building.
00:11:46 --> 00:11:50 They're creating a widget that nobody wants, or the go to market strategy
00:11:50 --> 00:11:52 doesn't address potential challenges.
00:11:54 --> 00:11:57 Like sometimes star, almost always startups, overestimate, total
00:11:57 --> 00:11:59 addressable market, for example.
00:11:59 --> 00:12:02 Um, founders often think that the problem that they're trying to
00:12:02 --> 00:12:05 solve is something that everybody in the whole world cares about.
00:12:06 --> 00:12:10 Um, I have some great examples for that, Dan, but are there anything
00:12:10 --> 00:12:11 I wanna hear, like, to share?
00:12:11 --> 00:12:14 I gotta hear one since, so I would, again, I don't even know
00:12:14 --> 00:12:15 some, some of those words mean.
00:12:16 --> 00:12:17 Oh, come on.
00:12:17 --> 00:12:18 It's so true.
00:12:18 --> 00:12:19 What do you not understand?
00:12:20 --> 00:12:22 Do business people go to market this and that?
00:12:22 --> 00:12:24 Ah, I just, I'm just listening.
00:12:24 --> 00:12:24 So go on.
00:12:24 --> 00:12:25 I, I wanna hear, well, go to
00:12:25 --> 00:12:30 market is really like, do you have what it takes to be able to sell the product
00:12:30 --> 00:12:32 or service that you're trying to sell?
00:12:32 --> 00:12:39 And do you have a strategy that will help you find the people
00:12:39 --> 00:12:40 who want what you're selling?
00:12:41 --> 00:12:43 And do you have a team to find that group?
00:12:45 --> 00:12:48 So in this, in this this case, I'm actually gonna bring up ADA
00:12:48 --> 00:12:53 Energy, which is a vehicle to grid startup that ended up folding.
00:12:53 --> 00:12:56 I was the COO, uh, for a short time a year.
00:12:57 --> 00:13:00 And the idea is actually a beautiful idea is that.
00:13:02 --> 00:13:08 The electric, uh, the, in electric vehicles, there are batteries.
00:13:08 --> 00:13:11 And essentially it's the idea that you think about battery
00:13:11 --> 00:13:13 storage on wheels, right?
00:13:13 --> 00:13:19 So why not when your electric vehicle is fully charged, discharge that to the grid.
00:13:20 --> 00:13:24 And we could have a whole, you know, podcast just on that.
00:13:24 --> 00:13:29 But I, I think one of the main reasons that firm failed is that.
00:13:29 --> 00:13:35 There wasn't enough demand for the charger that they were trying to build.
00:13:35 --> 00:13:37 So, Claire, you described Ada.
00:13:38 --> 00:13:38 I sorta of get it.
00:13:38 --> 00:13:40 I sorta of don't get it.
00:13:40 --> 00:13:43 But vehicle to grid in its simplest terms means what?
00:13:43 --> 00:13:44 Okay.
00:13:44 --> 00:13:48 So the idea is you've got an electric vehicle, it has a battery in it, right?
00:13:49 --> 00:13:51 For a bunch of hours during the day.
00:13:51 --> 00:13:54 That vehicle and its battery are doing nothing.
00:13:55 --> 00:13:58 So if that battery in that vehicle is charged up.
00:13:58 --> 00:14:02 Why not sell the electricity from that battery back to the grid?
00:14:03 --> 00:14:06 It's actually a very elegant, very lovely idea.
00:14:06 --> 00:14:10 It's the idea that you can have a bi-directional energy solution.
00:14:10 --> 00:14:10 You can both.
00:14:11 --> 00:14:17 Pull electricity from the grid to power your battery in your vehicle and sell
00:14:17 --> 00:14:22 electricity from your vehicle back to the grid and make money by selling
00:14:22 --> 00:14:24 back electricity back to the grid.
00:14:25 --> 00:14:27 And I think this might be one of the examples that I hope will come
00:14:27 --> 00:14:32 back to, it's my favorite concept, but maybe my least favorite acronym
00:14:32 --> 00:14:34 or term, and that's prosumers.
00:14:35 --> 00:14:38 You are both a producer and a consumer of a product.
00:14:39 --> 00:14:44 Sounds weird in terms of the word, but it really sounds like the energy world we're
00:14:44 --> 00:14:49 moving into and there wasn't enough demand because utilities were disinterested,
00:14:49 --> 00:14:51 which we, we might get into later on.
00:14:51 --> 00:14:52 That's a big theme of mine.
00:14:52 --> 00:14:59 Or because customers themselves didn't see this as a cool addition
00:14:59 --> 00:15:01 to just having an EV to drive around.
00:15:02 --> 00:15:03 Well, certainly customers didn't understand it.
00:15:03 --> 00:15:05 That's number one.
00:15:05 --> 00:15:10 Number two, utilities hate vehicle to grid for a variety of reasons.
00:15:10 --> 00:15:12 They don't understand it and they don't know how it's gonna impact their
00:15:12 --> 00:15:17 grid, and so they pushed it away.
00:15:17 --> 00:15:19 Tooth and nail, barring a few.
00:15:20 --> 00:15:25 Pilots with, um, Sacramento Municipal Utility District, um,
00:15:26 --> 00:15:31 and the only car that actually was able to perform that tech that.
00:15:32 --> 00:15:37 Technology was a Nissan Leaf, and even Nissan was having trouble
00:15:38 --> 00:15:39 figuring out how to use it.
00:15:39 --> 00:15:43 And so it was, it was a be brilliant idea, really brilliant idea.
00:15:43 --> 00:15:47 But the go to market strategy really wasn't there.
00:15:47 --> 00:15:55 And the size of the market was vastly over overestimated based on reality.
00:15:56 --> 00:16:00 And just to be clear, from the geeky analyst side, um.
00:16:01 --> 00:16:05 Not only are utilities to, for, to blame for either not understanding
00:16:05 --> 00:16:09 or not wanting to kind of literally, pun intended, share
00:16:09 --> 00:16:11 the power with these companies.
00:16:11 --> 00:16:17 But analysts like me were part of the problem because 10 years ago, even though.
00:16:18 --> 00:16:23 Your car is generally your second largest purchase after your home.
00:16:23 --> 00:16:28 So finding a way to use it for the 23 hours a day that you're not driving
00:16:28 --> 00:16:30 it on average sounds super sensible.
00:16:30 --> 00:16:30 Super
00:16:30 --> 00:16:31 smart.
00:16:31 --> 00:16:31 Yeah.
00:16:31 --> 00:16:31 It's
00:16:31 --> 00:16:35 like, it's like the most duh moment you could possibly get.
00:16:35 --> 00:16:38 You know this, this is like a Simpsons level, you know,
00:16:38 --> 00:16:40 managing a power plan issue.
00:16:40 --> 00:16:44 What happened was nobody was willing to push.
00:16:45 --> 00:16:50 The story so that car manufacturers were compelled to have their
00:16:50 --> 00:16:52 vehicles ready to do this.
00:16:53 --> 00:16:55 Very few, even today.
00:16:55 --> 00:16:58 I mean the Ford one F-150 Lightning can do it.
00:16:58 --> 00:16:58 Yes.
00:16:58 --> 00:16:59 Remarkably few others.
00:16:59 --> 00:17:03 For a circuit that costs on the order of 20 bucks, it's not an addition
00:17:03 --> 00:17:04 that would make any difference.
00:17:05 --> 00:17:09 But analysts at universities at Think Tanks thought this was going
00:17:09 --> 00:17:13 to really confuse things if vehicles were being used in this way, plus.
00:17:14 --> 00:17:16 They didn't have that much confidence in the batteries,
00:17:16 --> 00:17:18 which has also been proven wrong.
00:17:18 --> 00:17:22 So I do feel like not only the analytics, but the business types
00:17:22 --> 00:17:25 were aligned not to make this work.
00:17:25 --> 00:17:29 Which I guess goes back to the old adage, the Upton Sinclair.
00:17:29 --> 00:17:33 It's very difficult to convince someone of something when their livelihood
00:17:33 --> 00:17:35 depends on the not understanding it.
00:17:35 --> 00:17:36 Isn't that the truth?
00:17:37 --> 00:17:37 Yeah.
00:17:37 --> 00:17:37 Okay.
00:17:37 --> 00:17:40 So thus far we've talked about three things.
00:17:40 --> 00:17:43 One, leadership and culture with end phases, as an example.
00:17:44 --> 00:17:48 To product velocity and direction with Mia Sole as an example.
00:17:50 --> 00:17:55 Three market sizing and go to market strategy with ADA Energy as an example.
00:17:56 --> 00:17:59 And the last one I think we're gonna talk about today is unit
00:17:59 --> 00:18:00 economics and the revenue model.
00:18:00 --> 00:18:04 And what I mean by that is what are customers willing to pay, right?
00:18:05 --> 00:18:08 That's a huge part of any technology, right?
00:18:08 --> 00:18:10 Not only does anybody care about the widget.
00:18:10 --> 00:18:14 I'm making, but what are they willing to pay for that widget?
00:18:14 --> 00:18:17 And does it cost me less to make that widget than what
00:18:17 --> 00:18:18 customers are willing to pay?
00:18:19 --> 00:18:23 Um, for sure, and I hear this from technologists all the time, is
00:18:23 --> 00:18:26 that, oh, well my cost structure will be lots cheaper and easier as
00:18:26 --> 00:18:29 product scales reach to price parity.
00:18:29 --> 00:18:32 Um, but you gotta get over the hump.
00:18:33 --> 00:18:36 To reach that parody.
00:18:36 --> 00:18:36 Right.
00:18:36 --> 00:18:39 And then the other part of unit economics, of course, is
00:18:39 --> 00:18:41 like, what's the cost to sell?
00:18:41 --> 00:18:42 So what are people willing to pay?
00:18:42 --> 00:18:44 What are people willing to sell?
00:18:44 --> 00:18:46 Uh, what's the cost to sell rather?
00:18:47 --> 00:18:52 And like, sure, if you're at a huge scale, things are cheaper,
00:18:52 --> 00:18:53 but how do you get there?
00:18:54 --> 00:18:54 Right?
00:18:54 --> 00:18:59 So what's a good example of unit economics and a revenue model
00:18:59 --> 00:19:02 where people, somebody's done actually a good job or a bad job?
00:19:03 --> 00:19:06 So I'll give you one that I feel like is a good job.
00:19:06 --> 00:19:12 And this is a company that does exist today, and I do have founder shares in it.
00:19:12 --> 00:19:15 So whether you wanna discount that or not, and it's called Renew Financial.
00:19:16 --> 00:19:20 And unlike what I said before, that I typically gravitate to companies
00:19:20 --> 00:19:23 that have a technology widget.
00:19:23 --> 00:19:25 I was attracted to Renew Financial.
00:19:26 --> 00:19:27 For two reasons.
00:19:27 --> 00:19:33 One is that it was birthed as an idea in Berkeley, and I was part of the team
00:19:33 --> 00:19:41 that wrote one of the early papers, and the scale up was one that I saw
00:19:41 --> 00:19:45 in their financial model, something that was so wonderfully simple.
00:19:45 --> 00:19:51 And so in sort of super short version, what Renew Financial said was, Hey.
00:19:52 --> 00:19:57 Cities or public private partnerships, a bank supporting a city frequently
00:19:57 --> 00:20:05 lend money to individuals or businesses so that they can do upgrades, they
00:20:05 --> 00:20:09 can fix the sidewalk, they can fix the sewer lines, all kinds of things.
00:20:09 --> 00:20:14 And so what the said, and it was founded in the mayor's office in the
00:20:14 --> 00:20:17 city of Berkeley, which is actually kind of a fun side story in itself.
00:20:17 --> 00:20:20 And they said, why don't we do the same thing for energy?
00:20:20 --> 00:20:21 That was it.
00:20:21 --> 00:20:23 That was the whole model.
00:20:23 --> 00:20:27 Initially, uh, renew Financial had a very unfortunate initial name.
00:20:27 --> 00:20:28 It was called Berkeley First.
00:20:28 --> 00:20:29 First.
00:20:29 --> 00:20:31 I remember that selling Berkeley with Cisco Breeze
00:20:31 --> 00:20:32 out of Berkeley, outside of Berkeley.
00:20:33 --> 00:20:38 But the, but what they did in terms of unit economics and revenue model was what?
00:20:38 --> 00:20:39 Exactly.
00:20:39 --> 00:20:40 It was super simple.
00:20:40 --> 00:20:45 They said, we are gonna copy the model that's already in existence to lend
00:20:45 --> 00:20:48 people money to do upgrades in their city.
00:20:48 --> 00:20:51 And we're gonna extend it so that you can do energy efficiency
00:20:51 --> 00:20:53 upgrades in your home or business.
00:20:54 --> 00:20:59 And only after you do that can you also get sort of the second
00:20:59 --> 00:21:00 part of a loan to do solar.
00:21:01 --> 00:21:03 Some people just did efficiency, some did both.
00:21:04 --> 00:21:10 And the innovation was to work with the local municipality so that your
00:21:10 --> 00:21:16 renew financial loan was quote unquote superior to your mortgage, meaning
00:21:16 --> 00:21:22 it had to be paid back first and the payments could transfer when the
00:21:22 --> 00:21:25 property changed hands, and they.
00:21:26 --> 00:21:31 Really leaned into existing financial structures in terms of
00:21:31 --> 00:21:33 these loans that go out already.
00:21:33 --> 00:21:38 And they basically just made money available as easily as possible
00:21:38 --> 00:21:41 to do efficiency and solar.
00:21:41 --> 00:21:41 That was it.
00:21:42 --> 00:21:43 And that worked.
00:21:44 --> 00:21:50 So Claire, I've sort of sung the praises of Renew Financial as a clever idea,
00:21:50 --> 00:21:53 built on a very standard platform.
00:21:53 --> 00:21:53 Yep.
00:21:53 --> 00:21:54 How does that.
00:21:55 --> 00:21:56 Sing to you.
00:21:56 --> 00:21:58 Do you see a different view of them?
00:21:58 --> 00:22:03 Because ultimately what happened is this model worked well in Australia for.
00:22:03 --> 00:22:08 Residential property in the US it really only caught on for commercial property.
00:22:08 --> 00:22:11 'cause if you were a really clever homeowner, you could probably
00:22:11 --> 00:22:15 get a little little better rate by going to a bank yourself.
00:22:15 --> 00:22:18 But there's so much extra work in it that a lot of people.
00:22:19 --> 00:22:22 On the commercial side, just use them as their clearing house.
00:22:23 --> 00:22:29 So I actually would say that Renew Financial and, and what we call
00:22:29 --> 00:22:33 property assess clean energy now is built on a simple idea, but is
00:22:33 --> 00:22:35 a actually incredibly complicated.
00:22:35 --> 00:22:37 And I would actually argue that the unit.
00:22:38 --> 00:22:39 Don't work well.
00:22:39 --> 00:22:47 And what I mean by that is you need to municipality by municipality, get them to
00:22:47 --> 00:22:55 change their tax code to allow for this attachment to a house or to a commercial
00:22:55 --> 00:23:01 building, and have that be connected and be paid before your property taxes are.
00:23:02 --> 00:23:08 And so I founded it, a close to impossible model to work.
00:23:08 --> 00:23:12 I mean, we tried in Baltimore City to get legislation passed and you really
00:23:12 --> 00:23:14 have to go municipality by municipality.
00:23:14 --> 00:23:16 Now, obviously it has worked.
00:23:16 --> 00:23:21 We've got Nuveen Capital and Jessica over there who's done a wonderful job.
00:23:22 --> 00:23:23 Um, but.
00:23:23 --> 00:23:27 You know, I wouldn't argue that that was a great unit economics play.
00:23:27 --> 00:23:28 I think so.
00:23:28 --> 00:23:29 That's interesting.
00:23:29 --> 00:23:29 Yeah.
00:23:29 --> 00:23:30 Okay.
00:23:30 --> 00:23:35 Yeah, because I viewed it as a, a good version of this because while there
00:23:35 --> 00:23:38 was a lot of work to get it done, and you're right behind the scenes,
00:23:38 --> 00:23:41 there's a lot of messy stuff to be done.
00:23:41 --> 00:23:46 It built on something that had a long tradition of working where people are
00:23:46 --> 00:23:48 comfortable taking out these loans.
00:23:48 --> 00:23:52 So that's why I viewed this as a unit economics that.
00:23:52 --> 00:23:57 While difficult to do in reality, built on something, people understood.
00:23:58 --> 00:24:01 So this has been a super interesting episode for me, Dan, because I think
00:24:01 --> 00:24:04 where you come from and where I come from are just so incredibly different.
00:24:04 --> 00:24:08 Like I am, I'm constantly thinking about operationally, how are we gonna
00:24:08 --> 00:24:09 actually be able to execute that?
00:24:10 --> 00:24:13 And you are thinking about the idea and then Absolutely.
00:24:13 --> 00:24:13 Yeah.
00:24:13 --> 00:24:15 And it's just, it's super interesting.
00:24:15 --> 00:24:16 You're the scientist.
00:24:16 --> 00:24:17 I'm the business person.
00:24:17 --> 00:24:19 And I think the more we have conversations, the better for everybody.
00:24:20 --> 00:24:20 Wow.
00:24:20 --> 00:24:21 That sounds good to me.
00:24:21 --> 00:24:22 We better do another one.
00:24:22 --> 00:24:27 And we still have most of your checklist to go when we come back to
00:24:27 --> 00:24:30 startup culture in another segment.
00:24:30 --> 00:24:30 Yep.
00:24:30 --> 00:24:33 So this is Energy Matters with Claire and Dan.
00:24:33 --> 00:24:36 Please check out Energy matters.world and thanks for listening.