Sachin and Adam
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.
00:27:25 · Zach Dell
[00:27:25] S0: Right. Most people don't. And and there's a lot of people that think their electricity provider is Oncor. And Oncor is the transmission and distribution service provider, the TDSP. They run the poles and the wires. They do not sell you electricity. They cannot. They're they're legally not allowed to. Right? So, you know, people just don't understand this because why would they? Today or to date, this has been a commodity market. Right? It's like someone just sells me the thing and, know, they don't... Because there's not a lot of margin there and not a lot of opportunity, it hasn't attracted great talent, they haven't been able to differentiate, but we show up with a new model and we say, hey, we're actually gonna develop technology to change our cost structure. And because our cost structure is lower, we can actually give you a discount on this commodity. We can sell it less for less and we can make it more reliable. And we can make it more reliable through this technology that we're gonna put on your home. And so that allows us to bring to market what we call an IQ test product, where if you don't sign up, you fail the IQ test. Right? Because it's such a no brainer. It's like, of course I wanna save money and of course I also wanna back up my home from from from power outages. Like this is a total IQ test. Right? And that's kind of where we are in the product today is because of this cost advantage that we've been able to develop through the vertical integration and, know, the factory and the manufacturing and the fact that we do the installs ourselves and we have our own consumer brand and we don't need to go buy leads from someone and, we can generate those leads really effectively because we have a great brand and we have great reviews and we have five stars on, you know, all of the the platforms and we have, you know, almost half of our customers are coming from word-of-mouth and referrals. Like these are things that other companies in the space don't have, which allow us to just flow through that cost advantage to a better price for the customer. And that's a huge huge advantage. And then when you take a step back, like what does that actually mean system wide? You know, when it comes to to to power, there's really only four things. Right?
00:29:19 · Zach Dell
You have to make it, you have to move it because it's not used where it's made, you have to store it because it's not used when it's made, and you have to sell it. That's it. Those are the four things. Right? And so we said, okay, well let's start with store and sell, right? Let's start with batteries and retail electricity, but we wanna make and we wanna move. And when you do all four of those things, you can take the technology that you build across those four things and you can bring them to market in different ways. So we'll start by bringing them to market in the competitive retail markets where we can just show up and we can be an energy retailer. So we kind of subtly announced on X recently that we got our retail license or it's it's actually called an Ares not a retailer, in Illinois. So that'll be our next market. And we'll bring batteries there too. And so, you know, make, move, store and sell, right? You can take the technology across all four and you can bring them to market in the competitive markets in The US. You can go to The UK, you can go to Australia, you go to Germany, you know, Japan is starting to de re... Regulate. Brazil is starting to de regulate. Right? So you can take, you know, that stack to all of these deregulated markets. But this stack is incredibly valued to regulated utilities. Right? The vertically integrated investor owned regulated utilities. And you're seeing this already. We have announced, I think five publicly deals with regulated utilities where we're building them power plants. We're taking this technology stack. And right now we're taking, you know, parts of, you know, we're taking mostly store and parts of cell, software parts, and we're providing that to the utility in the form of a power plant. We build the utility distributed power plant. Well, soon we'll be able to add parts of move and make to that offering that we can sell utilities and to the things that we can sell to counterparties in the, deregulated markets. So, or the competitive markets I should say. So really we think about it as this kind of like two headed monster on business model that sits on top of one cohesive technology roadmap. And then, you know, and I think about things very much in this kind of like top down way where the company is actually structured functionally, not in terms of products, right?