Podcast    ·    Episode #23

Energy entrepreneurship

MIT Energy Initiative · #23 - Energy entrepreneurship

Guest

Tod Hynes, senior lecturer, Martin Trust Center for MIT Entrepreneurship


In This Episode


Transcript


If you have either an idea or technology at the right stage, in this class, you’re able to actually go out and talk to customers, talk to people in that industry, vet the concept, and really get some feedback around the potential pathway to market.

Jason Jacobs: I’m Jason Jacobs and I am typically the host of the My Climate Journey podcast, but have the honor of guest hosting the Energy Initiative podcast today.

Tod Hynes: Hi, I’m Tod Hynes. I’m the Founder and Chief Strategy Officer at XL Fleet, and I’m also a senior lecturer at MIT, where I teach Energy Ventures.

JJ: I’m so excited for this episode, Tod. It’s funny, it’s been about a year and a half that I’ve been on this climate journey, coming in from the outside and just learning as much as I can about everything that it’s going to take to facilitate this global energy transition. I met you pretty early on in that journey. We’ve now spoken many times. I feel like you’re a friend but I don’t know that I’ve ever taken a good chunk of time like this and done a deep dive into your background and the different things that you do, so I’m so excited for the opportunity.

TH: It’s great to have this conversation officially. It’s always been good over the last year and a half to connect with you. I think you’re doing an amazing job bringing together a great community and helping multiple people that have been in this industry for a long time, as well as newcomers, to have a bigger impact and to make some progress.

JJ: The other thing I should say, selfishly, is that it’s not just a chance to get to know you and your background, but also, I’m a local boy, I grew up in Newton, I live in Brookline now and Boston’s my home. MIT is such a world class institution and I know that it’s doing a number of things to really lead the way as it relates to the clean energy world, but exactly what those things are and all the different initiatives and both the things you’ve been involved in or otherwise, I stand to have a lot to learn there as well. I’m psyched to learn more about both of those things.

Maybe for starters, just give us an overview of the different things that you’ve got your hands in, MIT-wise and otherwise, as it relates to clean energy and climate change.

TH: I’ve been teaching MIT Energy Ventures since 2008. The class was originally started by Bill Aulet, who leads the MIT Martin Trust Center for Entrepreneurship. He and I actually co-founded the MIT Clean Energy Prize in the end of 2007-2008 timeframe. He had started the class originally in 2007. I’ve been working closely with Bill to initially launch and then advise the MIT Clean Energy Prize since the 2008 timeframe, and then with Energy Ventures, really worked closely with Bill to get the class going in the first few years. Then Frank O’Sullivan, who used to be with the MIT Energy Initiative, started co-lecturing the course with me. He’s been with us for a number of years now. Most recently, we added a guest lecturer, Libby Wayman, who works with the Breakthrough Energy Ventures group, and she’s a great new addition to the course.

I’ll give a quick background on the class. MIT Energy Ventures is a project-based course that brings together engineering, science, business, and policy students from across MIT, as well as some from Harvard, to identify new opportunities in energy and even more so in climate. We’ve had a number of teams in the last few years that have gone outside of the energy sphere into a more broader climate venture opportunity. We provide maybe 15 to 20 different technologies or ideas around the beginning of the class for the students to come in and learn about. In many cases students bring their own technologies or ideas. The whole goal of the class is really to create a learning-by-doing, mens et manus type experience—mind and hand—and it gives the students direct access to various labs or technologies that have been worked on for many years or it could be a brand new idea that someone has, that’s a clean sheet of paper. Those students then form teams of about five students, so you get about seven teams per class. Then they pursue that concept or technology over the course of the semester and really try to create a business plan, a business model, and a company around that concept.

The goal of the class isn’t necessarily to start a new company, but it’s to really get almost a first take at the process. Ideally, by the end of this class, they’ve actually learned a lot in a compressed timeframe of about three months, where they can then go on after the class into the MIT Clean Energy Prize, or many other competitions, in a much better position, having had a lot of insight from a range of industry experts, as well as advisors and mentors we connect to. By the time they graduate, they ideally can then go off and start their business or apply what they’ve learned in that class to the companies that they go in and work for.

JJ: Are these undergrad or grad students?

TH: It’s a graduate course. We do have typically a few undergrads per year and they’re usually quite strong. We do try to find people that are in the last year of their program. If it’s an MBA, if it’s a second year MBA, if someone’s getting a PhD or a Master’s, usually it’s the last year of whatever program they’re in. With the idea being that if the project they have has legs that they can continue to run with it when they graduate.

JJ: How do you think about the pairings when it relates to team formation? Is it entirely up to the students to decide? What types of skill sets or backgrounds are ideal as it relates to team makeup?

TH: We definitely try and have the team process be organic. We do have an application process for the class. We try to get a good mix of students with a range of capabilities and backgrounds. Then each team we try to have a mix of engineering or technical capabilities as well as business and policy. Over the years, I’d say that the experience of the students coming into the classes has increased significantly. When we started the course maybe 30% had worked in energy. Now it’s about 90% of the class has already had a job in energy, 50% have already worked at a startup and even 10% or 20% have started their own companies.

We enable the teams and students to really spend the first couple of weeks of the course networking with each other, learning about the different projects or potential ideas, and then we give them a format to aggregate around the ones that they’re most interested in. If you can get five students to agree upon one idea, then that’s typically a project that gets selected and moved forward. At the end of the day, the instructors and the TA have final say on the teams, but it is very much driven by the students and their interest.

JJ: When I think about clean energy and building companies in clean energy, it seems like it’s a long slog. When I think about three months in the context of a long slog, it seems like not even a blip on the radar. What type of progress is realistic for these teams to make from a dead start to three months in? What does success look like?

TH: That’s very true. It takes a long time to make progress in this world, especially if you have a hardware-heavy solution or a science-heavy solution. Many of the teams are working off of technologies that have been in a lab for many years. You do have, in some cases, millions of dollars that have gone into research for a certain technology. What they really want to do is figure out, what is the best path to market for this technology? That’s where I think we have some great examples of teams that have found a technology that’s at the right readiness level for this class. It’s not very early stage and it’s also not too late stage—obviously, if it’s already in the market that’s not a good fit for this course. That gives the teams a reasonable amount of time to assess a number of different end use applications to specific markets. Where does the right value fit for that technology? Then what’s the business plan and the strategy to launch that product?

There are also good examples of ideas that students had that were just at the right time in terms of the market. If you have either an idea or technology at the right stage, in this class, you’re able to actually go out and talk to customers, talk to people in that industry, vet the concept, and really get some feedback around the potential pathway to market. At the end of the class, if you have some good proof points around that, and if the story holds together and it looks like that industry or market is taking off, it usually is a good launching point into some of these competitions like the MIT Clean Energy Prize. We’ve had a number of teams over the years actually go on to win in those competitions and do quite well and then actually start companies and raise money, get acquired, and have a pretty meaningful impact.

JJ: What are some examples of some success stories that stand out to you?

TH: There’s a few going back that I think are pretty interesting. A great one is a team from 2008. It wasn’t the actual project that was selected. There was a student named Oliver Stall who learned about demand response through the EnerNOC case study that we did. This was, again, 2008 time frame. He said, “This is great. I want to go and do this in Germany.” He started a company after graduating from MIT, so it wasn’t through the class, but it was just great to see that student learn about a whole new market, say, “I’m going to go do this in Germany,” and then he actually got acquired. His company got acquired by EnerNOC  about five years later. That was one earlier example.

There’s a company called Ayar Labs. A great bright woman, Alex Wright-Gladstein, who came to MIT and was looking through the labs on behalf of the class and found a technology that brought essentially chip-to-chip optics or optical communications that increased the speed and efficiency of computing and was able to get a pretty complicated agreement in place with MIT, with Berkeley, with Boulder, around this technology and formed this company that can have a pretty meaningful impact on the efficiency and performance of computing. You can imagine the potential energy implications on that front.

Another interesting one was a bright undergrad, Teasha Feldman-Fitzthum, great modeling and mathematics capabilities, and Mike Reynolds who was in a previous life in Goldman, met in the class. They were just the perfect combination to start a company that used advanced modeling to improve the output estimates for power projects and essentially reduce the cost of capital for various types of energy projects. Their company was a clean sheet of paper in the course. There was no lab or tech that went into it. It was really just these two good co-founders coming together and starting a company and eventually getting acquired by Ultra Capital. They’re now the core technology platform that helps Ultra Capital develop and finance small to mid-sized energy projects.

Those are just a few, but it’s been great to see the range of different technologies and ideas that have gone on to actually start businesses and scale up and raise money and ideally have an impact.

JJ: Is there a natural progression in terms of, as these companies go through the course, for the ones that are the most promising and have the most momentum and seem like they potentially have some legs to go and become a company, what is the next step coming out of that course from an MIT standpoint? What do you do with those people and those teams?

TH: The course is in the fall only. Most of the competitions, especially the MIT Clean Energy Prize, are in the spring. There’s a natural progression from this class into those competitions and a very direct one for MIT. Ayar Labs was the winner of one of the MIT Clean Energy Prize events. That was a key point for that company. There’s a whole host of other resources through the Martin Trust Center. There’s the delta v program which provides an additional stage. If you think about the academic calendar, they’ve actually done a great job of having the delta v program, which is over the summer, uses the Trust Center’s resources to really get the best of the best of these various student-based companies, not energy- or climate-focused, it’s a more broad program, but there are a number that have gone through that. They have a big event in the first week of school and in the fall semester and that’s a great motivation for students to go out and find out what classes and resources are available. The way we structured this track in terms of energy is the course is in the fall, the MIT Clean Energy Prize is in the spring. For teams that want to go through delta v, that’s another pathway. You have another extension in the summer where you can get additional resources through mentorship. The physical space at the center can be used essentially as an incubator. There are funds for traveling to conferences or meetings with customers. There’s a number of resources available for students through various programs at MIT.

One of the things that we do through the Energy Ventures course, and then also through the MIT Clean Energy Prize, is try and connect students with mentors. There’s a great alumni network through alums just of Energy Ventures. There are about 400 alums now who are primarily working in energy all over the world. Students that are in that class have access to tap that network during the course but also afterwards. Same thing with the MIT Clean Energy Prize. There’s a tremendous network of thousands of students that have gone through that event, most are not actually from MIT, but there’s a great resource. The other students that have gone through the program, as well as the judges and the mentors that have been resources for those teams as they go through that process.

JJ: I assume, with the Clean Energy Ventures, is it only open to MIT students or can they have collaborators and team members that are not part of the university? Then, same thing as it relates to the Clean Energy Prize.

TH: MIT Energy Ventures is primarily MIT students. We do have some Harvard students. You’re able to cross-register for certain classes. We have had students from other universities involved, not directly and getting credit for it, but involved in the teams. There have been some teams out of Yale and Tufts as well over the years. It’s definitely not just MIT. I think that’s important. There’s a tremendous network within MIT, but there’s also a very strong and broader network in the Boston area in energy as well. We’ve definitely pulled from that in the class. The class is very project-focused but we’ve had two Secretaries of Energy speak in the class. We’ve had the former Science and Technology Advisor for Obama speak in the class, John Holdren, who’s also at Harvard. We definitely pull in resources from the best organizations and the best backgrounds as possible for the students in the class.

As far as the MIT Clean Energy Prize, that is open to student teams from anywhere in the world actually. That competition was primarily funded by the DOE for many years. That funding had to go to U.S.-based teams but there had been international teams through that competition as well.

JJ: With the benefit of hindsight, do you find with all the success stories that you were rattling off, are there common criteria that are shared across that are good predictors of success or is it all over the map?

TH: Good question. I definitely want to spend more time getting some real data behind that. I would say maybe check back in a little bit. The best indicator for success I would say, based on my perspective, not doing a deep analysis, would be an individual or two who are highly dedicated and committed to pursuing that idea or technology. I think you need to have someone that’s really, really committed. The rest of the team is important but can evolve over time. A lot of times, maybe only a few students, one or two or three from a team, stay with the company as it actually goes forward. That’s probably the biggest thing, is someone that is really committed and dedicated to pursuing that opportunity.

One person and company that comes to mind is Ben Glass, who started Altaeros. Altaeros is a company, when it was in the course, the original idea was an airborne wind turbine. That was originally going to compete with the onshore wind market. That was very quickly determined as a tough sell. Onshore wind is already really low cost and that’s a tough path. They focused in the class on offshore wind, because you didn’t need any foundation, since you can imagine having an airborne wind turbine that’s tied to a buoy is a much more effective approach. The problem with that was you had to have such a massive scale as your launch point. It was a very hard initial market. When they continued forward with the idea, they focused on remote power. You can imagine remote communities or areas where it’s very hard to install something. Here you can drive up with a truck and a couple of tanks of helium and you have yourself a thousand meter tower. What ended up happening was someone said, “Can you put cell signals or cell tower equipment on that system?” They said, “Sure.” Now they have this super tower, I think is what they call it. It’s a very high tower that is really a heliostat. It’s connected to the ground and can produce power and provide the cell signal. In that case, it took many years to go through that transition. It was Ben’s commitment to this concept of a thousand plus foot tower as a new resource and that they got funding from SoftBank. They were actually one of the founding teams at Greentown Labs. I know you’re very familiar with Greentown Labs, great resource, very deep in terms of MIT connections. Two of the original four companies were actually out of the MIT Energy Ventures class. OsComp was the other one. Pedro Santos was the founder there. They were both in the Energy Ventures course and went on to start companies. They realized they needed a lot of space for their hardware-heavy ideas and got together to get some shared workspace in Cambridge. I think it was just on the border with Somerville, or maybe it was already in Somerville, but before they moved to Boston, they’re now back to Somerville. In the early days, that’s what got Greentown kicked off. There’s been a number of teams from the class that have cycled through there over the years.

JJ: I asked you about success predictors but I guess the other side of that is, are there common traps that people fall into? I’m definitely not asking you to name any companies by name or anything like that. If there were students on the first day when these projects were getting kicked off that were about to head down this path, what would you tell them to watch out for? What advice would you have for them?

TH: Good question. I’d say one of the most challenging things for a student coming into this class is the scale and complexity of the energy market and the climate problem. It’s very hard to know which technology or idea to focus on. Even once you’ve picked an idea, what’s the right path to take? What’s the best launch point for that technology or idea? One of the traps, and this is a constant battle between I have this proprietary patented technology, very defendable, maybe a little more press-worthy technology, compared to an idea that might just not be defendable. It’s a good idea but not, “We’re going to go start a wind development business” or “We’re going to start an energy storage development company.” It’s just an idea. The challenge of a lot of the teams that pick the technology path is that, in some cases, you find that it’s very hard to pivot. “Wow, this technology is really good for this market but this market really isn’t that big” or “There’s another technology or another solution that solves that same problem in a much easier or faster, better way.” That’s really hard to see in the beginning. It’s hard to give students that broad perspective. We try to. We do give a landscape in the first couple of classes around, here’s the world, the ecosystem that you’re diving into. But obviously, it’s at a pretty high level. We are able to go deep into certain segments but you just don’t have enough time. You could spend multiple years just on those, trying to understand the energy and climate systems. Whole careers are spent doing that. That’s the challenge for students. They get tripped up in maybe getting too focused on a specific technology when they’re not looking at, what’s the real problem that you’re trying to solve? What are the different ways of solving that problem? Really thinking through that before just picking a technology that’s trying to find a home or trying to find a market.

JJ: Just practically speaking, given that a lot of these projects, it sounds like are existing technology that’s been in the lab for years, how do you guys handle things like IP? A related question is, at what point does it make sense to incorporate? With all the different students involved in different ways, how does that equity arrangement get worked out? I would imagine it might be pretty messy.

TH: That can be messy in the best of times and in the best of circumstances. For the course, we’re very clear in the beginning of the class that this is an educational experience. No one is guaranteed any equity. We leave the arrangements with, if there is a technology owner before the class starts, that any kind of arrangement has to be negotiated essentially outside of the class or after the class. It has no impact on the grading. It’s something that is typically driven more by the competitions. If you think of the Clean Energy Prize, they have to cut a check to an entity. They can’t just give an individual $100,000 or whatever the prize is that year. The driver for incorporation is typically the competitions. There’s a solid three to four months between the class and when the teams need to incorporate. That’s usually when you see the teams incorporate. For the competition, you do need to be clear what the relationship or licensing arrangement is with the lab, if there’s a lab involved. That can be a difficult process because a lot of times you’ll be in negotiation with the technology licensing office at MIT or other institutions. If you win the competition before you finalize your agreement, then people tend to want to renegotiate because you all of a sudden create all this press around that solution. It can drive a lot more interest from the general market. You do need to be careful and try to get ahead of it.

JJ: It’s like a domain. You don’t want to go request to buy a domain if the person on the other side knows that you really need it super bad for your high profile thing with lots of money.

TH: Right. It’s a natural process for starting any company. We just make sure that we are very clear before the class that it’s an educational experience and there’s no guarantees of any team members getting any equity moving forward.

JJ: Taking a step back, what else is going on at MIT on the clean energy front that’s notable and interesting outside of the clean Energy Ventures class and the Clean Technology Prize? Clean Energy Prize, right?

TH: MIT Clean Energy Prize, right. The MIT Energy Initiative has been one of the big drivers for the institute in pushing a number of different initiatives and programs. The MIT Energy Club was actually first to market, so to speak. The students were a little bit ahead of the Institute in getting an organization together. The MIT Energy Club is an amazing organization that has done a number of big events. They have their annual Energy Conference which was just held last week. It actually had to be a virtual event this year.

It was unfortunate that they had to do that, but that has always been a great way of getting the students to directly engage with a whole range of companies, organizations, individuals across the energy world, to either sponsor the event, to come and speak at the event. That’s probably one of the premier energy events in the Boston area and it’s always a great one to attend. I’d say the MIT Energy Club is a big organization. They’re actually very open to membership, so whether or not you’re a student at MIT, you can join. They have a great newsletter that provides a range of events that are occurring in the Boston area around MIT that week. I’d highly recommend it for people who are not familiar with it.

The MIT Energy Initiative is, I think, one of the most consistent and well-funded research areas in energy over the last 10 years. They’ve rolled out a number of different programs, a number of different reports, the Future of studies. Recently they did the future of transportation study which is a great analysis around what the world of transport is going to look like in the 2050 time frame. They’re pulling from researchers across MIT. It’s a multi-year process to get one of those reports out and they can have some pretty interesting insights and some controversial ones as well. It’s something that is hard when you’re trying to aggregate a range of perspectives but it’s definitely a good example of how to pull those various scenarios for the future. They’ve done the future of the grid, solar, and nuclear power over the years. That’s probably one of the bigger initiatives they’ve had.

One of the teams this year at Energy Ventures actually worked with a modeling technology that’s been developed within the MIT Energy Initiative, which really helps model energy systems. In this case, for the class, the team was using that technology to essentially reduce the soft costs for solar development. If you think of the price of solar panels dropping drastically over the last 20 years or so, you still have a lot of soft costs associated with installing solar. In some cases, the cost of sales is higher than the cost of the panels if you’re looking at residential or commercial solar. This modeling system was able to help reduce those soft costs. We’re seeing work that’s being done within the Energy Initiative get turned into various companies and get out into the market as well.

JJ: We probably should have started here, but what about you? What else do you have going on in the clean energy world outside of your pursuits at MIT?

TH: I started XL Fleet a little over 10 years ago. We provide the electric power trains for commercial fleet vehicles. We started with hybrid solutions, brought into plug-in hybrid, and we’ll eventually offer a full-electric system. We sell to governments, Fortune 500 companies, utilities, everything from smaller delivery vehicles, vans, pickup trucks, up to larger delivery trucks, school buses, ambulances. That’s a market that’s really just starting to take off. I think we were probably five years early to that space but right now we’ve seen a tremendous increase in demand for electrified commercial fleet vehicle solutions.

JJ: Then you’re also involved on the nonprofit side as well, right?

TH: That’s right. I’m on the board of the Woods Hole Research Center, which is a global leading independent climate research center.

JJ: Phil Duffy, as you know, was one of the guests on My Climate Journey, the head of Woods Hole Research.

TH: Yes, I heard that. I listened to the episode. It’s a great one. It’s probably one of the most motivating things for me. I originally got into energy because of climate back in the 2001-2002 timeframe. It was very clear that climate change was going to be the challenge of my generation as I was graduating and it looked like energy was really one of the major drivers behind it. At that time, in the 2001-2002 timeframe, we were talking about this potential for feedback loops that could happen. If climate change really gets bad, you’re going to start seeing massive emissions being released from permafrost in the Arctic. Unfortunately, that’s really starting to happen and it’s bad. It’s a really big motivator for everyone to try and just move more quickly. The urgency is really, really high. There are others, the drying out of the Amazon. Right now, the forest fires in the Amazon are not natural. They’re man-made, basically. Someone cuts down the forest and waits a few months and then burns the trees. But if it continues to dry out, you could have a runaway of fires and that could be catastrophic globally. It’s been amazing to be on the board and get that direct access to some of the world’s leading scientists focusing on cutting-edge climate research.

JJ: Given the urgency of the problem, it’s amazing what MIT is already doing in this area. I’m curious as you look forward, do you have any time for dreaming in terms of what type of role you could see MIT playing in the future or any initiatives that you wish or hope that the organization will pursue that it hasn’t yet tackled?

TH: We’re starting to see some more activity in what might be considered geoengineering. This is going to be something that we have to consider. That is a very loaded term. There are other ways of reducing emissions that also can be done through natural systems, so how do you more effectively manage land to reduce emissions? I think we need to start really pushing on solutions. Wind and solar are basically there. They’re already there. Everything new is wind and solar but it’s not happening fast enough. We need a lot more renewable power generation but we also need other ways of reducing emissions and taking emissions out of the atmosphere.

Just a couple of points on that, the global investment in clean energy infrastructure, if you look at Bloomberg New Energy Finance, you’re looking at $300-350 billion per year. But that’s actually been relatively static over the last 10 years. We’ve been getting more solar and wind in the ground because the cost per megawatt has gone down. But we need to make that $350 million into $1 trillion or $2 trillion. The capital is there. There’s no shortage of capital if you have projects that are essentially financeable, that have a good return on investment. Then that return profile is getting pretty low considering, 3%, 4%, or 5% can now cut it in some of these markets because there’s so much demand for that steady return. How can we accelerate the investment in the things that we know work today? Then what are the big swings that we can take in other areas that aren’t the traditional energy markets that can potentially help us bend the curve? I mentioned land use. Just simply changing farming policy which is probably one of the hardest things to do in reality, but at the end of the day, that’s a path we should be really aggressively pursuing. Having some more science driving that policy and really pushing to make changes, I think is the kind of action that is needed.

JJ: Awesome. Is there anything that I didn’t ask you that I should have or any parting words for the listeners?

TH: I think the follow up maybe to that last question around, what are the things we could be doing looking forward? I’d mentioned geoengineering and people are looking at direct air capture for CO2. I know a few people starting to look at ways of accelerating the natural decay of methane. Some of the smartest people I know are working on that. That’s an area where I would love, if anybody’s listening and they want to dig into a new area, that’s something that sounds a little out there, but there are ways of… and it’s not methane direct air capture. I don’t think that’s necessarily the pathway, although if someone can figure that out that’s great, it’s how do you accelerate the decay of methane that’s already in the atmosphere? If you can do that you can buy us some time. Ultimately, we have to solve the carbon problem, the CO2 that’s in the atmosphere. We have to rapidly reduce our emissions and reduce the concentration essentially. We’re already well beyond where we should be. If someone can help essentially accelerate the decay of methane in the atmosphere, that would be a big win. I think that’s an area where I’d love to learn more what’s out there. I try and ask people about that whenever I can. That’s a call to anyone listening. If that’s something you’re interested in, please reach out. I’d love to try and provide some resources or connect you to people that are working on that problem.

JJ: Awesome. I really enjoyed this discussion, Tod, and I learned a ton about all the great things happening at MIT. Thank you so much for coming on as a guest and for all the work that you do. And thanks to the Energy Initiative for having me come on as a guest host as well.

TH: Thank you very much. I really enjoyed being on the podcast. Thanks again.


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