00:20:21 · Zach Dell
And if we don't make investments today in establishing a platform level energy technology company that can usher in this kind of abundant energy future, we're gonna get left behind. Because the paradigm, it's... If you look at the energy companies of America today, there are some big companies. There are some very powerful strong companies, but they're all oriented around the old paradigm. Right? They are oriented around coal and natural gas. They're not oriented around solar and storage. And some of them have dipped their toes in certain things, but they're all already trying this old paradigm. And they're also not engineering led technology focused R and D driven companies. And that's the most important point. Right? And if America is going to lead in energy, we must have an American engineering led technology focused r and d driven energy technology company or else we're screwed. Like, it's just it's just not going to happen. And you, you know, Anduril, this this is same thesis. Right? It's like, if the greatest defense technology company in the world is going to get built, it better be built in America. Right? As as I feel the same way about energy. If the greatest energy technology in the world, the greatest energy technology company in the world is going to be built, it better be in America. So why not us? Why not Texas? Why not now? And that's that's kinda how we get here.
00:21:40 · Adam Miller
[00:21:40] S2: I feel it. I I love your storytelling. We're gonna go into the Jen Taylor model in a second. But before, I wanna circle back to something you said. You said Josh helped you kind of psychologically get over this chip on your shoulder. I want to understand that a little bit more, but also what he saw in you to lead your seed round and to go after this big mission.
00:21:58 · Zach Dell
[00:21:58] S0: Yeah, I think you'd have to ask Josh. Mean, he has an incredible eye for talent and he's hired tons of people who are much better than I and tons of things. But look, I think Josh is a very thoughtful person who really helped me see myself more clearly and I think had gone through kind of similar things to me and kind of gave me permission to feel certain ways and think certain things and just help me mature in a lot of ways. And, you know, the seed round, you know, I think about it less around what did he see that that made him wanna invest, you know, in the seed round and more about the seed round was done when I joined Thrive, right? Like I joined Thrive and the the whole kind of conversation with him was, hey, you know, let's go invest together. And then at some point you build a company and we'll back you. It wasn't, it was less around the like, okay, well, you know, how much we're gonna invest and what's the valuation? It was like, you're gonna build a company, we're gonna support you. And that's kind of how Josh works is he's very partnership focused. And I think, you know, he helped me really, take ownership and responsibility for like my own future and my own wants and desires and less about what the world thinks and, you know, what the people say and, you know, you know, it really shined light on the fact that like, they're gonna love you, they're gonna hate you, it's gonna go back and forth, you know, and then the day, like, all that matters is, you know, the people in your inner circle, your family, your friends, your team, like, they respect you and they, you know, that that's really what matters, right? It's like, that that that inner ring, and that's kind of Josh's thing and I learned... I really learned that from him for that.
00:23:41 · Sachin
[00:23:41] S1: Yeah. That inner ring essay is great. I think Patrick O'Shaughnessy talks quite a lot about it. It... It's powerful. And going on to Base Power now, I think when people think about energy companies, they think about these asset heavy, capital intensive, low margin businesses that are run by these big old companies and it's very monopolistic markets. The venture capital model is typically very different for that... From that. And so how did you sort of set up the company so that you could attract venture dollars like this? You've raised a huge amount of money now and it's a very sort of contrarian venture play.
00:24:14 · Zach Dell
[00:24:14] S0: Yeah. I actually think it's quite simple. Dollars follow returns, right? And so if you can generate high returns on invested capital ROIC, you can attract a lot of dollars and the cost of capital that is attracted to your investment opportunity will be directly correlated with the investment return profile of that opportunity, right? So when we looked at the opportunity, we said, Hey, we think there was a really high return on invested capital play in this space, starting with batteries in our cut behind energy retailer in this Gentailer model, where we offset our short position on the retail side with the long position on the battery side, we build a vertically integrated battery company where we can install batteries at a lower landed cost than anybody that allows us to price our retailer at a really... In a really attractive way. We can acquire a lot of customers. We can take out costs through the whole part of the stack all the way from customer acquisition to install to fully landed cost. We can monetize the batteries better than anyone and dollars in dollars out like return on invested capital on a unlevered basis is really attractive and that hits the the venture cost of capital. Right? You then as the business gets more mature, you layer in additional sources of financing that have different cost of capital, that have, you know, different risk appetite and different part of the capital stack. And that's part of the strategy and that's something that we're doing. But if you look at the broader platform play, we have an opportunity we think to build one of the largest companies in the world. And it's not just distributed batteries in ERCOT behind a retailer. That's just our first business. And then we take that same technology stack. We can talk about the whole stack and the roadmap, and we apply that in the regulated markets. Right? In other international markets where you guys are from, Australia is an incredibly attractive battery market. There's a ton of European markets that are interesting. Japan is increasingly becoming interesting. Brazil and Mexico are increasingly becoming interesting. So we think there is a global energy technology platform to build.
00:26:13 · Zach Dell, Adam Miller
The return on invested capital, the like specific dollar returns of the incrementally invested dollar in the first thing are really high such that we can attract venture capital and we can capitalize the company really effectively, then we can get the flywheel going and then we can attract lower cost capital to scale the infrastructure and go after the larger platform play. [00:26:34] S2: You gave this kind of very compelling macro thesis of why America needs a new energy company. Now tell us why the approach that Base Power has taken is the approach to bridge this gap into what America needs, and maybe this is where we can go into product roadmap a little bit. [00:26:48] S0: Yeah. So let's start with the consumer, and then we'll zoom out a little bit. When it comes to the consumer, when I ask you what do you want in an electricity company, what answers are there other than affordable and reliable? You want your bill to go down and you want your light to stay on. There's no sexy electrons. Right? There's no like, oh, I, you know, I want my electrons from here. Like, some people care about like, oh, yeah, like solar's cool and wind is cool. But like, you want cheaper electrons. Right? You want you want the price of the commodity to go down and the reliability of the commodity to go up. [00:27:23] S2: I don't think we even know provider.