CleanTechies Podcast

#125 Revolutionizing Heating and Cooling with Smart Radiators, Facing Rejection, & Building Hardware like Software w/ Marshall Cox (Kelvin)

September 27, 2023 Silas MΓ€hner (CT Headhunter) & Somil Aggarwal (CT PM & Investor) Season 1 Episode 125
#125 Revolutionizing Heating and Cooling with Smart Radiators, Facing Rejection, & Building Hardware like Software w/ Marshall Cox (Kelvin)
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CleanTechies Podcast
#125 Revolutionizing Heating and Cooling with Smart Radiators, Facing Rejection, & Building Hardware like Software w/ Marshall Cox (Kelvin)
Sep 27, 2023 Season 1 Episode 125
Silas MΓ€hner (CT Headhunter) & Somil Aggarwal (CT PM & Investor)

In this episode, Somil Aggarwal (@somilagg) interviews Marshall Cox about his journey into being a climate tech founder, the impact of getting a Ph.D. on his journey, how he faced rejection, and how to build hardware like software.

Enjoy the Episode! 🌎

πŸ“Ί πŸ‘€ Prefer to watch: subscribe on YouTube.

πŸ“« Interested in written summaries and takeaways from the episode? Subscribe to the newsletter.

Want to be part of the community and engage further? Check out the Slack Channel. https://tinyurl.com/mwkn8zk5

Key Topics:

  • 6:00 Impact of PhD on Entrepreneurship
  • 8:32 Radiators vs. smart radiators
  • 13:59 Balancing impact vs. bottom-line
  • 15:30 Fundraising History
  • 18:27 Facing rejection
  • 27:06 New vision for Kelvin & hurdles for implementation
  • 38:56 Expanding into new hardware products
  • 43:13 How to make building in hardware like building in software
  • 44:59 Advice for founders

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Show Notes Transcript Chapter Markers

In this episode, Somil Aggarwal (@somilagg) interviews Marshall Cox about his journey into being a climate tech founder, the impact of getting a Ph.D. on his journey, how he faced rejection, and how to build hardware like software.

Enjoy the Episode! 🌎

πŸ“Ί πŸ‘€ Prefer to watch: subscribe on YouTube.

πŸ“« Interested in written summaries and takeaways from the episode? Subscribe to the newsletter.

Want to be part of the community and engage further? Check out the Slack Channel. https://tinyurl.com/mwkn8zk5

Key Topics:

  • 6:00 Impact of PhD on Entrepreneurship
  • 8:32 Radiators vs. smart radiators
  • 13:59 Balancing impact vs. bottom-line
  • 15:30 Fundraising History
  • 18:27 Facing rejection
  • 27:06 New vision for Kelvin & hurdles for implementation
  • 38:56 Expanding into new hardware products
  • 43:13 How to make building in hardware like building in software
  • 44:59 Advice for founders

 -----
 Links: 

 -----
You might enjoy:

Support the Show.

Somil Aggarwal:

Welcome back to the Clean Techies podcast, where we interview climate tech founders and VCs to discuss all things building and investing to solve the biggest challenge of our generation climate change. Today I had the chance to speak with Kelvin formerly called Radiator Labs with CEO Marshall Cox about their innovative heating and cooling technology. The inspiration was first from Marshall's twin brother, who had troubles with heating when he first came to visit. Legacy buildings with radiator heating often lack centralized cooling, a challenge that can be really prevalent in summer months. To address this issue, kelvin has developed a bespoke heat pump that replaces room air conditioners, works with a separate thermal battery and shifts heating and cooling to 80% electricity in these legacy buildings. This is called hybrid electrification, since now the heat pump runs on electricity. After that, radiator Labs knew it was time to rebrand to Kelvin. It's a really beautiful example of how to both build an innovative solution that first not only helps the user but also provides value at the stakeholders bottom line.

Somil Aggarwal:

Generally speaking, a great episode. Let us know your favorite parts when you finish listening and enjoy the episode. Welcome to the show, marshall. How are you?

Marshall Cox:

I'm great, it's great to be here. Thanks for having me. How are?

Somil Aggarwal:

you Good. I really appreciate you taking the time. We're super excited to have you on the show. The technology you're working on is pretty unique. I think the area that you focus on in terms of the overall sub-segment of the problem is an example of when someone's tackling a real problem that exists, rather than tacking on a solution to something that's already been optimized. I would love to just get straight into it. Could you tell me a little bit about yourself, how you got to where you are and what you're doing?

Marshall Cox:

Absolutely Overarchantly. I think I'm a big nerd. I got my undergraduate in material science and then my PhD in electrical engineering. I worked on a completely different technology set. If you're familiar with quantum dot well, qled TVs, which are a quantum dot LED I'm on all those patents. As I was getting my doctorate at Columbia, I lived in this hellhole apartment, super hot. The true story is I have a twin brother who's a professional ballet dancer. He was living on my floor because he was on a Broadway show a new Broadway show. He complained incessantly. I built this foil-faced bubble wrap duct tape monstrosity with a fan that tried to control the temperature in my apartment. It worked really well. He stopped complaining. I went to Columbia facilities, patented it through Columbia Tech Ventures. The rest is history. I guess there's a lot between then and now, but that was the origin of the company.

Somil Aggarwal:

It's really cool to hear a very natural beginning to the story From then. Was that the vision of okay, this is what I want to do? Did you spend some time thinking about? I know you had it got a PhD, for example. How did that overall factor into your journey?

Marshall Cox:

Yeah, I spent a lot of time thinking about it. I was pretty sure I had a job before I got my. I'm back to school. That's where I did all that research on the TV stuff or the display stuff. I think that I found another company as well. There's a lot of entrepreneurship going on in that department I was working in. I really wanted to be. Sorry, I'm jumping around a little bit.

Marshall Cox:

Part of my research was solar cells organic solar cells. I've always been really focused on environmental technologies. I really wanted to make an impact. As I did some research on what an effective radiator cover energy efficiency solution could do, it became very clear that that was the way to go if I wanted to make a real-world impact quickly. In fact, the launch of what used to be called Radar Elapsed and now it's called Kelvin was precipitated by competing in and winning the MIT Clean Energy Prize in 2012. I think that one of the biggest reasons we won that was because they also believed we could have a big impact quickly because it's a relatively simple technology. That really helped me decide that Radar Elapsed, slash Kelvin was the way to go.

Silas Mahner:

Hey there, quick break to remind any founders or VCs listening. If you are looking for deal flow, seeking to raise funding, looking for partners to help service your needs, or perhaps you're looking for corporate investment partners, feel free to reach out to us through our Slack channel, which can be found in the description. Because we meet a lot of people in this space, we set aside time each week to make introductions to the various people that we encounter. This is something we do free of charge in order to help these incredible companies solving climate change to scale. Looking forward to hearing from you in the Slack channel.

Somil Aggarwal:

I've seen a lot of different founders who come out of these competitions that put them in a good position in terms of validating their technology, validating the novelty like that competition. How did you feel about how it validated? Now, looking back yourself as a company, there's a difference between being a great scientific innovation and being a great company.

Marshall Cox:

Yeah, exactly, I think that so long story short it helped enormously. The MIT Clean Energy Prize is the biggest I'd say one of the, if not the most prestigious clean energy competitions you can take part in and win. Obviously, looking out of a very engineering focused program and having a stamp of approval from a very business oriented construct like the MIT Clean Energy Prize, it gave me that. It gave people who were looking at us the confidence that this is not just a science project. This could also have real world potential.

Somil Aggarwal:

And tapping, lastly, into a little bit more of the scientific background, we see a lot of founders the traditional mold of going through an MBA or a traditional accelerator program that gears them up to lead a business. Climate especially has a relatively large subset of deep tech professionals and people who are working at the leading edge to get into the field. How do you feel as though your education with the PhD helped you throughout this journey or maybe, interestingly here, did it hurt you at any point in time?

Marshall Cox:

Yeah, it definitely did both. So if anybody who gets a PhD, I think the one thing you learn is one thing you are expert at, if anything is how to learn. You are forced to go from point A to point B, however arduous the journey, and figure out how to do it. So I think that I've certainly gained that ability, but I am also very prone to oversharing and to going into discussing amounts of detail that no one wants to hear. So back then, I think if you asked me the same question, I'd be like oh, I'm the best situation to do it.

Marshall Cox:

We don't need business people, and I would advise anybody starting a company today to definitely get a business person in from day one. It's not just the education they've gotten as part of business. Ideally, they have experience, they look at things differently and those perspectives are critically important. Today, when I think about the company versus back then, it's all about sales. Right, it's always all about sales, and I didn't know that at the very beginning. I was like, no, we just approve it and then the sales will come. Absolutely not. You just need to always sell and then everything else will follow that.

Somil Aggarwal:

Yeah, that reminds me of I believe it was back in 2020, Elon Musk came out and said I wouldn't hire an MBA. I sort of against that sort of education and background, but there is a lot of validity in seasoned operators and understanding how to grow a business from previous experience and knowing sort of the trials and tribulations of commercialization. So I definitely resonate with you there, especially in venture capital, you see the different types of founding teams. You almost always need either an industry veteran or someone who's generally specialized in how to grow a technology. So that's super great to hear that from your perspective as well. Yeah, I totally agree.

Marshall Cox:

And to refine my answer, I agree precisely with you. It's not necessarily someone with a business degree. Someone who has experience is the most important thing you could have in your founding team.

Somil Aggarwal:

Yeah, definitely, and so I want to pivot quickly into you know at just a high level. We'll read for the audience. For those who don't know, could you just break down to me in simple words what is a radiator and also what makes a smart radiator?

Marshall Cox:

Sure. So most buildings before certainly almost all of them before World War II and most of the buildings before built before 1916, 70 even have this form of heating, called radiator heat. And newer buildings have ducted, you know, hot air furnaces, blah, blah, blah, blah. The back then we didn't really have good water pumps and we well, we didn't have good water pumps, we didn't have good, good fans, and so the only way to get really old buildings heated was to boil water in the basement, let that steam flow through the pipes and heat up the rooms. And then we invented water pumps, and really good ones, in World War II, and then we started piping water around buildings.

Marshall Cox:

And so any radiator is just something that sits in a building room that provides heat during cold weather. That's as all it is. A smart radiator is a radiator that can control how much heat gets transferred to the room at that point. So it's not just, you know, a central system turning on and pumps turning on. The radiator itself in each room can say I'm going to give heat to this room or I'm not going to give heat to this room. That's how I had to find it.

Silas Mahner:

Hey, there are you building a climate tech business and looking for very specialized talent? Consider reaching out to our sponsors, next Wave Partners. Next Wave are experts in talent acquisition, recruitment and retention across the climate tech, renewables and ESG spaces globally. So if your team is growing or you're looking to make a career change yourself, feel free to reach out to Next Wave at Next-WavePartnerscom, or reach out to one of their consultants directly via their LinkedIn page.

Somil Aggarwal:

And so the improvements are those led by innovations and sensors, or sort of an integrated IoT system, or what allows you to do that.

Marshall Cox:

So from Calvin's perspective, it's not there's no rocket science here I'd say the most enabling aspect for I mean certainly in terms of me starting the company if you've ever heard of Arduino, you know low cost, easily accessible electronics. That's what allowed me to develop the system on my own without, you know, 10 more years in electronics experience. The enabling aspect, I think, for a lot of these smart systems out in the world today is IoT and, more specifically, radio technology that is low cost, accessible as well. So being able to get the data from the system to the cloud and, you know, do work on that data and then connect to other things to has really enabled you know smart anything.

Somil Aggarwal:

And so the end goal of an improvement like this, would you say it's quantified as you know energy reduction, or what are you really aiming for in terms of your ROI on investment in this new technology?

Marshall Cox:

So Calvin has two, I'd say two, pillars of technology. The first is this this this radiator, smart radiator product. The goal there is to take a building that is relatively inefficient because radiator heated buildings, by virtue of how they work, are relatively inefficient in heating and increase the efficiency of those buildings as much as possible. So that's that first pillar of technology and I can talk about the other one, and I don't know if you want to go there yet.

Somil Aggarwal:

Yeah, we'd love to hear.

Marshall Cox:

Okay. So when you think about older buildings, they have an efficiency problem because, you know, radiator heat is not that great in terms of it's great for a lot of reasons. It's not maximized in terms of efficiency. But these old buildings also have a huge barrier in context of path to decarbonization how do you electrify these buildings? When you think about, when you hear about heat pumps and electrification, most of that work is being done in small and single family buildings, because very large, older buildings without ductwork are extraordinarily hard to electrify. And in fact, if you think about New York City, which is a big city, has a lot of really old buildings. One building of the type I'm talking about has been electrified and it is an NYU dorm. They do not have the barrier of money and they actually moved the students out for two and a half years to do the work. So these kind of retrofits for this building segment are impossibly hard to do not impossibly, but very expensive and the payback doesn't work.

Marshall Cox:

I'm going to just go out. I'm going to talk about four seconds very quickly. The market barriers here. So cost is a barrier and that's a huge barrier for this market because most of these bigger, older buildings are operated as businesses.

Marshall Cox:

Right, it's not a single family. They're not thinking about being green, it's somebody who's fiduciarily responsible for improving the bottom line. So if transitioning to a decarbonized state costs them more in any way, they're pretty much not going to do it. So even if the incentives you know, if, even if there were trillions of dollars in incentives and the implementation costs let's think about this like this type of the closed situation I am able to walk into a big building and I cast a spell and magically electrify it with the best technology on earth overnight. That building would spend more on heating the following winter because electricity is so much more expensive than natural gas. So there's all these barriers to making it happen, and even if it were free, people still wouldn't do it because it costs so much. And so the other pillar of what Kelvin is doing is we've developed a pathway to decarbonization that overcomes these cost barriers, as a primary focus of overcoming the barriers to electrification.

Somil Aggarwal:

You talked about something that I find really interesting, that a lot of seasoned entrepreneurs seem to bring up, especially in this space, which is you can have an impact side of your business, but it's more important to know how you're helping your stakeholders bottom line Throughout your entrepreneurial journey. I'm sure you had to balance how much you talked about the decarbonization sustainability side of things versus the real profit hard hitting impact. Could you break that down in terms of who the primary audiences are for either side?

Marshall Cox:

Yeah. So you know, if you think about who wants us to decarbonize as policymakers, it's humans, it's sometimes utilities, but it's really the policy folks who are saying like this needs to be done because we need to decarbonize. For you know, I think it is really an altruistic like I want my kid to live in a world that's not choked with carbon On the building side. It's far removed from that right Again, single family, like co-ops and condos even they live where they operate, so there's more openness to spending more money for something that makes them feel better and makes them confident that they're doing the right thing. But most of the buildings are operated like businesses and they're not going to do something that does not have immediate positive returns for them, and that's not their fault. It's how we're set up right. It's how businesses are set up. So to really enable a transformation, you have to make that part for them a no-brainer.

Somil Aggarwal:

And I think that factors in a really important way in terms of how you're selling your message right. Like you said, people and policy might be more willing to hear that kind of a message because of their incentives. I think this also extends to fundraising, and I think Calvin at formerly Raider Labs has a really interesting fundraising history. To my knowledge, you've raised from the Schmidt Family Foundation, the partnership for New York City, but you've also raised from traditional private-style funds such as GP Ventures and the Doormal Fund. Could you break down for me if there was a real difference in your fundraising story between these different capital-giving groups, or if it was relatively the same, and what other entrepreneurs could learn about how to navigate their language and their mission?

Marshall Cox:

Yeah, I mean the fundraising history of the company has been a little rough right. I found the company in 2012. I graduated from Columbia in 2013. And we got some really great early investors micro-VCs who are fantastic still involved to this day. They're the best.

Marshall Cox:

But we spoke to a lot of people and there are only a few people who believed in hardware and who believed that radiators were an okay thing to invest in. Clean tech ding. Half the investors don't care Radiators. I had an investor one time and I won't say their name, but they were like we were at this trade show and this guy walked by and he was a very well-known person and he looked at us and he went radiators and kept walking. Those are hard things to get money for.

Marshall Cox:

So it took many years to do this, and I'll throw in there that one of the lifelines that kept the company afloat is government grants. You know National Science Foundation, sbir. That bridged us a very long time and it took a long time for us to make this happen because we had to get certified. We're new technology in real estate putting things in people's homes for heating. That's like a pretty mission-critical aspect of people's lives. So we had to go through many rounds of certification and the ultimate being, you know, in part, put into the New York State Technical Resource Manual, which is like what the YouTube you can't get for the certification. That happened in December 2019, which was not good timing for us to be ready for primetime.

Marshall Cox:

So this year, finally, over the past 10 years, it's been mostly smaller groups, micro-vcs, and no proper VCs were interested, and then, in 2000, we started talking about electrification and really developing some really exciting things, I think, and that allowed us to get the attention of these larger funds. And, you know, 2015, earlier this year, took the plunge, really fought for us. The folks in there, christian Hernandez, who fought for us, are champions in my book, for sure, and great people to work with. But it is really, you know, you have to find the people who care about what you're doing, and sometimes what you're doing may not be as sexy as crypto or right. There's a number of buzzwords I can rattle off right now that'll make sense, but it really is who.

Somil Aggarwal:

You have to know who you're talking to and know what they care about yeah, on the investment side, it takes a lot of discipline to be able to look at every opportunity as its own and not conform to former bias. I'm curious, as a founder, how did you react to this well-known name coming across and sort of dismissing your technology?

Marshall Cox:

I mean it wasn't surprising at that point, right Like it had happened before. It happened many times since. Then it will happen again. Some people just don't care about the small. We get put in boxes all the time. Right, Everybody puts things in boxes. And if you, as an investor, the box you want to see is every man, woman, child on earth, right Like if you want to sell software, for instance, right Like, you're not going to care about anything that's outside that box, so it's not surprising. I mean it's hurtful to have somebody be so dismissive to your face, but that's also not a vanishingly rare act.

Somil Aggarwal:

Assuming then you don't have some of the signals or things to pay attention to, like a, Like a software founder or someone who's applying to a broader audience. I mean, you know, I'm curious as to what signals you might follow to know that you're on track right. Like you said, you're probably going through a pretty unorthodox fundraising journey navigating government grants, navigating all these incentives. It might be hard to understand it. If you're being successful, especially as a founder, if you're being successful in your fundraise, what did you use to keep yourself on track and get yourself to the place you are now?

Marshall Cox:

Just as a clarifying question do you mean like process, or do you mean like knowing who to talk to?

Somil Aggarwal:

I think you know, it's sort of maybe like a philosophical side to the process, which is, you know, a lot of the things founders don't have the answers to are the intangibles, which is, when I'm being told no in a lot of different directions. How do I know where to go Right? And so I guess I'm wondering for you when you were dealing with that, you know people don't want to talk about climate, then people don't want to talk about radiators how did you still stick to your goal and your plan?

Marshall Cox:

Yeah, I think it's all about networking the people you confide in and who you trust. To be honest, if I had to distill it down and there were many times that, like I, lost a lot of faith in what we were doing and needed to speak to people and you need to get those people early on in your journey. So it could be a co-founder who has experience. Right. For me it was, honestly.

Marshall Cox:

My co-founder is great. He's a professor at Columbia, he's not full-time and he has gone through this stuff a lot. He has decades of experience talking down his grad students who are facing different but, I guess, philosophically similar questions. And then one of our very early investors, Urbanus, who is now Thorsphere, Sean Abramson, has been that like trusted advisor for almost a decade and this is a person who has vast experience, is exposed to every, knows everybody, knows everything and is able to, as a result, put it in perspective that I am not able to put it in. He sees it from the outside and can really help you find that path. I think that's a super important thing to have.

Somil Aggarwal:

Have you ever gone through a relationship that's gone sour with an advisor or a person that you were trusting along the way?

Marshall Cox:

I don't think so. No, because, first of all, I guess it's hard to get into a contractual agreement with somebody that you don't like or don't trust. I think that's one of the benefits of going through a long due diligence process with most investors. So if you've gone through a diligence process and then it ends badly, like whoa, you missed something real major in that diligence process, like on both sides, right. So I don't think there's any group that we've left without being amicable with which I maybe is special, I'd say if you looked at the mission of Kelvin, one of the top, one of the number one things, is honesty and transparency, and I think that's one of the things that has been a positive for my PhD and a negative right Like in science transparency. If you're not being transparent, you have failed already, and I brought that to what I do now and I think it's helped us a lot.

Somil Aggarwal:

I think there's a super unique perspective. I find that you know I have a background in research myself as well. I think there's a lot of parallels between, like operating excellence in a research lab and getting your goals, staying on track, navigating ambiguity All of that's relevant between you know, academia and operating a business. But I think there is a real difference between how do you navigate profitability and I just want to succeed versus in academia. I think it's okay. I can't just succeed, I have to succeed in the right way, right? Otherwise maybe a peer review journal might catch me or a colleague might call me out or something like that, right? I think some of the privacy and competitive advantage things about running a business make it easier to be a little more cutthroat. Do you find that your vision is shared amongst other entrepreneurs that you talked to in terms of maybe maintaining some honesty and transparency, or is it something that you find a lot of friction in?

Marshall Cox:

I think that changes depending on what industry you're in. There's certainly cutthroat folks in the real estate industry. We don't really talk to the people who are cutthroat or real estate at arm's length. I guess that's not a real answer to what you're asking. But yeah, there's a lot of similarities. Right, you're working on a paper.

Marshall Cox:

I was never working on a paper where I had another group racing to get a publication in nature. That wasn't the kind of stuff I was working on. But you see a lot of little depth between competitive research groups where you might get scooped or whatever. It's similar in business, right, you play your cards close to your chest because if your developing is really cool and someone else might be close to it, they'll be in stealth mode or whatever, like there's different terminology for it, but it's similar. But there are certainly people who are very cutthroat and they generally do not rise to the top, I'd say, because if you're cutthroat and you do stuff that's not great, no one's going to work with you again. Maybe in some small niche applications that works great and it certainly is more effective when you're a big, big company, right, but that's not startup world. We don't see too much of that and when we do, we just stay away.

Somil Aggarwal:

Do you think operating a hardware business factors into that? I'm sure, especially since you're grounded in more results-driven metrics with your technology, it might be easier to maintain that honesty.

Marshall Cox:

Yeah, that's true, and obviously there's the whole patent. That adds a bit of. I work with a lot of groups today different other hardware-focused companies and we could be. You could consider us competitive in a way, but I still rarely sign NDAs unless I really think it's important because it's all there. You can buy our product and you can take it apart. What are you going to do? Are you going to make the same thing and then get sued by us? No, the fact that a hardware has intellectual property typically, I think, allows you to be a little more open with people.

Somil Aggarwal:

Definitely and in no way a good segue. I was actually really curious. So you mentioned that you were previously called radiator labs and now called Kelvin, maybe similarly philosophically. Why the change?

Marshall Cox:

Yeah, so this gets along, this gets towards the decarbonization angle of our business. We changed the name because we're really moving beyond radators and we didn't, and in the way that that investor was like radiators, like we just don't need it anymore, Right, Like. I think investors also thought that in their heads too. So we wanted to remove ourselves from a very narrow view, not only for the perspective of customers and investors, but because we are doing very different things now internally for our own vision. That's why we changed the name. I can go into what that new vision is if you'd like.

Somil Aggarwal:

I'd love to hear it.

Marshall Cox:

Okay, awesome. So I talked about the barriers to electrification in this market earlier and again. It's cost, and so we've seen all these technologies out there. The COSI, which is the name of our smart radiator cover, one of the things we launched last year. Because, a people don't like spending money and, b a big portion of our market is low income who don't have any money, we launched our subscription model where we financed, we have enough data showing how well our system works and we have financial partners who will finance the deployment of that technology and get paid back over time, and so very low subscription costs to buildings and then the IRA tax credits all the utility incentives allow this to happen, and that's great.

Marshall Cox:

Decarbonization electrification of heating and heating is one of the biggest, if not the biggest, contributor for CO2 from any building is really expensive, and heat pumps aren't expensive. It's the cost of installing them, running new electric, drilling a hole through the wall, et cetera, and the discomfort for the tenants that comes along with that. So we realized there's an opportunity here. Cold climate heat pumps are more expensive, but not super expensive. But they need 220 volts typically. They're really invasive to install and you're spending all this money to enable that heat pump to work in the 15 to 20% of the coldest weather out there In our buildings.

Marshall Cox:

They have radiators, they have boilers, so what we're doing is we're saying let's use that, let's use carbon fuel during the coldest weather, when it actually makes sense to do that, and let's take people's crappy air conditioner out of their window with their sleeve and replace it with a commodity window or sleeve heat pump that is very low cost, so that we can run those when the weather permits, which is 75% of the winter, and then flex back to the existing system for the last 25. There's a few things embedded in this that are uniquely enabling, and I want to get in there, but I want to make sure you're with me. So far, okay, yeah definitely with you there.

Somil Aggarwal:

I think one of the things that I one quick question I want to ask on that is you know, there's a lot of seemingly great advantages to this. Who, if you had to think about like you know, I'm looking at technology seemingly very, you know, innovative and a lot of clear bottom line incentives who are the biggest resistances to putting and innovating on this kind of technology?

Marshall Cox:

In terms of the customer.

Somil Aggarwal:

Yeah, it could be. You know, whichever stakeholder sort of gets in your way of putting this technology out there.

Marshall Cox:

It's the building owner, it's the person who pays for fuel, the person who needs a return on investment for things they do or they won't do it. Oh sorry, Glenn.

Marshall Cox:

I was going to say. I mentioned earlier that businesses won't do anything if things cost money to them. So there's two angles of that. Right, there's upfront investment, which is a huge barrier, particularly for loan communities that don't necessarily have money in the bank to pay for things. And then ongoing operational costs. Right, like, if you're saving a ton of operation costs, you can bear some upfront costs. But for electrification there's a huge upfront cost and there's operational cost increases, right. So the payback is infinite and the goal is to overcome that. And so the barrier is always the building owner, who pays for fuel and will pay for the implementation, if that makes sense.

Somil Aggarwal:

Yeah, definitely makes sense, and the thing. So the thing that I just wanted to ask, too, is how did you go about, especially in the beginning, convincing them and showing your value? What was the language that you use and the angle that you took?

Marshall Cox:

For the, for the cozy, for the base technology or for electrification Electrification. So we're doing that now and we're deploying the first technology, the first platforms, this this fall, and one of them is a DAE grant from the Department of Energy through National Grid and one of them is partially funded by NYSERDA and CONDAT. So it's really getting the utilities and the Department of Energy and the policy make the policy stakeholders interested and partially funding it to de-risk the projects for those, those end customers. And then, once we de-risk it and we show what we can do, then we should be able to deploy it commercially at scale and and branching off that to finish the description of what our solution is. So by by taking up people's crappy recognition and putting in a standard heat pump, we can shift about 75% of the heating from from carbon-based fuel to non, to to high efficiency electric heat. Great, that's a huge win, right? Because one of the barriers this building electrifying is that they have boilers and they're not going to. This is called. This is a form of a lock-in problem. A building with a boiler paid a lot of money for that boiler and they're not going to replace it until it dies. So typically about three to 5% of any any building is considering even even eligible to consider an upgrade every year. That's a big problem for you know, companies that self heat pumps Compounding that is called a break fix problem. When a boiler breaks, it's almost always in the middle of winter and so when it, when it breaks and their tenants aren't going to pay rent because they have heat, they freak out and they're like, oh my God, get a new boiler in there right now. They do not care about an upgrade and that's a rational decision for them, right? So locking in another 20 years of boiler is disastrous. So from our perspective, we're like look, let's work with the boiler in the building, let's rip out these crappy air conditioners, let's put it in a heat pump, let's decovern it as 75%. Huge win, right? Awesome. So that's step one.

Marshall Cox:

Step two is I mentioned that they won't do anything if their cost of operation increase. If it was just doing that, their heating costs will increase because electricity is so expensive. So we actually couple a thermal battery to the, to the, to the heat pump, and this is this is our, this is our IP, this idea here, and by doing that a, we size the batteries that we can take part in every demand response event that utilities operate. And right now the utility demand response events for that load that we can now control will 100% allow us to finance the deployment. So we can go. We can go to a building, literally say we're going to install this majority electrification solution and it does. It costs you $0. Right, awesome, that's great. And I mentioned earlier also again I'll mention this again that if you cost of operation increase, they're still not going to do it.

Marshall Cox:

So we have this big battery that can, that can participate in all the demand response, which is mostly air conditioning in the summer. Right now, what do you do with that battery when it's not doing that four hour peak shift? Well, you can take the majority of the of the electricity, electrical consumption of that heat pump and shift it into the middle of the night, when electricity is half as much as is during the day, right, and then store that energy and then distribute it during the day when, when peak electricity prices would make it less, you know, totally unprofitable, and this reduces your cost of heating below that of natural gas. So now we can go into building. We're going to say we're going to play with technology, it's going to be free to you and you're, you're going to spend less heating the following winter, sound good. And I think everyone's going to be like, yeah, that sounds good. And the tenant, I think you. This is one of the things you want to talk about A lot of times decarbonization, energy efficiency, blah, blah, blah has this thing called the split incentive, where you have to make someone experience pain to to make progress on these fronts.

Marshall Cox:

And in this case that's not true at all. We're, we're like, if you think about, you've lived in a building with a radiator. You went right, like the. The it's super uncomfortable, it sucks, so we're giving them control, we're giving the thermostat. You can do, you know, set setbacks. You can do day, night settings, it's all. The it's programmable. It's basically an S thermostat for radiators, right, so they're super comfortable.

Marshall Cox:

And that energy shifts. It's called a time of use optimization. We can shift the energy consumption from middle of the day to the night in the summer, when the tenant pays for your conditioning. So they're saving 30% on their, like other conditions cost as well. So everybody here benefits, right, and by removing those greatest frictions financial we can actually incentivize these buildings to, to, to make this switch, because why wouldn't they.

Marshall Cox:

And then I know I've been talking for a long time. The last step, step three, is okay, great. Now we're deployed with hyper electrification. What's the next step? What happens to the boiler dies? Well, we've been deployed in this building. We know everything about the thermodynamics in the building so we can match it exactly to the the right full electrification solution and we're running the boilers right.

Marshall Cox:

If you say, oh, your boiler died, remember that that report we told you about what your building should do when the boiler dies. Well, that happened. This is that report, up to date. This is a technology you should buy. We know exactly what size system because we know exactly what you're building means for heat. Here's the up to date, up to the second incentives available. Here's a partner that that we work with that can do it.

Marshall Cox:

Press this button and you can make this transition and we've a backup heating system in every room of your building, so there's no longer this, this lack of heat emergency anymore. So we get, we buy the time for them to make that transition. And then, even above that, we've designed our heat pumps in each unit to be able to integrate with whatever that future full electrification solution is, so you can run a cold climate heat pump refrigerant line into the unit that's already installed and it will hook it up. So we've already installed half the unit and the thermal battery we've installed is still functional. So that value proposition persists beyond that full electrification solution. So it's a three step transition. Right, let's decarbonize now. We'll do it for no cost, we'll save you money, and then, when the full electrification solution comes, boom. It's way less expensive. We know exactly what to do. It's not an emergency. The transition is going to be painless. That's the goal.

Somil Aggarwal:

Yeah, and you mentioned talking for a long time. I think the more you talk, the more you convince the next person listening to go out and get a smart radiator, so I think it's definitely all good there. It's really interesting to hear about both aiming to do the now and set up for the future in terms of building out the infrastructure that allows for future gains. I think that's a really smart way to go about it. And also, where a lot of product market fit it's different in hardware, but a lot of where it's found, which is you have someone changing the behavior of a system, the behavior and the way that people think about technologies, and then you have this new technology that taps on that tax on to it and builds upon the fact that you've already built the infrastructure, for example, for greater electrification efficiencies.

Somil Aggarwal:

Right, and I think that relates a lot to software, especially where a lot of people are talking about. Well, you can't software your way to a solution. However, there is a lot of, for example, energy on demand efficiencies, about when do you modulate energy, how do you manage it, how do you send it If, for example, not this business model, but how do you send it to the grid or other sources. All of that's done through calculations and automation that is achievable through software, and so it's great to hear about that component of the technology. I know you mentioned it very briefly, but I wanted to highlight that because I think that's a key example of how people can think about hardware solutions in terms of their tangible benefits and the way that they're actually going about it. I found that to be really interesting.

Marshall Cox:

Yeah, totally, and you spoke to logical learning previously, so it is a big part of our business. By the way, grid services will be the funding method for this deployment. We're able to store a huge amount of energy in each building, in each room. I think my dissimath if we deployed in 20% of New York City's residential housing, we'd be able to completely supplant the 2.5 gigawatt peak, peak or plant capacity in New York City. They wouldn't need it anymore, literally. So grid services huge part of what we're doing and the implications could be massive.

Somil Aggarwal:

Definitely, and your opinion on that. One of the things that you talked about is how you tacked on a thermal I believe it was at a thermal battery onto the solution as well. I'm not a hardware expert, but to me that sounds like okay. You took your existing technology and you added a dimension and you make it sound super simple, but I figure there's something a lot more complex going on there. So how do you decide to just at a high level for the listeners who might be interested in building hardware, how to think about hardware? How do you go about expanding your solution one step further?

Marshall Cox:

Yeah, I think it was a natural transition for us. A lot of what we do with just the radiators thermal mass, right. So we because we could store energy inside of our enclosure. And radiators are huge hunks of metal, right, they have pretty substantial thermal mass. We're able to do things like peak shaving right. We can charge up a building with gas and store the energy and release it later. And that's actually valuable to folks like National Grid who have constrained gas pipelines and have real problems on peak days.

Marshall Cox:

So we started out doing DR for them and then we're thinking well, you know once that backward thermal storage at the point of use is what we describe it and it's enormously enabling.

Marshall Cox:

First of all, you don't have to have a centralized huge vat of something or you know enormous battery in your basement. Thermal storage at the point of use is cheap and easy to work with and extremely efficient. If you think about the round trip efficiency of a battery, it's about 85%, 95%. You're really really good at it. The round trip efficiency of a thermal battery is 100% when it's stored at the point of use, because any leaked energy into the room is conditioned. Right, it's conditioning energy and you can even increase that efficiency above 100% if you do stuff like ice storage, like you move with cooling into the middle of the night when it's more efficient. So, yeah, we really like it's a natural transition from what we were doing with COSYs and radiators to the world of electrification and I think it's one of the, it was one of the single links to make it not only feasible and avoid the power grid disaster scenarios that a full electrification of a city like New York would result in, while generating revenues through that flexibility.

Somil Aggarwal:

So if I, you know, just to you know, help clarify my understanding and also for the audience, it was a natural transition, not only in terms of what you needed, but also what would provide greater value. Is it especially in operating in hardware? Do you think that's commonly the case, where, if you're trying to build upon your solution, there's often a quick answer, or do you think this is sort of a unique situation?

Marshall Cox:

Well, it wasn't necessarily a quick answer. It was obvious only in retrospect, right, like we had to think about it a lot. But, yeah, I mean, when you work on a problem, ultimately you're going to figure out, you are going to start getting an understanding of what a showstopper is, what are enabling aspects, and sometimes those things will be easy and sometimes those things will be very, very hard, right? So, yeah, I think we're in a special situation where this case, it was relatively easy and aligned entirely with our IP set. So, yeah, this might not be the case every time, but I think often there are simple solutions. They might not be the best solution, right? Like the best solution is a fusion-powered cold-climbing heat, you know, like some greatly ridiculous thing, but it's the best of what we have today. And you have to, I'd say, like, in general I believe this wholeheartedly you have to assign a lot of value to simplicity.

Somil Aggarwal:

Yeah, and I think you, like you said, sometimes, especially with hardware, especially with the time it takes to get to market and get to a full-fledged product, there's a lot of consideration of does this move the needle far enough for it to be worth the investment? I think compared to software investments, unfortunately, that's really put a heavy lift on hardware. Whereas in software you can iterate to match and find that product market fit really quickly, in hardware I think it's put this you know at sometimes unnecessary burden to get everything right right away. And I think what I found really interesting in yours is you know you found something, but then you started iterating on that too.

Somil Aggarwal:

Again, moving to electrification, moving to add this extra, you know hardware in it and so you see some of the agility of software really being shown here. Do you think there was I know you said it was a quick and easy fit Do you think there was anything about the way that you made your technology that you know it's kind of like you build your own luck. Is there a way that you think you designed what you were doing that lend itself to actually have this easy add on easy expansion? My hunch is yes, but I wanted to know if there was any specific ways that you were thinking about it. I think.

Marshall Cox:

I think in general we aren't. We aren't developing the heap, right, he pumps it around for a long time and so we're really creating this new, this new heap of some rubber been around thermal batteries have been around like we're not creating anything new, we're creating a new system and so. So when you look at it that way, it's almost it's not software, but it's a lot closer to software than, like, developing new hardware. So in a way it's faster because of that. And I want to point out, by the way, like, from software to hardware, huge increase in technology risk, right, because exactly what you said, it's just takes so much longer to iterate from software to hardware.

Marshall Cox:

To hardware in someone's home is like another compounding it gets. When you deploy stuff, like even in a building, like if you're in the basement, not that bad, you can go there right, you deploy it in a hundred apartments in that building. It is essentially you will never get back in there, right, so like, you really have to make sure and that's what we did for that first eight years of the company, right, we like made sure we never had to get back in and it still has issues we have to deal with, right, like. But yeah, it's. That's all I have to say about that, I guess.

Somil Aggarwal:

No, super helpful and I think you know I've sort of been been tiptoeing around this and keying it at certain points. I think there's a lot of really interesting things about the way that you've gone about navigating, you know, very complicated fundraising strategy, being able to build something that really does affect the bottom line of your stakeholders. For many of the successful founders that we've had, there's oftentimes some key things that really led them to get to where they are right, things that they've learned over time and so you know at a high level. Especially as we get to the latter half of this interview, I just wanted to know, if you have you know, maybe you're if you had to go back in time, what would be the top three things you would tell you know a younger self, maybe especially graduate out of your PhD. What top three pieces of advice to yourself, either hardware specific or not about building a company?

Marshall Cox:

Yeah, the first thing would be that founder thing. You definitely have to get a more someone who's been a founder before. It doesn't matter if they've succeeded or not. It's like such an important part of a founding team who can handle the business thing, know what they're doing, talk to investors. Understand what investors want to see. Right, like, it took me a long time to understand what investors want to see. So I'd say that is.

Marshall Cox:

That is number one, and number two is is it's great to like again, it goes, goes towards like the two levels of inaccessibility of hardware where we're putting it Like I think it's like measure twice, cut once. Right, like if you can't and if you can get money to spend a little time. Like to waste a season. Right, like this is something I've been facing a lot, a lot of for the history of the company. Like, oh, I don't want to miss a season, so that's just worth missing a season if you can really go slow and perfect something rather than put something out into the field that's not ready. Do you know what I mean? So, like being very confident and putting your technology through the paces before you deploy. It is super important. At the very least, you really want to be able to do a firmware over the air before you put anything in the world. Let's, let's get that out there.

Marshall Cox:

Yeah, those are the two most important things I'd say. And then the third is is if you can do some market research, like if you can talk to real people like, what do you like, what do you care about building under, be honest with me, you know, and then, like that, give you really important information. But it's an opportunity to get get somebody involved and, and with the stake in in what you're doing, right, like, you need this problem. What if I solve it? If I solve this problem, can I solve it for you? Like, maybe, right, like, so you can get your first customers that way too. But those are my, I think, the biggest things.

Somil Aggarwal:

Is there a nuance to that last point? Is there a nuance to responding to customer validation essentially in hardware, because you can't necessarily do everything right. If someone's like I want, you know, my building to spend no electricity, well, you know, I think that's not possible yet right, and I think that's really tied to the fact that hardware investments just take a longer time and you know deep tech is a is a different beast in terms of how you get technology to market. Do you have any specific piece of advice about how to navigate customer validation, especially with the hardware?

Marshall Cox:

investment? Not really. I mean, you just got to talk to customers. You just got to go like, and there's very different customers, right, so you could have a technology that's great for commercial, and then, like, you're like, oh, this is great for residential, and you go talk to them and think it's not right, so it's it's. You just have to, you have to do a deep dive on your market and then you have to figure out, okay, who's probably the best person to talk to, and then go talk to them and then go talk to other people too, right, it's all about just talking to people. You have to talk to everybody.

Marshall Cox:

I, like you can. I think I know a bunch of people who develop, like because I went to the university, right, people develop stuff. It was cool, it was awesome, totally awesome, and it failed because, like it was, it was designed and built and developed for something that the person had in mind and it didn't have value there, right, and I'm certain it has value somewhere else. But you know, you spent all your time on that one thing and didn't work out.

Somil Aggarwal:

Yeah, definitely, and I think I think that just goes to the overall story of making sure that you have the right we know whether it's having the right founding team, the right technology, the right understanding of the space, just making sure you know enough about the opportunity to start and actually build something. I think that's pretty much been a common theme in your advice and something we've seen across a lot of different founders, which is every person has their own way of getting acquainted in their own opportunity, but you have to be prepared, no matter. You know which way you're going about it. So I really appreciate your angle on that, especially, like you said, coming from you know the more scientific background where you definitely have a leg up over. You know a general, you know a builder operator who doesn't know the space as well. Well, look, I have.

Somil Aggarwal:

I've loved having you on this episode, I think you know. I think the end goal of this is really to have an audience that never goes at a radiator show, goes to a trade show and looks at a radiator and is confused ever again. I think you've made a major stride in educating everyone in terms of what the space is. Before I let you go, I did want to ask you just for a bit of background for the audience. You are very involved in this sort of the New York City area. You spend a lot of time working professionally in and around New York City. Are you going to New York City Climate Week and, if you are, what are the things you're looking forward to seeing and learning from your time there?

Marshall Cox:

So I am going only for two days because my, my, my family's going out of town next week and I have to take care of my kids, but it's it's really just going to the big meetings, like just meeting people. I think it's the opportunity to meet top people from from the organizations you care about, be that, policy makers, you know, portfolio owners, the founders themselves, et cetera. Everybody's going to be at these events and, unfortunately, you have to go to like the big ones, right, the biggest, like most coveted ones, to see the, the, the biggest names, but everyone's going to be all around, like there's a really cool event at the new lab in the Brooklyn Navy Yard. I think that's Wednesday. I won't be there, unfortunately, because that's when my wife flies out. No, there's. I think that you can. You can, you can find a list of events and go to the big ones and if that's all you can do, awesome. We're having an event at our place on Tuesday. If people can come to that, this airs. If I won't, or does it? When is this air?

Somil Aggarwal:

Well, you know that puts a bit of pressure on it, but I don't think it'll be out by the time you're at the time of the week, so close enough.

Marshall Cox:

No worries, yeah, there's a lot of cool things you can do there at that, that that you should be able to find pretty easily.

Somil Aggarwal:

Yeah Well, I'll definitely have to follow up on that. I I'm very eager to learn more about everything you talked about. You know, before I let you go, just a quick moment, when can people find you?

Marshall Cox:

So our URL is kelvinkelvin and we're in the Brooklyn Navy Yard and we're, you know, there's. There's. People talk about this in a lot of publications. So if you just want to reach out and connect, please do. If you want to have a free evaluation for your building, please do. If you live in a building that sucks, let us know and we'll try to contact the building owner. Yeah, we're, we're. We are very happy to connect with anyone who's interested.

Somil Aggarwal:

Oh, great, well, thank you so much, marshall. I really appreciate you taking the time and this was a great conversation, awesome.

Marshall Cox:

Thank you so much. Great to have you here.

Intro & having a scientific background as a founder
Impact of PhD on entrepreneurship
Radiators vs. smart radiators
Market barriers
Balancing impact vs. bottom-line
Fundraising history
Facing rejection
New vision for Kelvin & hurdles for implementation
Expanding into new hardware products
Making building in hardware like building in software
Advice for founders
Thoughts on NY climate week