Below is the text version of the webinar, "2020 Peer PReview: Hardware is Hard: How Do We Commercialize 'Hard Tech' Building Innovations Faster?" See the video.
Ilan Gur:
Great; thanks so much, David and Alex. I can't tell whether folks can hear me. I'm not seeing my video on the screen here so maybe we'll just ...
Another speaker:
Ilan, yeah, I can both hear and see ...
Ilan Gur:
Oh wonderful. OK, well, I'm really excited to have the privilege and pleasure to be here and moderate this panel. I think everyone's heard the backdrop on just how important and how much work we have to do in terms of driving building innovation forward. And I think BTO and EERE have done such an amazing job setting the foundation for what I think is probably going to be the most amazing decade ahead in terms of seeing transformation in this space. The panel we have today is really focused on the question of how do we translate the amazing inventions and research that the DOE and other parts of the government are funding across universities and national labs across the country, and how do we cross the gap and transform those into products and businesses that the private sector can take and drive to scale? And you know, this plot just as a framing is a pretty cliche one, but it's a nice one to think about. We talk a lot about valleys of death and everyone has their own definition of what a valley of death means, but the different gaps that exist from a finance -- generally speaking people talk about this from a financial perspective -- to get research into development, demonstration, deployment, and ultimately into products.
And a couple of the things that are worth pointing out at the onset of this panel. One is, you know, this panel is about thinking about hard tech. And the idea there is it's hard to make any transformation happen, regardless of what sort of technology or innovation you're working on. If you think of a new social movement, you need to get the world's perception to change around what's possible and you need to get that buy-in with software innovation. You need to do that and you need to provide some tech platform. But you can very nimbly adapt the technology based on what you're learning and you can very quickly get it out to scale, right? Obviously the biggest challenge with hard technologies, things that are rooted in physics, chemistry, material science, electrical engineering, real hardware is both the learning cycles in developing and de-risking the technology, but also the challenges in actually scaling a technology from a manufacturing and supply chain standpoint, make the innovation a lot more challenging to move forward. And so in hard tech, you need to end up with these moments where both the perception of what's possible in the market changes and the perception of what's possible in the technology changes. And it's those sort of convergent moments that allow us to make really great progress in transformation. And I think what we're seeing specifically when we think about the urgency of solving climate change, but also all the other benefits in the building space, what we're seeing is that the perception of what needs to happen and what the market may be willing to bear is shifting dramatically already. And I think now we have to understand, OK, how are we going to provide the right resources so that we can take the technology from the impossible to possible. And that doesn't just mean taking, you know, doing a proof of concept experiment in a lab or a demo. It means really showing that something is possible all the way through the scales that you see on this plot. And I would argue having spent a lot of time in the space and thinking about hard tech, that the building space is probably, you know -- it's among the hardest of hard, because frankly this this idea of valleys of death, this plot, it's really in reality a multi-dimensional one. You've got the technology but you also have the regulation hurdles that have to be passed at each of these steps. As David mentioned, you know, you got the pesky people and behavior involved in thinking about building innovations and mixed incentives. And so the idea that we're spending a little time thinking specifically about how to do this in the building space I think is really valuable. And I'd say David and the entire BTO staff and Mary leading the T2M team have just done an amazing job being thoughtful about how to support this sort of translation with an approach that pulls in and empowers talent from a number of different directions.
So the organization I run activates an independent nonprofit. My background is as a researcher and inventor, first in academia then entrepreneurship and finally at ARPA-e, and then I founded Cyclotron Road, which was a new division at Berkeley Lab built to experiment on how to help other entrepreneurial-minded scientists and engineers navigate this transition. We pioneered a new model called an entrepreneurial fellowship that provides two years for scientists and engineers to actually translate their research and their own mindset into thinking about commercialization. And now with Activate, which is an independent nonprofit, we're still partnered with Berkeley Lab to continue running Cyclotron Road, but we're expanding this entrepreneurial fellowship model. So it's been amazing. BTO has been one of the early groups within the DOE that has started supporting entrepreneurial fellowships, which is one example. But you heard about prizes like the e-ROBOT program. Later today there will be a panel on the IMPEL program, which is a really amazing shorter-term opportunity to learn about entrepreneurship in the building space, and some amazing folks from Berkeley Lab, other organizations, the business school at Berkeley, are involved in that. So all which is to say we've got a really amazing opportunity right now. And I think this community has amazing partnership from BTO to really move this forward. And what I'm excited about in this panel is we've got perspectives and really amazing rich experience from every dimension that I talked about. So if we go to the next slide I think we just have a flash of the panelists.
And I'm not gonna spend a lot of time; you have their backgrounds. But I'll just flash. You know, we've got Orin from The Engine, probably among the most recognized right now hard tech venture capital firms, but it's even beyond that, thinking about how to support hard tech. So Orin's going to give us just an overview of how to think about this space from a high-level perspective. Edmund, coming more from the education perspective, thinking about how to educate people on commercialization of these technologies. We've got Kipp, that's CTO of Treau, a company that actually came out of one of our fellowships. And Kipp is someone who's been inventing as a really early-stage research technologist in this space for years, and he'll talk a little bit about his journey as a technologist at an early stage. We've got Ramsay from Wells Fargo, who as a corporate foundation has put a lot of money into helping support this gap and can think about it from the downstream and the corporate perspective. And then Alexandria, another entrepreneur but a little bit later stage looking at how -- and non-technical but working very strongly with technology and leading technology-driven innovation to enormous impact in a space. So the way this is going to work is we're just going to tee each of them up. The idea was to have 10 minutes for each of their talks. I'll just mention now, we're hoping those could be shortened a little bit because we got a bit of a late start here. But we'll have each of them give a talk. We're going to do a quick sort of speed round of reactions from the other panelists in between, just to kind of keep it interesting. And then hopefully at the end we'll have time for a little bit discussion and to take Q and A.
This is the instructions on how to submit questions for this panel. And hopefully those questions will make their way to me towards the end. It sounds like you can either take a moment here to type in the link itself, or you can just go to menti.com and you just have to remember, I guess, the six-digit code. So let me pause there for a second. The last thing I'll just say is I was told by the organizers here that there's a break after this session. They don't want to eat up the entire break, but because we got a late start, if the panelists are are available it looks like we can continue some of the discussion and Q and A until 15 past the hour. So we've got just about a whole hour here, and without further adieu, I think I'm going to turn it over to Orin.
David Nemtzow:
Ilan, it's David. You said you could have -- we said you could have extra time but only if you solve the hard tech investment problem. That's conditional.
Ilan Gur:
We can do; it we got the right team here. Thanks, David, and David, thanks for your note here in the chat. I should say I mentioned a little bit about about Cyclotron Road and Activate and the entrepreneurial fellowship model. It's really important to note that the initial support for that model came from EERE, from the DOE Advanced Manufacturing Office, which now is not only supporting these fellowships at Berkeley Lab with Cyclotron Road but also with two sister or brother programs, one at Argonne one at Oak Ridge National Labs. And it's been really amazing to sort of learn and develop this model all together. So thanks, thanks, David, for pointing that out. Orin, I can see your slides, and so I think I'm gonna go on mute here and pass it over to you.
Orin Hoffman:
Awesome; thanks, Ilan. Always great to see you and great to be here. I'm Orin Hoffman, venture partner at MIT's The Engine. Just very brief background. Roboticist by training. I spent several years at defense innovation unit in the Pentagon in CTO roles and now work on investments and run the government practice at The Engine. So per Ilan's encouragement, I'll try to run through this because I think that the Q and A will will probably be more interesting. So The Engine, in addressing a lot of the gaps of why it is so hard to pull breakthrough technologies out of government labs and academic labs and actually commercially scale them, MIT did a bunch of study on this and spun out The Engine as an independent for-profit venture capital fund that has some additional superpowers around it, specifically intended to reduce friction for these companies. So we are a traditional venture capital fund with the exception that we have patient capital. So that means that instead of needing returns in five years, seven years, we have an 18-year fund to account for the longer time horizons and higher capital requirements of a lot of companies we invest in. We also provide infrastructure for our startups for a couple of years. So that's not just office space but also lab space. So we have, you know, wet labs, bio labs, chem labs, maker spaces, etcetera, to avoid one of the pitfalls of early-stage top tech companies, which is spending a bunch of precious capital on infrastructure. And then the kind of third leg of the stool is what we call our network, which comprises the tough tech ecosystem of founders, entrepreneurs, academia, corporate partners, and importantly, government. In this regulatory and capital-intensive environment, partnerships with government, both on the non-dilutive side, the customer side, the regulatory side, as well as leveraging the amazing engineering and resources that are in our government labs, we view as critical on the journey for our founders.
I already emailed Ilan because I liked his valley of death slide more than my value of death slide, but you gotta have one if you're gonna give a tough tech talk. But I would just comment that we do view two specific valleys of death that this chart doesn't really explain very well but is particularly relevant in building technologies and our energy portfolio in general, which is, there's the kind of very early, call it pre-seed valley of death, just getting folks out of the lab and accelerated on their journey. But there's a huge, huge gap in what we call first of its kind, where, you know, some of our companies are, their initial pilot before they've proven out the revenue model and are able to get debt or project finance from traditional capital resources. Just building those N equals 1, N equals 2 manufacturing plants or pilots, that is a problem that just to be candid has not been solved. But I fundamentally believe that partnership with government on that second valley of death is going to be critical as we move forward into trying to scale a lot of the emerging energy companies that we see on the radar.
So how do we view tough tech problems? Generally there's a couple of core components. Most of our companies fundamentally are based on a breakthrough technology. So there's IP protection, there is some thing, some core component in the company that we feel like can transform market. But generally speaking, when you look at our portfolio, those companies tend to approach the problem from a systems level. ... I managed to stop my sharing; let me try that again. They take a very systems approach to the problem that isn't just tech forward, it is very much understanding the market and regulatory framework within which they have to operate. But also, it is almost always a multidisciplinary approach. So you know, we have three different portfolios that range from climate change, which is where most of our energy companies are, human health and advanced systems. But part of our investment thesis is this idea of this cohort approach, where we bring all these founders together, a lot of them co-located here in Boston. And it is amazing to see, when we had a cafe that people were actually in, the struggles that founders in deep tech human health were undergoing were oftentimes identical to the struggles that our climate change founders are undergoing. So that kind of cohort and convening of founders, we find to be incredibly beneficial for especially the technical type founders that we believe make the best CEOs and CTOs. But coming out of Ph.D.s or postdocs or whatnot, often there's a kind of leveling-up process that we certainly lean into with our founders as they grow not just technically but also as leaders of companies.
We do very much believe that building technology is ripe for tough tech investment and we are putting our money where our mouth is. We recently announced the investment in WoHo with founder and CEO Israel Ruiz at the helm. This is just -- we talked earlier about kind of dealing with the consumer when investing building technologies. And this company is taking an amazing swing, combining modular efficient manufacturing and logistics to create a modular construction kit for low- to high-rise buildings, but also are made up of a team of fundamentally amazing designers and architects whose designs will delight the consumer, from both the quality but also the flexibility in construction. So trying to combine the best of flexibility of design with the economies of scale of modular construction. And so we're really excited about that investment and will be most likely the first of many building technology investments that we make. Another example is Boston Metal, which is an investment in distributed, low-emission, low-cost production of steel and alloys using a breakthrough technology around cathodes in foundries. And it kind of goes to this idea of taking what were kind of foundational U.S. industries and hopefully allowing them to stay on shore through the creative go-to-market strategies of these companies.
I just want to end my comments by flagging that we do heavily engage with our government partners. And I'm proud to announce and urge folks to go to our website at engine.xyz. In collaboration with Ash Carter and the Balfour Center, we just released our top tech mandate, which is a call for better public-private partnership as we look to support the tough tech economy in the U.S., our national industrial base and our national security industrial base. And really it goes around kind of three core areas that I think are particularly relevant for the DOE, which is this early-stage concept of matching public money with venture capital money in order to leverage the public-private partnerships that are critical to grow these companies, a call to expand things like the DOE's loan program office to both provide smaller loans as well as to make that a more frictionless process to help address that second valley of death, and also calls to create more demand-side economics from the government, so that the government isn't just funding kind of non-dilutive technogorius but is also creating a demand side to allow you know the venture capital community to take some more of that technical risk but know that there's a demand side at the end of that. So I encourage all of you to go check out on the website. And I think it will be especially relevant for this crew. So Ilan, I think I i kept under my time limit and we'll stop there.
Ilan Gur:
Cool, great; thanks so much, Orin. And I don't know, this is a good time to test whether we can actually get our panelists and their faces up here at the top of the screen. So if you're a panelist, let's just try starting your video. We'll see whether we can make it feel like a panel. Hi, Alexandria, I see you. And I see Kipp and Edmund and Ramsay. Cool. So one thing I just thought was, as we cruised through here, if any of the panelists had anything that Orin brought up that just felt like something to double-click on for the audience, maybe we'll just take 30 seconds, and don't feel obligated. But Alexandria, anything come up there for you?
Alexandria Lafci:
I just -- I had a comment and then a question. So first, I love that you mentioned the value of just having -- I mean prior to COVID -- the physical proximity for the startup. So the nonprofit I founded [inaudible] combinator, and one of the best parts of that experience was the community of entrepreneurs. But there were a few. Like, we had maybe 110 startups and maybe 10 of them were hard tech. And it was a very lonely journey for those particular founders, to be working on a hard problem for five, 10-plus years. So to have a community of folks that are kind of going through the trenches with you, I think is immensely, immensely valuable. So I'm really excited that they have that network. And then I'm curious, because we have a venture fund and we do early stage funding, how much if any follow-on funding are you guys doing? And if you do, what type of traction are you guys, or what type of metrics are you guys looking for? For the companies that you would follow on with?
Orin Hoffman:
It's a great question. So we do -- generally speaking, you know, we're largely a seed stage investor, and we do follow on with pro rata beyond for our companies, you know, assuming they're meeting the milestones that we've laid out, but flexible to pivots and stuff that are are kind of essential at this early stage. And, but, you know, as with any investor, at some point we have to roll off. So we do things like SPVs and whatnot to kind of keep capital going through companies. But we certainly are not able to go the distance with companies just because of the mandate from our investors. And so we spend a lot of time within our network working for both mid-stage, series B, C, D investors. But also not to get the capital stack for these first of their kind projects requires a lot of socialization for people, that are not used to engaging in the investor community. So working with folks like Wells Fargo and Fidelity and just folks that you don't ordinarily think of as taking these kind of technical risks to get them socialized years in advance with these companies, so that when the 400 million dollar pilot plan needs to get built, we have capital providers that can actually handle that. And so I'm super excited to hear Ramsay's comments and whatnot, because they're they're just such a critical part of the capital stack for these companies.
Ilan Gur:
Well, thanks. Yeah, and I'll double-click the comment around having the community, the fellows we support. Probably the biggest value is that community and other people trying to navigate the same sort of hard tech transition. One of the things we like to say is, building a hard tech company in some of these spaces, especially industrial spaces or energy, where you've got regulation, all these different things, there's no cookie-cutter recipe in terms of how to do it well. So really finding a lot of people and understanding how are they navigated, figuring out who you want to emulate. And so maybe for the audience, if you're not already in a community where you have that, go reach and find those connections. Just taking a look at time, it looks like Ramsay's got to come in here, so let's go to Ramsay. We'll do your quick comment or question, and then we'll go to the next talk here.
Ramsay Huntley:
Super-fast, and just want to double-down on something that Orin finished with. He mentioned they've just published a paper on the tough tech mandate here. Really critical point to take away today for all of you on this call. We have to take this conversation outside of the 365 participants on the Zoom call. You all are really close to really important things that matter a lot for this next decade, and way too many people outside the circle are not aware of how challenging, how tough tech, this actually is. And so it's critical that if I give you anything else to take away today, is talk about what we're discussing here today, because this is challenging and not nearly enough people, particularly in the policy realm, recognize how challenging that is. And so, yeah, really glad to hear The Engine is published like that. I'm looking forward to grabbing it myself and using it, because we need to remind people of what it is we're up against here. And while I'm optimistic, I'm mindful that this is a big challenge.
Ilan Gur:
Oh, sorry, very important note on that because I think the folks on the DOE are legally not allowed to say this, so I'll say it for them. Talk to the Congress people in your districts and support things like the [inaudible] Frontiers act and the legislation that's going through that will end up benefiting your companies and rise the tide for all of us, because ultimately we need money and authorities to do some of these things.
Ramsay Huntley:
Of course, within the regulatory bounds, I mean, but the point remains that this is a message where you all have a lot of expertise to share and I would highly recommend you find a way to utilize your voice both within your organization and externally.
Ilan Gur:
I love that. Thanks so much, Ramsay. So let's turn -- I think we're going to tee up Edmund here, who's really been been focused on the very earliest part of this funnel. And to that point, you know, most people don't understand like, yeah, why is hard tech so hard, and what are the challenges? It seems like everything's working fine. We've got universities, etcetera. And I think the complexity and the ability to shape people's mindset around how to do this well starts -- the earlier you get that started, the easier everything downstream becomes. So Edmund, really looking forward to this.
Edmund Pendleton:
Thanks, Ilan. Just testing make sure you can hear me OK.
Ilan Gur:
Yeah, you're great; we can hear.
Edmund Pendleton:
Perfect. Well, Orin, congratulations, by the way -- I just read about The Engine in the Economist a few weeks ago. I was so excited I had to check out what you all were doing. So great story. I'm hopefully going to build on what you talked about. So let me go ahead and do the slide show here. So everybody, here's a quick little overview of me. You can check me out later on LinkedIn or reach out to me if you want. Most important thing I want to highlight here is that I'm a technology entrepreneur first and foremost. So I'm going to share with you a lot of my perspective sort of from that angle. But I've been in this space of innovation consulting for the last eight years. I'm going to talk specifically about some of the work I've done for NSF and other federal agencies through the i-Corps program. But I also work very closely with a number of corporate clients, as well, all in very hard tech spaces, by the way. Now NSF started i-Corps about eight years ago now. And it was really focused on academic researchers. You know, how can we help them get their stuff out of the lab and into the market. But over the last six years we've really pushed hard to get it also into the SBIR program. Many of you know about these programs, but if not, it's the world's largest seed fund, right? All the agencies have small startups they invest in. And one of the things we try to do through the i-Corps program is really prepare them for true commercialization success. At this point i-Corps has become a really important part of the innovation ecosystem. And again if you don't know anything about the program or think you would be interested in it, please check it out online.
I like to summarize the hard tech's sort of comments with this quote from Buzz Aldrin. I'm a big space buff, and I love this quote: "You promised me Mars colonies, but instead I got Facebook." Now, I wish Facebook had been my idea, right? I certainly don't want to disparage that. But all the types of companies we work with in i-Corps really are these deep tech types of technologies that all of you are working on. So one other thing I kind of want to highlight -- people get these terms a little bit conflated. And this is my own sort of definition. But I do draw a distinction between inventors -- you know, people that create things -- innovators, people that find opportunities in the market that those things can solve, and then entrepreneurs, who gather the resources around building a business around this sort of opportunity. These skill sets are hard to find in a single individua, so team building is really important. But I want to highlight those things are different. Now, this is a complicated slide. I'll try to simplify it. I'll simplify it by saying that innovation is very difficult. And this comes from the world of corporate innovation. I'll just point out here that they're two axes. The newer the market is to you, the harder it is. The newer the solution of technology is to you, the harder it is. But what you're going to notice here is that startups live in the upper right-hand corner. And for all the venture capitalists out there, I know you like simpler charts, and we'll just use this one. The simple fact is, most startups don't make it, right? They just don't get very far. And it's a real challenging business. Now the question is not whether those charts are precise or not. The question is why they even look like this, right? And can we do better?
And there are lots of sort of line online, you know, sort of ratings or lists of why startups don't succeed and why new product introductions don't succeed. I'm going to use this one because I happen to like it. Number one, building something no one wants, which is another way of saying not enough people want it, right? It's not that no one wants it. Hiring poorly -- somewhat obvious. But then lack of focus, I've circled it here because honestly I think this is the driver for a lot of number one. And most of what I spend my time on is helping my clients and the teams I work with understand how to better focus. So we like to use a systematic approach to identifying unmet needs, which means don't just build, show, and hope, which is a process many of us have used. I know I've used it multiple times myself. And the real emphasis is on getting out of the building, right? Let's get out of our comfort zone. Let's get out of the lab. Let's get out of working and talking just about the technology. Let's listen to some customers. So you've already heard about technology and money today, really two important topics. We can't forget the customer, right? And the primary learning in what we teach comes from interviews, really face-to-face interactions you have with potential customers and stakeholders. Now, I like to make the analogy that sometimes this feels a little bit like this. You know, Mike Tyson once said, "Everyone has a plan until you get punched in the face." That's kind of what this interview process can feel like at times. So I'm very cognizant of that fact.
So one question might be what what are we trying to learn in doing this? So I'm going to do this really fast because I know we're short on time. So there's several things I highlight. First of all, before you retire on this beach you have to find a beachhead. And probably the most important thing to consider when you find a beachhead is, does the customer really have a compelling reason or need to buy? Sounds simple. Not always easy to determine. One of the ways we help you get at that is to have you think through this concept: What's the customer actually trying to do? Do they really care about technology? E-ROBOTs look cool, but do they really care about e-ROBOTs? The answer is not really; what they care about is a job they have to do. And I love this quote. It summarizes it best. "People don't want a quarter-inch drill; they want a quarter-inch hole," right? So you need to figure out what are those sort of quarter-inch holes that our stuff actually is going after? Really important to understand the job and jobs that customers have.
So another key point is this: There are competing jobs. A customer might have multiple jobs, not just the one you're going after. And you're competing with all those other jobs, too. It's not just the other things that look like you that you compete with. You really have to understand that. And that's a really important part of discovery. And this is a little more complicated but I'll simplify by saying, what are they lying awake at night thinking about? And are they thinking about the job that you want to help them with, or are they relatively happy with what they're doing today? So not only understanding the other jobs they have but how they prioritize them. Really really important.
Which kind of takes me to really one of the most critical points, which is, if you're focused in on a job somebody's trying to accomplish something, how do they pick solutions when they go out to quote hire a solution for that job? What are they looking for? And you have to get beyond the features, OK? You have to get beyond features. I like to say, it's these underlying sort of knobs and dials that people care about. And your features of your solution turn those knobs and dials. The key question is, what are those underlying things that they really are making decisions based on? So this gets to your final point, right? Do we actually have a value proposition here, right? If we understand the job and the needs of the job, how do we know? How much better do we actually need to be such that someone would adopt our solution and fire the current one? Really tricky, but this is so critical in that upfront customer discovery you need to be doing, your perspective of the technology, OK?
And then finally, of course, there's more to it than that, but basically we start with does the customer have a compelling reason to buy? But if you're building a business, there are plenty of other things you need to understand. And you're going to hear more about that in some of the subsequent talks. So we will help teams work through other aspects of their business models, as well. But bottom line we start with: Does the customer truly have a compelling reason or need to buy? You need to think beyond your technology. You need to understand what they're trying to accomplish and whether or not you can actually move them to adopt your thing.
So my top takeaways from working with 3,000-plus deep tech projects over the past eight years: Number one, lack of focus, specifically around this beachhead market, is what I call a first order failure mode, meaning it is a very common failure mode for people. And if you don't get this right, you're not going to succeed. Number two, a much deeper understanding of the job and how people make decisions around solutions will help you uncover real customer needs. And you can do this, by the way, without even talking about your technology, which I'm sure is a bit of a surprise to many of you. And then number three, competition comes from in-kind solutions, things that look like you, out-of-kind solutions, which are things that don't look like you but could be hired to do the same thing, and then competing jobs. So you can't just look at other things that look like you, in other words, to understand the true competitive landscape.
So my final thoughts, a few words of inspiration as we wrap up here. For those that don't know Atul Gawande, I highly recommend this book. He actually is -- a fun fact -- is now on Joe Biden's Coronavirus task force. But he wrote this great book called "The Checklist Manifesto." All I will say is this is a great example of innovation that had nothing to do with technology at all. Take a look at the book. I won't give away the conclusion, OK? And then finally I'll wrap up with one of my favorite movies. I love outdoor activities. I love this quote from Alex Honold. Anybody who's a rock climbing fan might appreciate this. I love his quote. He says, "Nobody achieves anything great by being happy and cozy." So get out there, talk to your customers early and often. Don't be afraid to be a little uncomfortable. Don't hesitate to reach out to them. So that's it; I'll stop there, Ilan, and we can sort of take some questions.
Ilan Gur:
Awesome, Edmund. Thanks so much. And I'll just ask our panelists to start the video. We'll see if we can get everyone back on the top here. One of the things I'm really excited about is, we'll get to hear from Kipp and Alexandria on some of how this felt and feels really in the trenches as the entrepreneur. Wondering whether any of the panelists kind of have any quick quick reactions to throw out, just to emphasize or or pull on any of the threads there from Edmund.
Kipp Bradford:
I have a lot, but I'll try to cover them when I do my seven minutes. But yeah, I can second a lot of what Edmund was saying. The one thing -- one of my colleagues who's a fellow at Intel taught me to ignore user needs because users will tell you they need the wrong thing. Always focus on value. And when you're talking about jobs, the most important job that somebody is thinking about at a company that you're trying to sell to is their own job. And we think about what they value, usually they value keeping their jobs. So if you can provide somebody something that helps them keep their job or enhance their position at their company -- you know, get a promotion -- that's the most important job that you can benefit. And whatever you can do to allow them to make a decision that they can do that, it's the thing to focus on.
Edmund Pendleton:
Yeah, I just -- real quick to that point. Kipp, I love that comment because you're absolutely right. Sometimes people tell you all kinds of crazy things. It's better to focus on what they're actually doing, not what they're speculating about what they might do. So you're absolutely right. Be really careful.
Orin Hoffman:
I'll let you know ... comment with an investor hat on that we just love when founders come to us having gone through either the i-Corps program or the Activate program, because it's a real superpower to have that much customer diligence under their belt by the time they come to us. There's always this like balancing act with flexibility and dogmatism under the same roof when you're a founder. And so, you know, getting all of that amazing customer data to launch your company and break through all those walls, but also maintaining flexibility as you learn more and need to pivot as you actually go to market is a huge struggle for especially technical founders that are kind of used to in-lab kind of things going at least according to science, and that's not always the way it is in the world of entrepreneurship. So I really appreciate your thoughts.
Edmund Pendleton:
Yeah, Orin, I do want to build on one thing you said because I think it's a great point. One of the things I always tell my i-Corps participants is where else will somebody fund you to go do the customer discovery you should be doing anyway, building a business, right? So anybody listening here that's an academic researcher or an SBIR company that's looking to commercialize something, please check out the i-Corps program. Great resource for all of you.
Ilan Gur:
All right, I think we'll try and transition here to Kipp. I'll just mention one thing, because for those in the audience who haven't explored i-Corps and the concept of customer discovery. A really, really powerful methodology that I think is more than anything contributing to just a big mindset shift for scientists and engineers, saying, oh wait, it's not about the tech I'm building; it's about something outside the building. You know, one of the limitations that we've seen or one of the -- once you have that under your belt, one of the things we've seen with our fellows, it's really important is to recognize that the customer can tell you what they would want to buy if it existed. You know, for the technical folks in the audience, that's kind of like the thermodynamics of the situation. But there's so many kinetic barriers to how you get technology out to market. So we often say, you know, you need to do customer discovery, but then you need to go do investor discovery and you need to do regulatory discovery, right? And that's the hard part, is ultimately like the multi-dimensional puzzle has to come together for you to have that lane to go build and be successful in. So that's just a "yes, and" on discovery in general. Take those concepts and apply them in a number of dimensions. Kipp, let's see up here.
Kipp Bradford:
Sounds good. ... All right, let's make sure that I can see everything. Great. Morning, everyone. I'm Kipp Bradford, CTO of Treau. And I first want to thank everyone who's on the panel, who's helped host the panel, Ilan for moderating and David and Sven for being part of all this. So I'm going to start with a tiny little bit of context around my work, beginning with the research lab that created the technology that my company is commercializing, which is Otherlab. It's a San Francisco-based independent research lab that's pioneered a wide range of pretty interesting technologies. A lot of them are based on inflatable structures, and I'll get to that. Most of the work that comes out of Otherlab is hardware. It's hard tech focused on making energy cleaner, saving energy, energy efficiency, and improving manufacturing processes. Otherlab tends to hire engineers and scientists that both have a strong theoretical background and also a good track record.
Panelist voice:
Yep, you're in presenter mode, so ...
Kipp Bradford:
Sorry. Let's switch screens here. Thanks for telling me. That's the danger of having too many screens. ... All right. Can you just see the slides now?
Panelist voice:
Yeah, unfortunately now we're seeing the whole kind of presentation layout with your slides.
Kipp Bradford:
Let's try to do that again ...
Panelist voice:
But that's OK; you know, you could leave it there and just maximize the size of the screen if all else fails.
Kipp Bradford:
Let me see if I can fix this quickly. ... How about that? All right, we'll just do that. Won't see my presenter notes, but that's OK because I know the stuff. So as I saying, Otherlab tends to work on a lot of projects that are hard tech, and the engineers and scientists have a combined background in strong theory and physical product development, which is pretty rare to find. And one of the results of that experience, I think, is reflected in the track record of spin-outs that have either commercialized or been acquired over the last 12 years or so of Otherlab's existence. One thing that I really think is cool that I should point out is the departmentof.energy (they're a little cheeky in taking this URL), but the work that's there is a giant Sankey diagram that's interactive, which covers the entire U.S. energy sector from source to destination. And you can go through it and break down where every joule of energy goes as it flows from the ground or the sun to somebody's house or a factory.
And my particular involvement with Otherlab is at a spinout called Treau. We're developing a fundamentally new HVAC platform. And that platform is based on some of the inflatable polymer technologies that Otherlab has developed, and we're looking at heat exchangers and compressors. The funny thing is that I am not actually an Otherlab employee, unlike most of the other co-founders of other lab spinouts. I was initially brought on as an advisor. I was working as faculty at MIT. I'd previously been faculty at Brown University, where I was teaching entrepreneurship. I had about seven startups, eight startups under my belt before MIT and a couple after that. And my work was, I was hired by Nicholas Negroponte as part of a slide off search for a professor of other.
And when I arrived at MIT I was given the directive of creating a new field of science that had magic and impact. My background is actually biomedical engineering, but I have a strong interest in thermodynamics, and I was trying to merge those two things, to think about how we could make energy use more practical and more efficient, where we weren't cooling buildings but we were cooling people, or we're heating people, looking at ways that we can make people more comfortable with less energy. And that to me fundamentally was not an energy problem because [inaudible] limits how we use energy, but it was really a biomedical problem and understanding of the comfort question. And I've been developing wearable air conditioners. If you Google Adam Savage / Kipp Bradford, you'll find a fun video of us building a wearable air conditioner for his spacesuit. And the Otherlab founders had connected with me around HVAC and said we've got the startup that's doing some interesting stuff that we'd love you to take a look at. I said, yeah, this looks really interesting. They asked me if I'd be an advisor. I said sure. And things proceeded from there, where I started building their prototypes, I started consulting with them, developing the supply chain. And finally they said, would you join us to be our CTO.
And the first answer was no. I thought, yeah, I kind of like this academic thing. And I left MIT to help start the Center for Ecosystems and Architecture at Yale. We were doing some really neat stuff that was building scale, and this particular project was a disaster relief sustainable housing unit that was completely off-grid, self-sustained, and ideally scalable. But I developed the heating / cooling and electrical infrastructure for this project. And at the end of that, we published some things and moved on, and I said, that's not quite the impact that I want to have. I want to have scalable impact. And that kind of led me back to Treau, but I couldn't quite disconnect from the academic world. There's a lot of just really amazing innovation and research happening at the boundaries of science and technology.
And this is a project at the Chaos Lab that I'm affiliated with at Princeton, looking at ways to again use less energy and make people comfortable in some more extreme environments. So I want to second the emphasis on hard tech is all about crossing the chasm, all about how do you take the leaps of faith that you need to get other people to take to support the work that you're doing. And also think about what are the challenges that you need to overcome. The first thing I want to do is say, if you are not familiar with product development and product design, even if you're on the scientific side of the boundary, the spectrum, get this book "Product Design Development" or one like it. There are lots of good books on engineering design, and really dig into the resources available to you, startup accelerators talk to seasoned tech transfer people and investors.
And the next reflection I have is it's really, really, really important to make a requirements document. What are the things that make your product unique? What are the things that make your technology or your invention or your scientific discovery unique? And put those on paper. And then know that everything you're putting on paper in a requirements document is an assumption that needs to be tested, and to test that you have to develop a plan. Your plan should incorporate a lot of iteration. So people talk about your technology readiness levels or whatever framework you use to define what your milestones are, and then know that every one of those milestones needs to be broken down into small milestones, small steps where you can make tiny wins. One of the things that you have to consider is that when you're climbing a mountain, you can't jump from the base to the top. You have to think about where you're putting -- every where you're putting your hands at every position. Every step is well-practiced, well-thought-through. Each one of those, every time you grip a new handhold, that's got to be a micro win. And you have to think about it that way.
Also consider the fact that everything you've simulated is fake until you've built and tested it. So simulation is really important. I highly encourage doing as much of it as practical. But none of is real until it's tested and working. Getting back to your iterations, every one of those steps is an iteration, and every one of those iterations allows you to accumulate wins and successes towards small goals. It also allows you to de-risk your project. So a lot of the things that I do as a CTO is just de-risking, thinking about where the risk lies, how to avoid it, how to get around it. Another thing that is funny: You'll hear people emphasize patents. I've given talks about how patents are worthless, and I also aggressively pursue patents. I could get into that more, but I'll let you read Eric Von Hippel's "Sources of Innovation." It's important to build your portfolio, especially if you're doing things that are really scientifically novel. And it's also important to know that there are tons of ways to engineer around patents. So build a portfolio, protect it, but know that you're not going to sell or license a patent and become a millionaire, particularly in the building industry because everything moves slowly, everyone is risk-averse. So you have to prove and demonstrate the technologies that you're building. Getting back to some of what Edmund was talking about, focus on value. Everything is about value. And find investors that align with your business models. If your investors are talking about, where's your disposable, where's your recurring revenue stream, well, unless that is your business model, they're not your investor.
And the last couple items scaling "Hard Tech is Hard." I'm sitting in my basement where I do a lot of my work. I'm hands-on. I have a fairly large team and I'm in the trenches with them, designing electronics, testing our equipment. I designed and built, like actually fabricated my garage, our first three iterations of prototypes myself. And then have slowly been transitioning all that work off to our engineering team. So this is a hard area to be innovating. It would be great to be able to hit "recompile" on software and then have everything update, and say, oh, we just did an iteration; it took us 15 minutes to recompile; It's great. Not, I have to source sheet metal; it's going to take six months to tool. But remember that you can do hard things, which is why we're here. With that, thank-you, and looking forward to the rest of the conversation and questions.
Ilan Gur:
Thanks so much. I really love that, and especially the sort of top 10 tactical pieces of advice, which is I'm sure really rich for everyone to see. I'm just looking at time here and I want to make sure that we have a chance to hear from all the panelists, in case any of them needs to run. So I'm gonna say let's keep moving. We'll go to Ramsay and then Alexandria, and then hopefully we'll have at least a few minutes to do some reflections at the end here.
Ramsay Huntley:
Great. Ilan, are you seeing my screen now?
Ilan Gur:
Yeah, we can see and hear you, so you're good to go. I'm seeing the slides, yeah, hit "present" and let's see what happens, or you can just leave it like that. We're good either way.
Ramsay Huntley:
Should be presenting now, right? ... All right, great. Well, thanks; really appreciate the opportunity to be here. And I'm gonna try and do this just really quickly since we're near the top of the hour here. But I'm here on behalf of the Wells Fargo Innovation Incubator, which just a quick flash through on what the program is, it's a 50 million dollar public-private partnership between the Wells Fargo Foundation and the National Renewable Energy Laboratory, focused on three things. One, how do we identify promising companies in their technology? Two, how do we validate that technology with the support of both NREL and the Danforth Plant Science Center? And third, how do we actually demonstrate and scale that technology so we can, as we all have been talking about here, move that to commercialization as rapidly as possible? Just a quick kind of brag sheet, if you will, on the program. We've had 46 companies either in the program today or graduated from it. They've gone on to raise nearly 400 million dollars in follow-on funding. So 33-1 funding leverage ratio for the dollars we put into that. And we've had seven of those companies go through merger and acquisitions. So very successful program by the numbers. But what you're probably most interested in then is how do we do this from a demonstration perspective? So let me hop really to kind of that part of my conversation.
And so first I'll say, I have the absolute worst "valley of death" slide here today, I'm going to definitely steal from my co-presenters because they're much better than mine. But we're working on two valleys of death with this program. I won't talk about the technological valley of death, but I will focus on the commercialization valley of death and give some of our perspectives on that. So we see that overcoming that critical kind of first demonstration barrier is just essential to the startups that we work with because that's what's preventing them from getting to the market in the first place. And one of the reasons, or I say one of the most important reasons, frankly, is because end users often don't want to be the first to try something. There's inherent risk in this. And so these demonstrations help the innovators themselves. It helps them fine-tune their business model, helps them fine-tune technology in the way they bring it to market. It also helps the companies on the other end of that, the actual demonstrator host, to understand how that integrates with their existing systems and where the capability for them to utilize that potentially scale it is, as well. Important to note, demonstrations aren't one size fit all, not in any way frankly. And so we have to think about a lot of different issues as we think about how we even choose demonstration. So who pays for it? What is the cost of this? What's the risk of that cost? Hard tech, you might be talking about something has intense capital commitment versus a software program that you could deploy maybe for just a few thousand dollars into an existing system. We also have to think about cyber-security. It's a very critical issue, particularly for us at the bank but for pretty much every company looking at integrating technology these days. To those of you who are innovators, I would say do not discount this issue as you think about how your technology is going to come to market. The cyber-security aspect is incredibly important. Understanding the needs of who your end customers are. We've already talked about that a lot here. It really matters from the demonstration perspective, too. It's one of the important things in our secret sauce, so to speak, which is connect very specifically that end user in that company in a way that there's support from NREL to actually bridge the gaps between them, because they're not going to speak the same language. And so we need that important bridging capability to bring that to bear. And then like I said, the matchmaking is absolutely probably the most critical part, in one way, we don't really advertise the program but really critical because we use that asset of a knowledgeable PI, a knowledgeable business-to-market type person to connect the dots between that startup and that corporate in a way that they're, like I said, speaking the same language and understanding what it is they're all trying to achieve out of that. And that's where this program and what we're doing by NREL you know is so important.
And so just real quick, and I'll flip back to everybody else. We want to give one quick example of how we've done this. So we have a company in the program called PowerFlex. They were in our third cohort adapted electric vehicle charging network. And so solving for a really big problem as you bring up scale, which is how do you control loads of lots of EV chargers working all at once, because that places huge demands on the building and grid infrastructure. And so this technology dynamically adapts to those different demands. But as you can imagine, you have to demonstrate this to actually prove it, right? And so you need a large system in which to place it in order to prove that you can dynamically manage those loads. And so we started with testing at what you can see there in the background with the wind turbine. That's the NREL Flatirons campus, where they do their testing for wind turbines and other similar technology. And we had 16 chargers there and tested those in place for [lost audio] over system, and then based on that and the growth with other clients they had outside of that demonstration, NREL identified that their own demand that is on the campus itself for EV drivers was growing at the same time. And so PowerFlex was able to bid on the contract for NREL, and this was this is an open bid, so they won the bid relative to other players in the market and actually have now 108 in fact chargers on the NREL campus in the garage there for NREL's own employees. Well, how did that actually lead to scale? EDF Renewables watched what took place there, saw PowerFlex as the winner of that bid and recognized that they had the winning technology with the leading lab in the country and knew that was an opportunity for them to make an acquisition that would fit with their own aggressive growth plan. So just an example there of how that demonstration kind of went all the way through the pathway to the end, where we got to substantial commercialization with our partners at EDF Renewables.
So I am going to stop there because I know we're running up against time but really appreciate the opportunity and hopefully we have a chance for some questions here.
Ilan Gur:
Thanks so much, Ramsay. One thing that I'll just say in transition here as we move to Alexandria, is just that I think the Wells Fargo program is such an amazing example of what can happen when an organization steps up in the right-sized way to tackle this problem. You know, one of the problems with hard tech is [lost audio] everything's more expensive. It's got not generally not sort of drop out college checking about here, although sometimes it is. But the challenges can be harder the tech the infrastructure is more expensive. And so the fact that Wells Fargo from the get-go said this needs to be a really big program from a financial perspective and really designed it around that I think has been really amazing. So thanks so much for the leadership there, Ramsay. Let's move just on time to Alexandria and then we'll -- it looks like we'll have just a few minutes at the end here. I'll try and scan some of the questions and see if we can we can do a speed round of getting to some of the audience questions here before we have to wrap. ... And Alexandria, we see your -- oh, there you go.
Alexandria Lafci:
OK, perfect, you can hear me. Fantastic. Just for warning everyone, my Internet's been a little shaky. I think we'll be fine, but I might turn off my video just so we can be sure. But hello, thank-you all for sticking around. My name is Alexandria Lafci. I'm the co-founder and CEO of the housing nonprofit called New Story. I'm also the founder and managing partner of Home Team Ventures, which is a venture fund focused on construction technology. And while one is a nonprofit and the other is a fund, they both operate under the same goal, which is to catalyze solutions to end global homelessness. We're looking at decreasing cost and increasing speed without sacrificing quality or the environment. So I'll start by telling you just a little bit -- I'll be brief given our time -- about New Story and Home Team just so you can understand the perspective that I'm coming from.
And here we go. So New Story for the last six years has built homes for the bottom billion. We've been able to successfully build thousands of homes across Latin America and the Caribbean for less than eight thousand dollars per home. Typically it's about six thousand dollars per home for very high-quality housing. OK. We've been able to impact over 15,000 lives. And we're very proud of that, but unfortunately 1.6 billion people have inadequate access to shelter. So although New Story has become very efficient and effective at building housing developments for those who need it the most, we know that massive leaps need to be made in the cost, speed, and quality of construction in order to meet the magnitude of the need. So first New Story began an R and D program where we bring innovators in academia and industry to the communities that we build to field-test and iterate on their technology in the lower cost / lower barrier areas where New Story builds homes as a step toward commercializing. And then second, as I mentioned, I started Home Team Ventures to invest in the next generation of construction technology companies that all developers hopefully -- but specifically affordable housing developers -- can use to scale production. We invest in pre-seed through series A hardware and software startups. And one of the reasons I started Home Team is because of the value I saw while at New Story in helping early entrepreneurs with pilot projects.
So you know, pilot projects with the ideal customer is not always possible. So similar to the other panelists today, what I want to share is encouragement for founders, especially in hardware, to think about -- and what I want to emphasize is potentially unlikely partners like nonprofits or smaller governments, municipal governments, governments and other countries, who might present an opportunity to put your technology to use earlier than you would have otherwise been able to. The fellow panelists that gave -- they emphasized that real tangible application of your work outside of the lab or the warehouse is of course an unbeatable learning ground and can be catalytic to customer acquisition and future funding. The more capital-intensive your technology is -- as we know, hardware often is -- the more patient capital and early risk takers you'll need to find. I learned best through case study, so today I'll just share quickly too from my own work.
Icon is a 3D printing company based out of Austin, Texas. They 3D-print homes. I met their founders just a few months into the company formation and presented the opportunity for New Story -- again, we're a nonprofit -- to invest and bring their technology to one of our communities in Mexico. Icon was too early, way too early, for most funders to give them the money they needed to build their next machine. And customers will seldom sign an LOI or take you seriously without seeing your work in action first. They usually typically need to see a few reps and sets. But for New Story we saw a mission-aligned opportunity to advance a solution that could help reduce global homelessness. 3D home printing, for us it held promise to drastically increase speed of home building, to eventually reduce costs, all without sacrificing quality. It's also a nearly zero waste form of building with an insulating thermal envelope created by the method of extrusion. The technology had high impact potential for the bottom billion. But most companies like Icon, they create their technology for more lucrative markets, at least for more lucrative markets first, not affordable housing. So I saw an opportunity by investing and influencing Icon early on to help them see in practice how their technology could take part in solving the global housing crisis. The founders agreed, which was bold, because as if building a working 3D printer and then the material to extrude effectively from it wasn't hard enough, New Story works in areas that are hot that are humid that are sometimes very remote. Power, potable water, aren't always reliable. These were design constraints that because they were introduced earlier than they would have been without this partnership makes Icon arguably the most advanced in 3D printing technology for the built environment today.
They have a waitlist of customers. They're partnered with NASA. They can deliver in part because within their first year their awesome team was able to build real homes for real people under real conditions. And let's see ... get to the next slide .... Great. This is one of our beautiful homes in Mexico. A nonprofit New Story and in this case the government of Tabasco, Mexico, gave them a chance and the room to learn by doing. Icon can point to the real community of homes in non-ideal circumstances as they raised their very successful series A fundraising round earlier this year. So I just challenge all hardware companies to think about mission-aligned partners that may take a risk before traditional funders or target customers might. And I'm just going to power through this next example.
Another quick one is a company called Airworks. They are autonomous land surveying software paired with drones to radically reduce the time it takes to understand the topography of a chosen piece of land. The amount of hectares that they survey contributes to their bottom line, as well as their learnings to improve their technology. To understand some of the challenges this company faces in customer acquisition, we got to take a look at the space that they're entering. For over a hundred years, we've been doing land surveying in largely the same way. So to replace humans walking a site step by step, mapping land to drones flying overhead, is a big leap for the space. Civil engineering firms, the ideal target customer of Airworks, they know when they trust the old way. And so Airworks has a lot to prove with respect to the accuracy. And these big firms don't necessarily have the time or the patience to give a startup a chance to learn and improve on their time or on their projects. So this example's early, but we at Home Team are working to connect Airworks to the national land authority for a Central American country. That country has six year one term limits, and the secretary of land is very motivated to formalize land for thousands of families without titles during his tenure. So it's a big opportunity for impact. This old way would take years just to understand the land coordinates and the boundaries between plots of land. So that the secretary is motivated because of the short tenure to try something new and take a risk because of that time crunch. So this is an excellent opportunity for Airworks to get the reps and sets under their belt to de-risk their technology in the eyes of future customers.
So at Home Team we're bringing these two entities together to do a pilot that could result in thousands of hectares surveyed, which is huge for Airworks' portfolio and very impactful also for this government partner and of course for the families who will have land titles because of this technology. And even if this opportunity didn't go beyond pilot, just the process of working with a national government teaches Airworks things like how to train a remote team, how their technology can be leveraged to formalize land, which is a use case they haven't explored, how to secure a government contract, etcetera. So if you are ... let's see, next slide ... if you are early in your business, particularly if you're too early to work with your intended customer, say, you know a real estate developer in the case of Icon or a civil engineering firm like Airworks, I challenge you to look at alternative partnerships early on. Who is motivated enough to take a risk on you? Look to nonprofits, to smaller governments, lower costs, and lower barrier geographies that may not have been your initial target area of focus. They might provide challenges, but they can serve some critical functions like expanding how you view your total addressable market. Maybe you can expand your TAM. Perhaps there's a region or vertical you hadn't considered that can open opportunities for your technology. I'll of course always put a plug in for the 1.6 billion-person housing deficit that I urge all technologists to consider applying their technology toward. Second, pressure-testing your technology by taking it out of the lab and into the world quicker. We of course know these learnings are invaluable to getting the iterative cycles and feedback from end users needed to accelerate market acceptance. And then providing proof points, a portfolio of your work, that will help immensely for future funding and for customer acquisition. I had a little bit more but given our time I will just stop there. Feel free to ask me questions or reach out at any time.
Ilan Gur:
Alexandria, thanks so much. So just -- we're basically at the end of the time of the session here. And maybe the panelists can turn on their videos just so folks can see and we can thank you all. So a few thanks, first of all, for all of the panelists sharing those remarks. I mean, I think this was not meant to be answers to any of these hard questions. But I think that the goal here was to provide a number of different perspectives and experiences -- and I think you saw a really wide range there -- just to get some juice flowing in the conversation going among this community. And I just say thanks to the BTO team for making space for this, because without the space to have these perspectives, the rest of this event wouldn't have had this kind of richness on this topic. And Sven in particular from BTO, who sort of corralled this group and helped organize the panel. Maybe just with the last couple of minutes, and then I think if it's going to move to a break, I scanned the questions and I would say the one theme in terms of the few questions I thought I saw were really about how to bring some of these lessons learned and think about the uniqueness of the building space. So there was a question about what do we do about the vested interests of the established institutional architectures. Buildings and the system basically supports incumbent techs versus innovative tech. And there was a related question around the context of residential retrofits, if that's one way to get at this and get out of the entrenched space. You know, people don't really like to hear there are things wrong with their home. How do you get to the end customer? And so I just offer a chance for any of the panelists to give a last remark on something from their experience or what they heard and how it hits the building space. And then I thought it might be nice to end with David, if he's still on. David's not just running BTO, but you know was the CTO of a startup in this space, so maybe he can give us some closing remarks here.
Orin -- I don't know who we've got. Alexandria, Kipp, Ramsay, Orin? Any any last comments here?
Kipp Bradford:
I'm happy to just reinforce the value question. People are going to spend money on something. You want them to spend money on the thing that you make. And everybody's making a choice on how they're going to use that dollar. And I think that the thing to keep in mind is that when you've got a choice, you've got to convince somebody that what they're going to get with the dollar they spend on you is going to be more than they'd get with the dollar they could spend on someone else. And frankly, that goes not only for the customer that you're trying to sell to, whether it's business to business or business to consumer, but it also goes to your investor. Your investor can spend their investment on you or someone else. And your job is to convince that investor that their dollar is going to gain them more value spent on you than it will spent on another startup. So that value equation just really propagates its way all the way from every stage of your project.
Alexandria Lafci:
I would say because we're talking about the built environment, it's very exciting because it represents a lot of opportunity. The construction sector is the least digitized sector, they're a second only to farming, right? The construction industry spends less than half a percentage point of profits on research and development. And so the innovation is not necessarily happening from within. But that also represents this huge adoption challenge. And I can't remember which one of my panelists shared -- I think it was you, Edmund -- one thing that I'm seeing in a lot of companies now that I've started investing is really going deep into building and working on the solution without getting an understanding that someone wants it yet. So I would say it's important to work a little bit, work for a few months, like make sure you understand you have enough to share, but as early as possible if you want to make sure that the incumbent per se is going to be receptive to what you're building, start talking to customers. The aim doesn't need to be to get an LOI, but it needs to be to understand whether they even would use the technology before you spend a lot of time and energy and resources building something that for some reason you have a blind spot to, won't get the adoption necessary.
Edmund Pendleton:
Just a quick add on to that thing; it's a great point, both what you and mentioned. I'll bring up the fact that I work with a company that has five billion dollars of business in the building industry, and when they go develop new products they still struggle. It's such a complex ecosystem. And understanding all the different players is really challenging. So I would just encourage all of you in your particular situations to understand that value means something different to the different stakeholders, and you have to understand who has the influence and it's not easy. So that's why discovery is important. I'll just end there.
Alexandria Lafci:
And if -- I just want to just give this example because I just heard it today and it was interesting. And I'm sorry, it's not a hardware one, but I think the lesson's still applicable. There's a young gentleman who's building a company. He started with a labor marketplace. He evolved it into like HR software like Agusto, if you guys are familiar, for construction sector workers. Was really excited about it, got a lot of great feedback from investors and others. And then I spoke to someone who is a property developer and he said -- and this is a little taboo -- but he said a lot of the workers on construction sites don't necessarily have paperwork. And so these contractors don't necessarily want to have HR software or want to know or create a better experience. And so that's like a blind spot I didn't have, that this entrepreneur didn't necessarily have, that could present a insurmountable obstacle for what he's trying to build. So just having as many conversations with a diverse set of stakeholders and perspectives as possible.
David Nemtzow:
Ilan, this is David. Can I add something from a different angle?
Ilan Gur:
Yeah, and why don't you close this out here, David? Thank-you.
David Nemtzow:
Well, I'll let you close it up, but I just want to say, not in my current capacity but 10, 11 years ago, I was chief policy officer of Ice Energy, a startup in the distributed energy storage space, thermal energy. And so what I'm about to say doesn't apply as much to the panel as to the rest of us in the audience. One of the reasons why Ice didn't survive, and despite having Goldman Sachs and other good quality money through the valley of death, is we had to spend, and I personally had to spend, a lot of time with government and policy makers explaining what thermal energy storage is and why storage is a good thing, let alone thermal energy storage, let alone Ice Energy's product. That's the nature of a democracy. I get all that. We had invest so much effort into just getting some basic policy signals and policy metrics understood and supportive. It was crippling, and so I just wanted to mention that, because in the clean energy space I think we all live that. And so part of my current job and as I see the people in the audience is to understand that not everybody has patient capital or has enough of it, and we have to do our best to get those policy and programmatic signals right in a way. And at DOE we are used to dealing with big organizations, not little ones. We do what we can, but just not how we were built. So I just want to say that from the other side that government has to try to anticipate the needs of startups and other companies that don't have, may not have, the benefit of a Wells Fargo or some other sophisticated player with some wind to their back. Back to you, Ilan.
Ilan Gur:
Thanks, David. Orin, I realized just in that last round of comments I'm not sure whether you have anything to add, and then I'll wrap us up. And I imagine if people needed a break, they're probably -- their screen is, they're muted and they've headed to the fridge or the bathroom already.
Orin Hoffman:
I couldn't echo the stakeholder comments enough, so we can leave it at that. Well-said by Alexandria.
Ilan Gur:
Great. I'll just pick up on David's comment and say, I mean, one of the things that I think was clearly a cross-cutting theme from folks who have invested their life into figuring out how all the cutting-edge research turns into the impact. I think you heard everyone probably say five different adjectives of this is hard and complicated. And I think my hope is that there's an increasing recognition that if you look, the federal government spends roughly 70 billion dollars a year on research, probably twice that if you think of research and development. The private sector is obviously spending hundreds of billions of dollars a year in terms of taking existing tech and bringing them into the market. And there's very little money by anyone spent in the in-between phase, the how do you translate one to the other. And given everything we're hearing about how complex and multi-dimensional that is, I'm hoping that there's a growing recognition that if we want to solve that, we need to invest in it, and in the same way that technology development is unpredictable and hard and you need to explore and experiment and test and it's expensive, I think that's true here as much as anywhere, and I sort of see it as a linchpin. And so maybe there are a lot of words of encouragement to everyone out there, but if you're either working on the front end of that and you've got a research concept that you're trying to see make its way into world, or if you're on the investment side and you just want to see more cutting-edge opportunities to invest in, hopefully over the next number of years there's going to be a lot more support for that in-between space, and make us all more more successful as a system and get to the impact goals we want. And thanks for DOE's leadership in that, not just BTO and the team here, but as David mentioned, groups like the Advanced Manufacturing Office that has taken a strong lead in thinking about hard tech development, EERE in general and then and then beyond.
So really exciting things to come, not just for the world but in the day's program. So I'll just also end by mentioning that from 1:15 to 2:45, which I imagine is East Coast time, that's now -- I guess the next panel is around the IMPEL+ program and hearing from the IMPEL+ participants who have been thinking about the early-stage research they can translate out. You'll hear some pitches and some expert advice from them, so this theme will continue. And that's it. There's at least a few minutes for a break for those who stuck around with us, and thanks so much.