Best Of Forbes 2023: Innovation, Science & Technology

Forbes

0:00 Generative AI Is About To Reset Everything, And, Yes It Will Change Your Life 21:13 This Next Billion Dollar Startup Is Helping Truckers Get Paid Faster 27:23 Merge Or Perish: Why Billion-Dollar Fintech Companies Are Suddenly Facing A Bleak Future 33:12 Tesla’s Cybertruck Complicates Elon Musk’s Climate Commitment - Can He Deliver? 40:27 Inside The Audacious Plan To Use 10,000 Nuclear Microreactors To Wean The World Off Coal  1:04:27 How This Estonian Startup Beat Uber At Its Own Game 1:13:28 Tony Hsieh’s American Tragedy: Inside The Zappos Founder’s Final Months 1:24:36 Early Uber Investor Steve Jang Keeps Backing San Francisco Startups And Local Culture 1:36:16 Vanta: The $1.6 Billion Unicorn Automating Complicated Security Compliance For Businesses 1:45:05 The AI Founder Taking Credit For Stable Diffusion’s Success Has A History Of Exaggeration 1:56:08 The Founder Of This $10 Billion Israeli Startup Called Wiz Is Shaking Up Cloud Security 2:11:43 This Next Billion-Dollar Startup Was Built To Save America’s Farms With Tractorbots 2:19:56 Green Hydrogen Could Power Your Life Sooner Than You Realize - These Companies Are Making It Happen

Transcript

00:00:00 [MUSIC PLAYING]

00:00:02 Generative AI is, in a sense, the second wave

00:00:06 of transformative AI that we've experienced

00:00:08 over the past few decades.

00:00:10 And that first wave was really around ranking systems.

00:00:14 And so you're thinking here about Google Search, Facebook,

00:00:16 YouTube's recommendations, TikTok.

00:00:19 All of this is around choosing sort

00:00:22 of the ranking of information that was already

00:00:24 created by people.

00:00:25 And this seems like a small thing.

00:00:27 It's just ranking a set of items.

00:00:28 But when you're ranking everything

00:00:30 that humanity has created, that actually

00:00:32 affects the incentives of politicians,

00:00:35 of entertainers, of journalists.

00:00:38 You're now restructuring society just

00:00:40 by that simple act of ranking, because you're

00:00:42 ranking for billions of people every day, all the time.

00:00:47 The second wave is where we go beyond ranking to actually

00:00:51 generating that content.

00:00:52 This second wave of transformative artificial

00:00:55 intelligence, we don't know fully

00:00:57 what those implications are going to be.

00:00:58 The whole way in which we make information

00:01:02 and the basis of communication across society like that

00:01:05 is all going to be rewired.

00:01:06 [MUSIC PLAYING]

00:01:10 At its simplest, generative AI refers to an AI tool

00:01:25 that is generating or creating content.

00:01:27 That could be text, audio, or video.

00:01:30 You're taking a really large data set,

00:01:32 and you're inputting a prompt.

00:01:33 And then you're outputting something completely new

00:01:36 that is learning from all that info

00:01:38 and creating something to answer the prompt.

00:01:41 We've covered AI for some time at Forbes.

00:01:43 But on November 30th, when OpenAI launched ChatGPT,

00:01:46 it's a tool that allows you to ask for a recipe or a sonnet

00:01:50 in the form of Shakespeare or a script in the form of Alex

00:01:56 as movie star, which my boss did.

00:01:58 He also asked it to write an annual performance

00:02:00 review for me, which I did not appreciate.

00:02:02 When we saw everyone playing with these tools,

00:02:04 we thought, OK, AI is really breaking

00:02:06 into the mainstream here.

00:02:07 It's not just something that the tech bubble cares about.

00:02:11 And it's time to ask questions about who's really

00:02:13 going to make money here, how real is this hype,

00:02:16 and what will be the business impact.

00:02:18 OpenAI is a really interesting company.

00:02:20 It actually started as a nonprofit.

00:02:21 It was backed by Sam Altman, who used to run My Combinator,

00:02:25 as well as the billionaires Elon Musk and Peter Thiel.

00:02:27 And it was formed with the idea of creating

00:02:30 an artificial general intelligence.

00:02:32 This is a real kind of sci-fi AI,

00:02:35 one that is conscious, self-learning,

00:02:37 that could theoretically rethink capitalism,

00:02:40 as Sam Altman has said, or could potentially

00:02:42 outstrip human control.

00:02:44 Building that AGI was something that OpenAI

00:02:47 could not do as a nonprofit.

00:02:48 They couldn't raise enough money to do this.

00:02:51 So it needed to create a for-profit entity.

00:02:53 OpenAI does that in 2019, and that's when Sam Altman

00:02:56 becomes CEO full-time.

00:02:58 And not long after, we've seen the company become

00:03:00 a key ally to Microsoft, which has reportedly

00:03:04 invested $10 billion recently at a $29 billion valuation.

00:03:08 This current wave that we're seeing,

00:03:13 this generative AI wave, has been kind of building up

00:03:16 over the last couple months now,

00:03:18 really hitting an inflection point probably

00:03:21 summer of 2022.

00:03:23 We were slowly seeing these different companies

00:03:25 starting to tease out new releases like OpenAI

00:03:29 launching Dolly 2 in beta, and then Stability AI

00:03:34 announced Stable Diffusion, this text-to-image

00:03:38 generation model.

00:03:39 I think really it was the culmination

00:03:41 of all these different models that reached a viral moment,

00:03:44 really got to the masses.

00:03:47 I would characterize the consensus

00:03:49 as cautiously optimistic.

00:03:53 I think there's not so much pessimism around AI

00:03:56 as a technology anymore.

00:03:57 I think more than optimism, it's kind of gotten to a point

00:04:00 where people are accepting that this is an inevitability.

00:04:04 Now, what do we do with this inevitability?

00:04:06 Different folks have different levels of bullishness

00:04:09 on where this technology can take us

00:04:12 or what the potential harms and risks of it are.

00:04:16 But for the most part, people seem

00:04:18 to be optimistic that we still have time.

00:04:21 It's still kind of in our hands to kind of control

00:04:23 the destiny that this new AI paradigm shift brings.

00:04:26 I think the way to look at this is if Steve Jobs said

00:04:32 that the phone was a bicycle for the mind,

00:04:35 this technology is really a rocket ship for the mind.

00:04:37 The most exciting application, I think, of this generative AI

00:04:40 is with what we're building, allowing humans

00:04:42 to communicate visually.

00:04:44 So you can take what's in your mind

00:04:45 and create it almost instantly, whereas before it

00:04:48 would have taken days or months even for skilled individuals

00:04:51 to do that, be it art or PowerPoint or whatever else.

00:04:54 I think we've also seen the impact of this also emerge

00:04:56 in other sectors, such as education, where students are

00:04:59 now using it to help with their homework structuring

00:05:01 or writing.

00:05:02 I think we'll see it across everything, whereby, again,

00:05:05 anything you can imagine, you'll be able to create now.

00:05:08 Stability, our differential is that we are open source,

00:05:10 so we release our models.

00:05:11 So there's an amazing community that's built around it.

00:05:13 If you look at popularity on the code base,

00:05:15 it's outstripped things like Bitcoin and Ethereum

00:05:17 in a few months.

00:05:18 What took them 10 years?

00:05:20 The types of applications that we're seeing

00:05:22 are largely around basic creativity at the moment.

00:05:24 But now they are extending into combining these things

00:05:27 to create video game assets, to create

00:05:30 artwork of various types, to create new textures and things

00:05:33 like that, to extend the capabilities of creators

00:05:36 and to make more people creators.

00:05:38 I think where it goes from here, I

00:05:40 think we'll see more and more business workflow use cases.

00:05:44 Definitely expect to see these big tech companies

00:05:47 like Microsoft and Google that are building

00:05:50 some of these models and kind of working with companies

00:05:53 like OpenAI on these models to start integrating them

00:05:56 more deeply into some of the existing software we know.

00:06:00 So for example, we could expect to see generative AI use cases

00:06:04 in Microsoft Word or Microsoft Outlook, Google Docs,

00:06:08 stuff like that.

00:06:10 I think one of the open questions remains,

00:06:12 are we going to see an entirely new wave of AI native

00:06:17 applications kind of become a whole new generation

00:06:20 of software tools that people use?

00:06:22 Or will it be kind of the existing options

00:06:25 that are able to integrate this AI faster

00:06:28 and stay ahead of the curve?

00:06:30 For example, Adobe putting this AI

00:06:33 into Photoshop versus an entirely new AI-powered photo

00:06:38 editor coming about.

00:06:40 Speaking to Bill Gates about AI, I was honestly a little

00:06:43 surprised just how excited he was.

00:06:45 I asked him, how does this compare

00:06:46 to previous technological cycles,

00:06:48 like the rise of the PC or the PC with graphics interfaces

00:06:53 that allow us to play games and do a lot more graphically

00:06:56 inclined things on computers, or even the internet itself?

00:06:59 And Bill said that he thinks this

00:07:01 is one of the four big technological changes

00:07:03 of his lifetime.

00:07:04 And he said that he thinks AI will deservedly

00:07:06 be the hottest topic of this year.

00:07:08 Overall, I would say Bill Gates was optimistic about the impact

00:07:11 that these AI tools could have, particularly

00:07:13 in the developing world where he spends a lot of his thoughts

00:07:16 with his foundation.

00:07:17 He was thinking about how in Africa, some people may not

00:07:20 have access to human doctors.

00:07:22 You can do a lot as a foundation to try

00:07:24 to get doctors to that place or train new doctors.

00:07:27 But an AI tool that could answer some basic medical questions

00:07:30 could fill a need without challenging

00:07:32 doctors' professions.

00:07:34 Similarly, he was thinking in lower income neighborhoods

00:07:37 here at home in the US.

00:07:39 There might be some math tutoring or basic homework

00:07:41 support or teaching support that a tool like this

00:07:44 could use for students who don't have access to human tutors

00:07:47 or don't have a lot of time with a teacher.

00:07:54 So with AI, you can do existing use cases better than before.

00:07:59 So you can improve search.

00:08:01 For example, you can improve moderation in social networks.

00:08:05 You can improve communication by adding virtual backgrounds.

00:08:10 For example, to this video, you can also

00:08:13 create completely new use cases that were just not

00:08:16 possible before.

00:08:18 You can generate image from text.

00:08:20 You can generate 3D from text.

00:08:23 You can recognize voice and translate that.

00:08:27 You can create better conversational AI.

00:08:30 So it really opens up a new range of possibilities.

00:08:35 The same way the previous generation of technology

00:08:38 created the ability for machines to calculate better

00:08:42 or to retrieve information better with search engine,

00:08:46 there's a whole range of new use cases

00:08:49 that weren't possible before that are now

00:08:52 made possible by machine learning.

00:08:54 The hype that we're seeing now is just

00:08:57 a catch up on the previous wave of usage.

00:09:00 This is very different, for example,

00:09:02 than crypto, where you had a lot of hype but very little usage.

00:09:07 I think it's quite sustainable.

00:09:09 And as we see more use cases, more usage,

00:09:14 more companies investing on the topic in 2023,

00:09:18 hopefully it's going to become more and more

00:09:21 of a mainstream topic and more and more central topic.

00:09:25 What we want is for everyone to understand AI,

00:09:29 understand what it can do, what it can't do.

00:09:32 Some of the challenges associated with it,

00:09:35 for example, biases, are a big challenge for AI systems today.

00:09:40 We want everyone to understand that so that they can help us

00:09:48 mitigate some of the risks and make sure it

00:09:52 doesn't create more challenges.

00:09:56 So there are a number of issues that

00:09:58 fall into different categories that still need

00:10:00 to be resolved with this AI.

00:10:02 As flashy and exciting as some of this new technology is,

00:10:07 it's still prone to errors and mistakes.

00:10:09 AI practitioners call it like hallucination,

00:10:11 where you might ask open AI's a basic math problem,

00:10:17 and it will very confidently give you an answer.

00:10:19 But it turns out the answer is completely wrong.

00:10:22 That could, in a business capacity,

00:10:24 hurt a business if they're using inaccurate information,

00:10:28 taking it at face value.

00:10:29 Beyond that, there are more deeper ethical concerns

00:10:32 that have not been addressed, one of them

00:10:34 being the copyright and IP around this new AI.

00:10:39 The way that this generative AI is possible

00:10:41 is these companies have trained their AI models

00:10:44 on these massive, massive quantities of data.

00:10:47 And a lot of that data is pulled from the internet.

00:10:52 So take an example like Stable Diffusion,

00:10:54 which is trained on millions and millions and millions

00:10:58 of images around the internet.

00:11:00 Stability AI, which is one of the companies

00:11:02 that we write about in our coverage

00:11:04 and is behind Stable Diffusion, they've

00:11:07 been sued recently by Getty Images, which

00:11:09 is alleging that they used millions of Getty's photos

00:11:13 to allegedly train the models without paying

00:11:15 Getty a dime for their work.

00:11:17 There's also a lawsuit going on against OpenAI, Microsoft,

00:11:20 and GitHub, which is owned by Microsoft,

00:11:23 from programmers who believe that the code that you can get,

00:11:26 which is usable, it's not perfect,

00:11:29 but it can actually save time for some programmers today,

00:11:31 that that code comes from programmers who similarly were

00:11:35 not compensated for their work.

00:11:36 [MUSIC PLAYING]

00:12:05 The rate of change that I expect that we're

00:12:07 going to be seeing over the next few years

00:12:10 makes me concerned that we are not going to be

00:12:15 ready for what's coming next.

00:12:18 And yes, we're better at the issues from 10 years ago,

00:12:22 but we still haven't even solved the problems that

00:12:25 have been caused by the old transformation

00:12:29 where ranking systems sort of reshaped our society.

00:12:31 Right now, there's two main sort of camps within the tech world

00:12:37 in terms of how we're going to govern this technology.

00:12:40 And one is we're just going to give everyone

00:12:43 the power as an individual to do whatever they want with it.

00:12:46 And the other is that the tech companies themselves

00:12:48 will decide what you can do.

00:12:50 And both of those don't seem really great.

00:12:53 Like, yes, it's nice for us to have individual power,

00:12:55 but if everyone has the power to mess with democracy,

00:12:58 if everyone has the power to harass others,

00:13:01 to extort others, to generate scams quickly on demand,

00:13:05 like, that maybe isn't really good for the world.

00:13:09 There's a question of what else is there, right?

00:13:11 And that is what democracy tries to do.

00:13:13 It's can we take that question of how this technology should

00:13:18 impact society and bring it to a process

00:13:21 where those decisions are being really considered

00:13:24 in terms of their impacts?

00:13:26 But the challenge is that our current democratic systems

00:13:29 are frankly too slow, and the AI advances

00:13:35 are both incredibly quick and they're global.

00:13:38 One of the most terrifying and in many ways exciting

00:13:45 applications of generative AI is to copy our voices.

00:13:49 That's incredibly useful for translating across languages.

00:13:52 So you can have you just speaking in any language,

00:13:55 and it really sounds like you.

00:13:57 But the downside there is someone

00:13:59 can use that same technology to just copy your voice saying

00:14:04 anything they want.

00:14:04 We had companies in the space that were really responsible,

00:14:08 as well as one could be, and they had a lot of safeguards

00:14:10 to make it so that you really--

00:14:11 it was really hard to copy someone's voice

00:14:13 about their consent.

00:14:15 But that all changed very recently

00:14:17 when a number of companies just came out without doing that.

00:14:21 It's sort of like you're lowering the bar

00:14:23 for responsibility because these new entrants are coming in

00:14:26 because it's cheaper to not build in that extra tech,

00:14:29 and it makes it easier to use.

00:14:31 And so we can't live in a world where

00:14:33 people keep undercutting those responsibility practices.

00:14:36 There is real risk that we are moving toward a world

00:14:41 where people just don't have any sense of what is real,

00:14:45 and they just sort of give up on that.

00:14:47 And we've already seen that, obviously,

00:14:49 in many parts of the world, the sort of what

00:14:51 I've been calling reality apathy.

00:14:52 That is not the ingredient that we

00:14:56 need if we want to have functional society,

00:14:58 functional democracy.

00:14:59 Society is built on trust.

00:15:01 Economics is built on trust.

00:15:02 Politics is built on trust.

00:15:03 And we get into a really dark place

00:15:07 when we don't know what we can believe.

00:15:11 I think it's very difficult to see where this AI will not

00:15:18 impact anywhere that a human or a computer interface,

00:15:21 from better chatbots to the whole of the media industry

00:15:24 changing to create faster, better output, and even

00:15:28 areas like education and health care,

00:15:30 augmenting human potential in these areas.

00:15:33 It's hard keeping up to date with what

00:15:34 Jones' AI look likes next week, let alone one year or five

00:15:37 years.

00:15:38 But I think in the next few years, we're going to see video.

00:15:40 We're going to see audio, 3D, the ability to really create

00:15:44 any world you can imagine.

00:15:45 And I think that will be amazing.

00:15:47 I think we'll see it in areas like education, health care,

00:15:49 and others, really helping and enhancing

00:15:51 our ability to aid people.

00:15:53 And I think that's going to be great to see,

00:15:55 because it can integrate into existing systems,

00:15:57 unlike other things like maybe a metaverse or WEN3 that

00:16:00 always created their own systems and there was never

00:16:02 really immediate value for.

00:16:04 A couple of things that have shocked me about AI

00:16:06 as I've gotten to know this space, one

00:16:08 is that I feel like we're not all as unique as we

00:16:10 think we are.

00:16:11 These tools are pretty good at predicting

00:16:14 what an email to reject a PR pitch looks like,

00:16:18 or right back at me, the kind of way

00:16:21 to send a PR pitch to someone like Alex the reporter.

00:16:24 That kind of communication is actually pretty well predicted.

00:16:27 And so I think that we're going to see these AI tools being

00:16:31 useful there much earlier than I would have guessed.

00:16:34 Sam Ullman declined to be photographed

00:16:35 for our Forbes story.

00:16:36 We did photograph Greg Brockman and a couple

00:16:38 other leading entrepreneurs in this space.

00:16:41 But for Sam, we thought it would be really fitting

00:16:43 to use his own tools to generate an image of himself.

00:16:48 So we put into a prompt in OpenAI's image generating tool

00:16:51 called DALI that said, Sam Ullman on the cover of Forbes.

00:16:56 We got some weird ones back, including

00:16:59 a cover of sort of a blurry faced, uncanny valley,

00:17:03 Sam Ullman like person holding a cover of a magazine

00:17:07 like Forbes with the same image of blurry Sam Ullman.

00:17:10 We've already seen some media companies

00:17:12 starting to explore how to use these AI tools themselves.

00:17:14 Some elegantly, some actually getting

00:17:17 in trouble for publishing stories written by an AI tool

00:17:20 and not disclosing it right away.

00:17:23 I think this is a debate that's going to happen

00:17:24 across the media landscape.

00:17:26 For someone like me, I'm actually not concerned.

00:17:28 I do believe that just like using

00:17:30 an iPhone or a transcription tool

00:17:33 or other pieces of technology in my job,

00:17:36 I'll be using AI to do my work better.

00:17:38 If the AI can replace my work,

00:17:39 then I don't think I'm doing a good job.

00:17:42 I think our sense talking to these founders,

00:17:48 these investors is that a lot of the coolest applications

00:17:53 that are going to come out of this AI wave

00:17:55 haven't even been invented yet.

00:17:57 Maybe haven't even been imagined yet.

00:17:59 That said, it seems like for the most part,

00:18:02 starting out where this AI is going to be applied

00:18:04 is in some of the more boring places

00:18:07 and the more busy workplaces.

00:18:08 How do we integrate this AI into our basic business workflow?

00:18:12 So I think you're starting to see

00:18:14 kind of consumer behaviors change.

00:18:17 Students, for example, are already kind of using

00:18:20 ChatGPT to generate essays for them.

00:18:23 Some artists are using models like Stable Diffusion,

00:18:28 Mid Journey, or OpenAI's Dali

00:18:31 to help them create works of art.

00:18:34 I think because machine learning

00:18:36 is such a different paradigm as typical software,

00:18:40 there's going to be like a flock,

00:18:42 like a wave of AI, ML, native startups

00:18:46 that are going to do things,

00:18:48 build products a hundred times better

00:18:51 than the incumbents who have not been able

00:18:54 to build machine learning the same way.

00:18:57 So this is very exciting

00:18:59 because I think we really have the opportunity

00:19:02 to change the paradigm completely

00:19:05 and make emerge a whole group of newcomers

00:19:10 and new companies that are going to be able

00:19:13 to do things differently.

00:19:14 What we can do is you can use

00:19:17 sort of new forms of democratic processes.

00:19:21 And this is what I've been calling

00:19:24 sort of platform democracy or AI democracy,

00:19:26 to ask a sort of representative selection

00:19:30 of the global population.

00:19:32 Like, how should this technology be used?

00:19:34 How should it be deployed?

00:19:36 It sounds crazy to say this,

00:19:39 but there already are pilots

00:19:42 of this sort of global process.

00:19:44 And the reason why you need it to be global

00:19:46 is because this technology affects everyone.

00:19:48 It creates legitimacy.

00:19:49 It makes it really, really hard for companies

00:19:51 to then be like, "Oh, we're democratizing this technology."

00:19:55 When really what they mean is we're giving everyone

00:19:56 the ability to just like mess with everything.

00:19:59 That isn't what a democratic process,

00:20:00 that isn't what considered deliberation would have led to

00:20:03 if you had the people who are being impacted

00:20:05 by that technology in the room.

00:20:07 We need our AI systems to not just be optimizing

00:20:11 for engagement as we've seen with things like Facebook

00:20:15 and TikTok and YouTube,

00:20:17 but for the sort of the human values

00:20:20 that actually support society and support democracy.

00:20:23 And a big part of that is sort of not optimizing

00:20:26 for division, which is what comes naturally

00:20:28 out of those algorithms in many cases.

00:20:30 And so a lot of my work recently has been around

00:20:33 how can we instead optimize for bridging divides,

00:20:37 making conflict productive as opposed to destructive.

00:20:41 So I think that is absolutely core

00:20:44 to bake in from the beginning

00:20:45 because we've seen what happens to society

00:20:47 when systems that billions of people are using every day

00:20:50 are really optimizing for division.

00:20:53 And it isn't pretty.

00:21:01 In my opinion, AI and machine learning

00:21:04 is becoming the new paradigm to build all technology.

00:21:08 In my opinion, AI and machine learning

00:21:10 is becoming the new paradigm to build all technology.

00:21:14 If you think about the psychology of a person

00:21:18 who decides to be a truck driver,

00:21:19 there's something about the freedom of driving a truck

00:21:22 around the country, right?

00:21:24 So that person is already wired to be

00:21:26 kind of like an entrepreneur,

00:21:28 someone who loves them and craves this freedom.

00:21:31 Cloud Trucks, which is based in San Francisco,

00:21:33 helps truckers, especially smaller owner operators,

00:21:36 to manage their operations.

00:21:38 Before Cloud Trucks started,

00:21:39 a truck driver would go on something called a load board.

00:21:42 They would find a job that they want to take,

00:21:45 and then they would call a broker manually, right?

00:21:47 So actually call this broker

00:21:49 and negotiate with this broker to figure out

00:21:52 what the right price is

00:21:53 that they should book this load for.

00:21:55 And you can imagine that in this negotiation,

00:21:58 the driver is at a disadvantage.

00:22:00 They're on the road.

00:22:01 They are not in front of a computer.

00:22:03 So they don't really have the data to know

00:22:05 what's going on in the market in real time.

00:22:08 With Cloud Trucks,

00:22:09 not only are they searching multiple sources at once,

00:22:12 so you don't need to go, you know,

00:22:14 search by search by search in these different platforms.

00:22:17 You have one platform where you're doing this search,

00:22:19 but we also tell you,

00:22:21 "Hey, in this current time,

00:22:23 here's what we believe is a fair market price for this load."

00:22:27 So you're negotiating with confidence.

00:22:30 (gentle music)

00:22:32 - We'd started Cloud Trucks in 2019.

00:22:35 Prior to Cloud Trucks, I'd worked with Sabena and Scotty,

00:22:38 and that was my first exposure to the trucking industry

00:22:41 and learning some of these problems that truck drivers face.

00:22:44 And we had spoken with local carriers

00:22:47 and learned some of the pain points that they face.

00:22:51 And to us, we knew that there were,

00:22:53 these were really tangible problems

00:22:55 that we could use technology to solve.

00:22:57 So one piece of it is the search side of it,

00:22:59 making sure that all of this is integrated and aggregated.

00:23:03 And another piece of it is something

00:23:05 we call the schedule optimizer,

00:23:06 where we're recommending these jobs

00:23:08 that they should take to maximize their revenue.

00:23:11 We do similar things as well

00:23:12 with other parts of the problem.

00:23:14 So with cash flow, for example,

00:23:15 we've built something called a CT cash,

00:23:18 where we're able to pay these drivers instantly

00:23:20 after they complete a job,

00:23:22 as opposed to having them wait for 30 days

00:23:24 or 45 days to get paid.

00:23:26 And recently we launched a CT credit

00:23:28 where we're actually providing a credit card

00:23:31 to the truck drivers that work with us as well.

00:23:34 - Toben grew up in Nigeria,

00:23:36 where his parents had a soap factory.

00:23:38 After he moved to the US,

00:23:39 he worked at Zenefits and Open Door.

00:23:41 Then he found it's self-driving car startup, Scotty Labs.

00:23:44 In 2019, he sold Scotty to DoorDash.

00:23:48 - I come from a family in Nigeria that's entrepreneurial

00:23:51 and my parents owned a manufacturing business back there.

00:23:55 And I worked there for a year actually

00:23:57 before I moved out to the States for college,

00:23:59 15 years ago or so.

00:24:01 I've always been interested and attracted

00:24:03 to very traditional industries

00:24:06 and manufacturing and trucking are very closely tied.

00:24:09 But before I started CloudTrucks,

00:24:11 I started a company called Scotty Labs,

00:24:13 where we were building autonomous driving technology

00:24:16 for the trucking industry.

00:24:17 So I was spending a lot of time talking to truck drivers,

00:24:20 understanding their pain points.

00:24:22 And over the time running that company,

00:24:24 I've been in it for about three years

00:24:26 before it was acquired.

00:24:27 I came to learn that a lot of truck drivers

00:24:30 wanted to be entrepreneurs.

00:24:32 I think what we learned is that a lot of truck drivers,

00:24:37 the company drivers want to be owner operators

00:24:41 because they want to determine where they get to go,

00:24:44 when they get to go there, when they're on the road,

00:24:46 when they're at home with their families, right?

00:24:48 And a lot of the entrepreneurs just need more help

00:24:52 to be able to manage their business more profitably.

00:24:54 So the impact that we're seeing is if we do our jobs right

00:24:59 and we continue to build out the very best software

00:25:01 to make it very easy to operate a trucking business,

00:25:04 the owner operators that exist today

00:25:07 who are primarily the people that we work with

00:25:09 will be more and more successful.

00:25:11 - We have BI products that allow drivers

00:25:14 to really have data insights

00:25:16 on how their business is performing

00:25:19 to get a picture of what's going well,

00:25:21 how can they improve and how are they tracking

00:25:24 against their financial goals.

00:25:26 And then along with this, we have our schedule optimizer,

00:25:28 which just makes it easy,

00:25:29 which makes it easy for drivers

00:25:32 to plan out revenue maximizing schedules

00:25:35 over periods of time.

00:25:36 So instead of searching for independent jobs

00:25:40 or searching day in, day out,

00:25:42 they can put in their preferences

00:25:45 and we will generate a revenue maximizing schedule for them.

00:25:48 - With 142 million in venture funding,

00:25:51 CloudTrucks hopes to tap into the nation's network

00:25:53 of 3.4 million truck drivers.

00:25:56 - There are large trucking communities on Facebook,

00:25:59 there are large trucking communities

00:26:01 in every single state that you go to.

00:26:03 And just going out and talking to people

00:26:05 and really hearing from them,

00:26:07 it's pretty obvious that they want to be entrepreneurs

00:26:10 because they want to own their time, right?

00:26:12 They want to determine when they're going cross country

00:26:15 and when they're spending time at home.

00:26:17 I'm not saying that every single truck driver

00:26:19 wants to be an entrepreneur,

00:26:20 but certainly it's something that's a key part

00:26:23 of the trucking industry.

00:26:25 - So we're constantly listening to feedback

00:26:29 to really understand the pain points

00:26:31 our drivers are facing.

00:26:32 And this is feedback across multiple channels.

00:26:34 So our social media channels,

00:26:36 as well as feedback we hear from a conversation

00:26:40 with our sales team and feedback they submit

00:26:43 directly from the app.

00:26:45 And for example, a recent piece of feedback

00:26:48 that was acted on was actually drivers preferred

00:26:51 to submit preferences in terms of regions

00:26:54 as opposed to having to specifically submit

00:26:57 specific states or cities.

00:27:00 And that was what we had thought of as an engineering team.

00:27:03 And so we kind of quickly acted on this feedback

00:27:07 and built a region-based search and region-based preferences

00:27:11 and we were able to kind of ship this.

00:27:12 And so this really embodies the spirit

00:27:15 of customer feedback, of customer focus,

00:27:19 and continuing to iterate and build

00:27:22 towards solving the problems our drivers are facing.

00:27:25 - FinTech startups are really exciting

00:27:30 'cause they're innovating in the finance space,

00:27:32 which is typically a little bit slower moving.

00:27:34 So they're bringing things like new features,

00:27:36 like early wage access,

00:27:37 that plus like an easier user experience

00:27:39 was just really exciting for people.

00:27:41 - So what caused FinTech to get so much attention

00:27:44 and excitement initially is there's a lot of potential.

00:27:47 You know, when you think about meeting customers

00:27:49 where they are,

00:27:51 delivering banking services more cheaply and efficiently,

00:27:54 there's really a lot of opportunities

00:27:56 to give better services to people and for much cheaper.

00:28:00 And so that combined with COVID,

00:28:03 a surge in online transactions,

00:28:05 people not wanting to go to a bank in person

00:28:08 really created a lot of tailwinds behind FinTech

00:28:11 and a ton of interest in investing.

00:28:14 There are a bunch of companies getting attention

00:28:16 during the past few years.

00:28:18 Stripe is a big one.

00:28:20 They're a payments giant who make payments a lot easier

00:28:25 and they were valued at $95 billion in 2021.

00:28:29 Chime is a digital bank that was valued at $25 billion.

00:28:33 Buy now, pay later was a really big category.

00:28:37 So companies like Affirm and Klarna got a ton of attention,

00:28:42 really high valuations.

00:28:44 During COVID especially,

00:28:45 there was a view that this was gonna change

00:28:47 banking completely.

00:28:49 And they spent a ton of money on marketing

00:28:52 to bring in a lot of users,

00:28:54 but the valuations that they were getting

00:28:57 end up not being justifiable

00:28:59 when you look at the revenue they're bringing in.

00:29:01 And so real innovation here, really valuable service,

00:29:05 but the business models haven't been as productive

00:29:10 and bringing in enough revenue

00:29:11 to support the valuations that they really received.

00:29:14 - So Jeff and I started out with a really long list

00:29:16 that we pulled from CBN sites and PitchBook

00:29:18 of companies that hadn't raised in a long time.

00:29:21 I think our benchmark was about 18 months.

00:29:23 And then as we were researching those companies,

00:29:25 we kind of learned about a lot of other ones

00:29:27 through interviews with experts and analysts

00:29:29 and speaking with people at the companies.

00:29:31 A really common theme we saw among the companies

00:29:33 was that they raised money

00:29:34 and then they expanded really quickly.

00:29:36 So they hired a lot of people, they opened new offices,

00:29:38 and then as kind of macro conditions changed,

00:29:41 they weren't able to upkeep that burn rate.

00:29:43 And so they had to let people go,

00:29:45 they had to close down offices or products.

00:29:47 - Neo banks are digital first banks

00:29:50 that don't have any branch locations.

00:29:54 They deliver all their services

00:29:57 through online channels, apps, websites, and they're new.

00:30:01 You know, Neo banks are essentially in the UK

00:30:04 and in Europe, they call them challenger banks,

00:30:06 but they're newer banks,

00:30:07 so they're trying to disrupt

00:30:09 this traditional brick and mortar bank model.

00:30:12 Now for digital banks,

00:30:13 one of the challenges is the business model.

00:30:16 They don't have banking charters,

00:30:18 which is what allows you to lend to companies

00:30:21 and to do it very profitably.

00:30:23 Historically, lending has been really

00:30:25 banking's best business model.

00:30:26 It's how they make the most money.

00:30:28 And if you don't have a banking charter,

00:30:30 it makes it a lot harder to do it profitably.

00:30:33 Another big issue is banks actually serve customers

00:30:37 fairly well, especially when you think

00:30:39 about more affluent customers,

00:30:41 and especially in the US.

00:30:43 And people don't have a ton of complaints,

00:30:45 we're more affluent and use traditional banks.

00:30:48 And so where Neo banks really thrived

00:30:51 was middle and lower income customers.

00:30:53 And they did a great job of,

00:30:55 and have done a great job of serving these customers well,

00:30:58 lower fees, easier access to services.

00:31:02 The challenge is with lower and middle income customers,

00:31:05 they don't have as much money,

00:31:07 you can't make as much money off of them, unfortunately.

00:31:10 And so it becomes harder for these Neo banks

00:31:14 to actually make a lot of money off them,

00:31:16 they're harder to lend to.

00:31:18 Varo is one of the companies that stands out

00:31:20 for having financial issues right now.

00:31:22 They had an interesting model where they went out

00:31:24 and spent $100 million on a bank charter,

00:31:27 and it took them years.

00:31:28 The challenge they're having is they haven't been able

00:31:31 to attract enough deposits to really lend profitably.

00:31:35 And so they have a base of 5 million customers,

00:31:40 5 million accounts that they've reported,

00:31:43 only $275 million in deposits,

00:31:45 so only $52 per account.

00:31:48 And so it's really hard for them to make money on lending.

00:31:52 I think venture capital people

00:31:53 are still very excited about FinTech,

00:31:55 but it's more just about seeing what the public markets do

00:31:58 and kind of where that bottom is

00:31:59 before they start putting more money in.

00:32:02 The industry is going to be fine.

00:32:03 Basically what happened here is kind of classic tech bubble,

00:32:07 just like we saw in the dot-com bubble, boom and bust.

00:32:11 What happened was you had a lot of innovation,

00:32:14 long-term opportunities that people were pursuing,

00:32:17 and then a lot of investment flooded in.

00:32:20 And too many investors were bidding on the same companies

00:32:23 at the same time, and so companies

00:32:26 that didn't have half-baked business models

00:32:29 got funded pretty easily,

00:32:31 and there was too much money

00:32:32 chasing too few really good companies.

00:32:36 And so what you had was just a big bubble.

00:32:38 And now what's happening essentially

00:32:40 is kind of the aftermath and the downside of the bubble,

00:32:44 where you have a lot of companies that need to do layoffs,

00:32:47 a lot of companies that need to really lower their costs

00:32:51 so they can get closer to profitability.

00:32:54 And what we will see is a number of companies,

00:32:57 as we talked about in our article,

00:32:58 shutting down, a number of companies getting acquired.

00:33:02 And, but the industry will be fine,

00:33:05 and the strongest companies will ride this out,

00:33:07 and they'll, some of them may be even able

00:33:10 to gain market share during this tough

00:33:12 kind of bear market for FinTech.

00:33:14 - Pickup trucks are the biggest product segment

00:33:17 in the United States by far.

00:33:19 Ford's F-Series has been the top-selling vehicle line

00:33:23 forever, and it was again last year.

00:33:26 Americans love pickup trucks.

00:33:28 And so this is one segment that Tesla does not play in.

00:33:33 And Elon Musk has been promising Tesla would come

00:33:36 into the pickup segment for a very long time.

00:33:39 A few years ago, the company unveiled the Cybertruck,

00:33:42 and the expectation is this is a new type of pickup truck

00:33:46 that'll address an enormous market.

00:33:48 It's gonna be different than any other kind of pickup

00:33:50 we've seen before.

00:33:51 - I would think that the truck will be core

00:33:53 to their business.

00:33:54 I mean, as we've seen with the domestic automakers,

00:33:57 it is their bread and butter.

00:33:59 And I think there could be significant profits

00:34:01 for Tesla with a truck.

00:34:04 On the EV startup side, Rivian clearly is a competitor

00:34:08 because they were out there first,

00:34:10 and they've got a pickup truck and an SUV.

00:34:12 And then Ford with the electric Lightning,

00:34:15 and they've got a lot of production capacity

00:34:17 that they're ramping up, and they were out there first

00:34:19 as a real mass marketer.

00:34:21 And then of course, you know, GM will have

00:34:23 both the Chevy Silverado and the GMC Sierra

00:34:26 that will be competition as well.

00:34:28 - Elon said the vehicle would be priced from about $40,000.

00:34:33 I would say objectively, that's a highly unlikely price point

00:34:37 for this vehicle.

00:34:38 And in fact, as it turns out, over the long history of Tesla

00:34:41 there actually is no Tesla product that's ever sold

00:34:44 at the base price that Elon has promised.

00:34:47 So most people who are watching this space assume

00:34:50 that Cybertruck is going to kick off at a base sale price

00:34:54 of around 70 to $80,000.

00:34:56 Again, it's still sort of unclear.

00:34:58 What we do know is it's going to be heavy.

00:35:01 A few years ago, Tesla engineers were communicating

00:35:04 with California's Department of Motor Vehicles,

00:35:07 and they revealed that the likely weight of the vehicle

00:35:10 at a minimum would be about 8,500 pounds.

00:35:13 And to put that in perspective,

00:35:14 that's a couple thousand pounds more

00:35:16 than a standard Ford F-150.

00:35:19 Cybertruck is likely to be an extremely

00:35:22 energy-intense vehicle to produce and manufacture.

00:35:27 And that's for a number of reasons.

00:35:28 It's using this all sort of steel and aluminum body.

00:35:32 So there's a lot of metal going into this vehicle.

00:35:34 The batteries themselves are large

00:35:37 and very resource-intensive.

00:35:39 So lots of nickel, lots of cobalt,

00:35:41 lots of lithium coming from all over the place.

00:35:43 If you look at estimates by something

00:35:46 like Argonne National Laboratory,

00:35:48 which tries to calculate the carbon intensity of vehicles,

00:35:52 including how they're made,

00:35:54 every EV sort of starts overweight

00:35:57 in terms of carbon emissions relative to,

00:36:00 say, a gasoline car.

00:36:01 It takes more energy to build an EV

00:36:04 because you have to gather all these materials,

00:36:06 and the manufacturing process is a little different.

00:36:08 Another kind of mild concern,

00:36:10 or maybe not so mild concern,

00:36:11 is automotive tires, vehicle tires,

00:36:14 wear down over time and create dust.

00:36:17 There's a chemical treatment on tires

00:36:19 that's designed to keep them from wearing out so fast,

00:36:22 but it turns out that that particular chemical

00:36:25 gets into waterways, rivers, and the sea,

00:36:28 and is very toxic for certain types of salmon

00:36:30 and maybe some other fish.

00:36:31 Heavier vehicles produce more of this dust.

00:36:34 So there is an argument that if you're putting

00:36:36 an 8,500-pound electric truck on the vehicle,

00:36:40 that actually is gonna be producing

00:36:41 more of this tire dust pollution

00:36:44 than, say, a conventional gasoline or diesel pickup truck,

00:36:46 which may not be as heavy.

00:36:48 Analysts, investors, as well as customers

00:36:54 have been eagerly awaiting the release of the Cybertruck,

00:36:57 production of which has been delayed

00:36:59 on a number of occasions to date.

00:37:02 I think at this point, analysts are expecting

00:37:05 that the Cybertruck will be released at some point

00:37:07 in the first half of 2024,

00:37:09 and they see that as part of what will need to happen

00:37:14 for Musk to achieve his very ambitious growth targets,

00:37:17 which some view as probably unachievable,

00:37:21 but certainly important to making some headway

00:37:25 towards those.

00:37:26 So I think further delays or hiccups

00:37:29 as it relates to that release

00:37:31 probably wouldn't be good for the stock.

00:37:34 There are a couple ways to look at it.

00:37:35 There may be a group of buyers

00:37:37 that never would have considered a pickup truck,

00:37:40 but because it's an EV, because it's a Tesla

00:37:42 or one of the new EV startups, they will consider it.

00:37:46 I think the other big question is,

00:37:48 will the core truck buyers that have driven F-150s

00:37:53 and Silverados forever, will they shift to EVs?

00:37:57 I'm less certain about that.

00:37:59 And then of course, that leads to the question of

00:38:01 what are the volumes going to be?

00:38:03 And that's really hard to know

00:38:05 because we don't know exactly who will be the buyers

00:38:08 and how many of them there will be.

00:38:10 It's been a bumpy ride for Tesla stock for sure,

00:38:13 to say the least, over the last year or so,

00:38:15 dating back to mid-April of last year

00:38:18 when Elon first announced his Twitter acquisition.

00:38:21 Through the end of the year,

00:38:22 the stock crashed by nearly 70% before rebounding recently.

00:38:27 The distraction of the Twitter acquisition to Elon

00:38:30 and all the stock that he had to sell to finance it

00:38:33 played a big role in a significant decline in Tesla stock.

00:38:37 Most of Elon's net worth is derived from his shares of Tesla

00:38:42 and his options to buy shares in Tesla.

00:38:45 Largely driven by the Twitter acquisition,

00:38:47 the decline in Tesla stock over the last year or so

00:38:51 has taken Elon, who a year ago was the richest person

00:38:54 in the world by nearly $50 billion,

00:38:57 seen him replaced by Bernard Arnault of LVMH

00:39:01 as the world's richest person.

00:39:02 The company, when it introduced itself to the world

00:39:07 in 2006, set this really aggressive agenda

00:39:11 that we're going to change transportation

00:39:13 with sustainable vehicles powered primarily by solar power.

00:39:18 So they really wanted to be associated with clean energy,

00:39:22 clean transportation from the very beginning.

00:39:24 But he also said something important,

00:39:26 which was the first vehicle was gonna be an expensive one,

00:39:28 the Roadster, but each subsequent vehicle

00:39:31 would cost less and less and less

00:39:34 as the company scaled up and got better at making EVs.

00:39:37 Well, we're pretty deep into things now.

00:39:39 It's about 17 years, in fact,

00:39:41 since the first Roadsters were built.

00:39:44 Those cost about $100,000.

00:39:47 The average Tesla today retails for about $65,000.

00:39:52 I would argue that objectively,

00:39:54 the way Tesla products are now positioned,

00:39:57 it's harder and harder to make the argument

00:40:00 that this is purely an environmentally-oriented purchase.

00:40:03 From the very beginning, the company knew what it had to do

00:40:06 to get people to buy these things, to take EV seriously.

00:40:10 They had to be nice to look at and fun to drive,

00:40:12 and they had to have features that were as good as

00:40:15 or superior to those in a gasoline-engine car.

00:40:19 And they did a terrific job with that.

00:40:21 What they didn't do was then keep working

00:40:24 to make them more affordable

00:40:26 and actually more environmentally-friendly for more people.

00:40:30 - Why this business?

00:40:31 Why did you wanna get into nuclear?

00:40:34 - Five years ago, I set out to solve a problem.

00:40:38 Carbon had been increasing.

00:40:42 Access to clean energy is becoming difficult

00:40:46 across parts of the world,

00:40:47 and now we even see problems with energy security as well.

00:40:50 And so I founded the Energy Impact Center,

00:40:51 first just a research institute,

00:40:53 to take a first-principles look at our climate

00:40:56 and energy problems across the globe.

00:40:59 Our investigation, our interviewing subject-matter experts

00:41:03 across the country, across academia, across industry,

00:41:06 across policymakers, led us to understanding

00:41:09 that nuclear was the solution,

00:41:11 and it had just become stagnant for unobvious reasons.

00:41:16 And so we set out for even more research

00:41:18 and more interviews and more investigation

00:41:20 to figure out why that was.

00:41:23 (gentle music)

00:41:26 (upbeat music)

00:41:28 I'm here today with Brett Kugelmas,

00:41:49 the founder and CEO of Last Energy,

00:41:53 and we are here in what's called a mechanical prototype

00:41:58 of your first small nuclear reactor.

00:42:02 This is very exciting.

00:42:03 This building is, what's the size of the building

00:42:05 that we're in now?

00:42:06 - It's a cube that's 30 feet by 30 feet by 30 feet.

00:42:09 - Okay, and within this cube is housed

00:42:13 Last Energy's new nuclear reactor.

00:42:17 So this is kind of amazing,

00:42:19 but we've reached the point in the world

00:42:21 where we're really starting to think about the future

00:42:24 of new nuclear, advanced reactors,

00:42:27 and so Last Energy is working to commercialize this future,

00:42:32 but you're doing it in a very different way.

00:42:35 So what I'd like to get into is the story of Last Energy

00:42:39 and what you're doing that's so different

00:42:41 from some of the other companies like GE, Hitachi,

00:42:45 and Toshiba, and Westinghouse

00:42:47 that are trying to build enormous new power plants.

00:42:50 Tell me what you're working on.

00:42:52 - So we've taken is the standard

00:42:54 pressurized water reactor technology.

00:42:56 It's the workhorse of the industry,

00:42:58 300 power plants around the world,

00:43:00 10% of humankind's electricity

00:43:02 is produced from this power source,

00:43:05 and we have productized it, miniaturized it,

00:43:08 and modularized it in order to make it

00:43:10 a manufacturable product,

00:43:13 in order to bring the cost down

00:43:14 and increase the scalability

00:43:16 of nuclear energy production across the world.

00:43:19 - Okay, so in recent months,

00:43:20 we've seen some big breakthroughs

00:43:23 announced in fusion technology.

00:43:25 So nuclear fusion had a big day in late 2022.

00:43:30 This was newfangled, new stuff

00:43:34 that no one had ever accomplished before.

00:43:36 Tell me what's new about your technique.

00:43:38 - Yeah, we're innovative in the way

00:43:40 that we are not actually introducing any new physics,

00:43:43 any new chemistry, any new material science.

00:43:45 It's a very different approach

00:43:47 towards energy technology innovation.

00:43:50 We spent years trying to study

00:43:52 what makes new energy systems work,

00:43:54 so what makes new technology work,

00:43:56 and what we found over and over again

00:43:58 is if you change too many variables all at the same time,

00:44:01 back to that physics or the chemistry or material science,

00:44:04 if you deviate from the standard supply chain,

00:44:07 you find yourself in a position

00:44:08 where every component is 10 times as expensive,

00:44:12 and you don't actually make any headway on cost reduction.

00:44:14 Our core design principle is use standardized equipment,

00:44:19 off the shelf, one might say,

00:44:22 in order to benefit from the experience

00:44:23 of so many other industries before us.

00:44:26 - So all of the skill set is already here.

00:44:29 These guys are accustomed to building huge equipment

00:44:32 for the oil and gas industry,

00:44:33 and that fits your needs perfectly.

00:44:36 - Exactly, so we don't even have to invest

00:44:38 in our own facilities to get started.

00:44:39 We don't have that huge upfront capital cost.

00:44:42 Rather, we get to benefit

00:44:43 from already existing facilities,

00:44:45 and use a contract manufacturing process

00:44:48 in order to get off the ground years ahead of schedule.

00:44:53 - The kind of vessels that they're manufacturing here,

00:44:55 these are very common for the oil and gas industry.

00:44:58 How is it that you can use the same types

00:45:01 of equipment for nuclear?

00:45:04 - Yeah, one of the benefits that we brought about

00:45:07 in designing our system initially

00:45:09 was to base everything off

00:45:10 of the existing oil and gas supply chain.

00:45:12 So the oil and gas industry is already used

00:45:14 to dealing with high-pressure systems,

00:45:16 high flow rates of water, pressure vessels,

00:45:19 flanders, pipes, you name it.

00:45:22 And so by utilizing not only the existing supply chain,

00:45:26 but also their existing facilities

00:45:28 and the labor force and the expertise,

00:45:30 we're able to hit the ground running

00:45:31 without having to reanalyze the wheels.

00:45:33 - Fusion, even if they've made breakthroughs,

00:45:36 it could take another 10 or 20 years

00:45:38 to test out all the new parts

00:45:40 and get to the point where it's economically viable, right?

00:45:44 Your plan was to not have anything new,

00:45:49 to use the oldest possible technology that's been proven.

00:45:53 And so your, I mean,

00:45:55 why should people care about last energy?

00:45:57 Because you're, what,

00:45:58 you're putting it together in some new way?

00:46:00 - It's a technology innovation

00:46:02 from a systems integration perspective.

00:46:04 We productized nuclear.

00:46:07 The challenge with new physics innovations,

00:46:10 it's not just the 10 years to get past the physics part

00:46:13 and then another 10 years

00:46:14 to get past the engineering part.

00:46:16 The problem is if your materials,

00:46:18 if your supply chain deviate from what's common

00:46:21 and scaled across many other industries,

00:46:24 you might never be economical.

00:46:26 - Okay, so have you sold any of these yet?

00:46:29 - So we probably had more commercial success

00:46:31 than every other new nuclear startup combined

00:46:34 just this last year.

00:46:36 We've ended up signing contracts

00:46:39 throughout Eastern Europe and Poland, Romania,

00:46:42 and now also in the UK

00:46:43 as some of our early target markets.

00:46:45 We have over two dozen projects

00:46:47 under development across Europe.

00:46:49 - And you've accomplished this just as a startup.

00:46:51 I mean, I was led to believe that the nuclear,

00:46:53 new nuclear was gonna be still years and years away

00:46:56 and that you would need,

00:46:57 only the biggest companies would be able to make it happen.

00:47:01 - If you're trying to do too much,

00:47:03 if you're trying to reinvent components or technology,

00:47:06 almost all of the nuclear startups

00:47:08 start with the perspective

00:47:09 that there's something wrong with the reactor.

00:47:11 Okay, well that takes thousands of people

00:47:14 to solve the reactor problem.

00:47:16 But if you just use the existing reactor technology,

00:47:18 like you can see behind me here,

00:47:20 then with just a 40 person company,

00:47:23 you can make this type of commercial headway.

00:47:25 - My understanding is that you don't have a PhD

00:47:28 in nuclear science or anything.

00:47:30 You're an entrepreneur.

00:47:32 Your previous company involved using drones

00:47:36 to study rooftops for insurance companies.

00:47:40 How in the world did you go from that to this?

00:47:43 - Yeah, so I have a educational background

00:47:45 in mechanical engineering and an entrepreneurial experience

00:47:47 in a hard tech company, in Frontier Tech,

00:47:49 in building drone technology.

00:47:51 But after selling that company in 2017

00:47:53 and wanting to focus on global scale challenges

00:47:56 such as energy and climate,

00:47:58 I took my time studying the industry,

00:48:01 meeting with hundreds of experts first in climate,

00:48:04 and then when realizing that nuclear

00:48:06 was just totally misunderstood, totally under leveraged,

00:48:10 ended up taking thousands more subject matter

00:48:12 expert interviews just in the nuclear sector.

00:48:14 - And so the right problem was shrinking

00:48:18 the enormous nuclear power plants

00:48:21 that we have around the world into a more manageable size?

00:48:24 - That was our solution.

00:48:25 The problem that we discovered was construction complexity.

00:48:29 - Okay, all right.

00:48:30 - So just the time it takes,

00:48:31 the interest accrued on your financing charges

00:48:34 over that construction period,

00:48:36 this ended up, we realized, historically,

00:48:38 leading to most of the cost of nuclear energy.

00:48:41 And so that became the problem to solve,

00:48:43 constructability, not reactor physics.

00:48:45 - Okay, so problems have led people to think

00:48:47 that nuclear's just not gonna be affordable.

00:48:50 What you found is that it can be very affordable

00:48:53 if you shrink it all and use only these off-the-shelf parts?

00:48:57 - Go small, go repeatable,

00:48:59 and then build your way up to scale economies of many

00:49:03 instead of the economies of size.

00:49:05 That's our approach.

00:49:06 I think people's perception of nuclear

00:49:08 has definitely changed dramatically

00:49:09 over the last few years,

00:49:10 really understanding, as we start to scale up

00:49:13 these renewable systems, some of their shortcomings.

00:49:15 The land consumption, material consumption,

00:49:18 they themselves have a carbon footprint.

00:49:21 And then when you layer all the environmental benefits

00:49:23 of nuclear on top of the energy security benefits

00:49:26 that we're seeing ever more present throughout Europe

00:49:29 today's day and age,

00:49:30 nuclear's becoming the obvious choice.

00:49:32 And I think both people and governments are coming around.

00:49:35 I mean, we know they are

00:49:36 because they came to us looking for solutions.

00:49:39 - They came to you, in particular,

00:49:41 these Eastern European countries,

00:49:43 in part because after Russia's invasion of Ukraine

00:49:47 and the shutoff of gas to Europe,

00:49:50 they realized we need other solutions.

00:49:52 We can't just dig more coal to make ends meet.

00:49:55 - They always knew that there was an energy security threat.

00:49:58 And we've been talking to many

00:49:59 of these Eastern European countries,

00:50:01 Romania and Poland, for many years.

00:50:03 It was just, with the war, it became real to everybody

00:50:08 how serious a concern energy security was.

00:50:10 So they were able to put their political support

00:50:13 behind the projects that they always wanted to anyway,

00:50:16 because energy security became a threat to the public,

00:50:20 that the public was aware of as well.

00:50:22 And so, yes, within a month of the war breaking out

00:50:24 in Ukraine, we got a call from the prime minister

00:50:26 of Romania himself, came out, and he cleared room

00:50:30 for two of our projects

00:50:31 at the Mioveni Research Reactor Site.

00:50:33 - Now, when we look at some of the biggest obstacles

00:50:38 to nuclear, we've got, what, regulatory issues,

00:50:41 financing issues, how are you going to pay for things?

00:50:46 What's this gonna cost, anyway?

00:50:49 - Yeah, so each one of these units costs us

00:50:52 under $100 million to build,

00:50:54 and it produces billions of dollars worth of electricity

00:50:58 over its lifetime.

00:50:59 The way that we have architected our business model

00:51:02 is using what's common in the renewables industry,

00:51:04 known as a power purchase agreement.

00:51:07 So what we do is we get our customer,

00:51:09 usually a factory of some sort,

00:51:11 whether it be aluminum or glass or cement,

00:51:13 we get them to sign us up as their utility.

00:51:16 They write us a contract saying,

00:51:17 "Here's the price of power over this period of time."

00:51:20 We then take that contract to the financial markets,

00:51:24 to private equity infrastructure funds.

00:51:26 They fund the capex of the facility,

00:51:29 and then we both benefit from the electricity sales

00:51:32 and the profits of it over time.

00:51:34 - You said that that's the way

00:51:35 that renewable energy has grown.

00:51:38 Indeed, a factory is not gonna own its own solar panels

00:51:43 or wind turbines, right?

00:51:45 They contract through that long-term

00:51:48 power purchase agreement.

00:51:50 How many years are we talking, 20 years, 30 years?

00:51:52 - The contracts that we have in Poland right now

00:51:54 are for a 24-year period.

00:51:56 - So this, this is the mock-up, of course,

00:51:59 but the plant would be operating for 24 years.

00:52:02 Is that the average lifespan?

00:52:04 - The plant's lifetime is 42 years.

00:52:07 However, with these power purchase agreements,

00:52:09 it's much more common for them to be five, 10,

00:52:12 or 20-year power purchase agreements.

00:52:14 - It sounds to me like that would incentivize you

00:52:17 in a different way than utility companies, perhaps.

00:52:21 'Cause if I'm a big utility company

00:52:24 building a nuclear power plant,

00:52:25 I know that if I have cost overruns,

00:52:27 I can just charge my rate payers that money.

00:52:31 I don't have to eat it myself.

00:52:33 But if you're gonna continue to own the plant,

00:52:36 I mean, that must incentivize you

00:52:37 to really keep the costs contained.

00:52:39 - Us having ownership from concept through operation,

00:52:43 through decommissioning,

00:52:44 is a perfect alignment of incentives.

00:52:47 It means that from the design itself,

00:52:49 we're designing for affordable electricity.

00:52:52 We're designing with decommissioning in mind.

00:52:54 We're designing throughout the entire plant's,

00:52:57 we've designed the system from the get-go

00:52:58 to consider the entire plant's lifetime.

00:53:01 - At the end of the lifetime of this plant,

00:53:04 you're gonna have a lot of nuclear waste, I imagine.

00:53:07 That's a big concern of a lot of people.

00:53:09 They're still skeptical about the safety of nuclear.

00:53:14 How do you deal with that issue?

00:53:16 - Most of the safety concerns are perception-based

00:53:20 rather than resulting from the physical phenomenon

00:53:24 of the plant.

00:53:24 Yes, it's radioactive,

00:53:25 but it's not that radioactive after you shut it down.

00:53:29 The heat dissipates very quickly.

00:53:31 The radioactivity also, that's the magic of radioactivity.

00:53:33 It magically disappears all on its own.

00:53:36 And so within just a few months,

00:53:40 iodine-131, which is the radionuclide

00:53:43 that has a hazard to human health, all gone.

00:53:46 Okay, so all of a sudden you've eliminated the health hazard

00:53:48 within just a few months of waiting.

00:53:50 Within 10 years, most of the heat is gone.

00:53:53 And so we've designed our system,

00:53:54 this exact same modular frame with decommissioning in mind

00:53:58 to be able to take it apart just as easily

00:54:00 as you put it together

00:54:01 and bring it to whatever waste storage facility

00:54:03 or recycling center you wanna bring it to.

00:54:05 We've designed our reactor vessel itself

00:54:07 to be like a battery cartridge.

00:54:09 And we've designed the facility, this nuclear island,

00:54:12 with extra battery slots.

00:54:14 So every six years we come in with a new battery cartridge,

00:54:17 a fully fueled reactor vessel, drop it into place,

00:54:20 plug it in and run it for another six years.

00:54:23 We do that same thing seven times

00:54:25 throughout the lifetime of the facility.

00:54:26 And then we let it cool down

00:54:28 and then the whole facility can be packaged up.

00:54:30 - So you don't have to remove the spent fuel rods.

00:54:33 They just stay here the whole time?

00:54:37 - That is one of the key differences

00:54:38 in the operational paradigm

00:54:40 between us and the standard technology.

00:54:42 With the standard PWR technology,

00:54:44 you open up the reactor vessel,

00:54:46 you shuffle the fuel, you add new fuel.

00:54:48 For us, we don't.

00:54:49 We simply drop in a new battery cartridge, fully fueled.

00:54:52 - What would be the biggest obstacles

00:54:54 that you still have to overcome

00:54:56 in order to get the first one of these operating?

00:54:59 - Yeah, so we've checked off most of the boxes

00:55:02 from everything from government approval

00:55:04 to technology development,

00:55:05 manufacturability is what we're testing right here.

00:55:08 But there are still steps along the way.

00:55:10 This mechanical prototype will advance.

00:55:12 We're gonna test out the disassembly next,

00:55:14 the transportability,

00:55:15 and continue to make these design enhancements,

00:55:18 all serving our greater mission of scalable,

00:55:21 easy to construct, reducing complexity

00:55:24 to deliver the most affordable clean power

00:55:27 that you could imagine.

00:55:28 - Okay, so each one of these units

00:55:30 will produce how much electricity?

00:55:32 - 20 megawatts.

00:55:33 It's about the size of a data center

00:55:35 or a pulp and paper factory

00:55:37 or an automotive manufacturer's.

00:55:39 - But a big, old school nuclear,

00:55:42 those are how many megawatts, a thousand?

00:55:43 - A gigawatt, yeah, a thousand megawatts,

00:55:45 so about the size of a million person city,

00:55:46 whereas ours would serve a town

00:55:49 about the size of 20,000 people.

00:55:51 - But if I want more of them, I can build,

00:55:53 you can build them in parallel?

00:55:55 - And that's the other change in the operational paradigm.

00:55:59 Another area that we're innovative

00:56:00 is borrowing lessons learned from other industries.

00:56:03 When you build a solar farm,

00:56:05 you don't build one giant solar panel.

00:56:07 You build the same solar panel over and over again,

00:56:09 you stack them next to each other.

00:56:11 The exact same with our micronuclear facilities.

00:56:14 If you need 200 megawatts,

00:56:15 we're gonna install 10 identical 20 megawatt units

00:56:19 right next to each other.

00:56:20 - So like you were saying, it's counterintuitive.

00:56:22 You might give up a little bit of efficiency

00:56:24 because your units are smaller,

00:56:27 but you're making that up

00:56:29 in the ease of manufacturing and installation.

00:56:33 - Exactly.

00:56:34 - Since there's nothing really new here,

00:56:35 what's your, what's Last Energy's intellectual property?

00:56:40 - Well, there's still quite a bit of technical complexity.

00:56:43 The systems integration, the modularization,

00:56:46 the manufacturability,

00:56:47 these are all incredible technical challenges to overcome.

00:56:51 But the rule that we set for ourselves

00:56:54 is no component level innovation,

00:56:56 no new physics, no new chemistry, no new material science.

00:57:01 Those are the sexy and the fun problems

00:57:03 that people gravitate towards.

00:57:04 Instead, we chose the still technical problems,

00:57:09 but the boring ones.

00:57:10 - Okay, so your intellectual property

00:57:11 is in how to put it all together

00:57:14 and transport it to the other side of the world

00:57:16 and how much electricity we get from nuclear.

00:57:20 My understanding is there's something like 300

00:57:22 or 400 nuclear power plants around the world,

00:57:25 and they put out roughly 400 or 500 gigawatts of power.

00:57:30 Does that sound right?

00:57:32 - This is what is just so incredible

00:57:34 about nuclear technology.

00:57:37 It's that for so little input, you get so much out of it.

00:57:42 And so those 400, 400 buildings around the world

00:57:45 provide 10% of world's electricity,

00:57:47 4% of all of our energy consumption

00:57:50 as a global civilization.

00:57:52 That's incredible from 400 buildings.

00:57:54 The fact is that any society

00:57:58 that has experienced a rapid decarbonization,

00:58:01 whether you look at France or Sweden

00:58:02 or South Korea or Ontario,

00:58:05 anyone that's done a total decarbonization

00:58:08 of their energy infrastructure in under a decade's time,

00:58:10 it's always been nuclear.

00:58:13 - They still rely on coal,

00:58:15 especially in Poland and Romania.

00:58:18 I think they get the majority of their electricity

00:58:20 from coal still.

00:58:21 So your initial customer base are people,

00:58:26 companies that no longer wanna rely on dirty coal power.

00:58:30 - The factories that we serve in Poland specifically

00:58:33 have two problems.

00:58:34 The first is that yes,

00:58:36 their energy that they get is very expensive and very dirty.

00:58:39 And the other is actually capacity

00:58:41 because it's not so easy

00:58:42 to just string up new transmission lines.

00:58:44 And so they wanna grow their economy.

00:58:46 They wanna grow their industry

00:58:47 and they literally cannot get enough power to the factory.

00:58:51 So what do we do?

00:58:52 We ship over a bunch of shipping container size modules,

00:58:55 put it right next to the factory

00:58:56 and we become their utility.

00:58:58 Nuclear has yet again, another very unique advantage

00:59:02 and it's called distributed baseload.

00:59:04 The fact that you can perfectly match your power supply

00:59:08 with your power demand, both in location and in time.

00:59:12 If a city needs 400 megawatts of power,

00:59:15 they can buy 20 of our 20 megawatt units

00:59:19 and co-locate that with the city.

00:59:20 So you don't even need transmission cabling at all.

00:59:23 If they grow in terms of size,

00:59:24 they can just add on another unit.

00:59:26 So it's always perfectly matched.

00:59:28 - And you don't think those,

00:59:29 the citizens of that town should worry

00:59:31 about having all those reactors right in the fields,

00:59:35 right next door?

00:59:36 - I think part of the reason that some communities

00:59:40 have grown skeptical or scared of nuclear

00:59:42 is actually lack of exposure to it.

00:59:45 And so by building these beautiful buildings

00:59:47 and setting them up outside of town

00:59:49 and inviting the community to come visit it,

00:59:51 we're gonna be changing the perception of nuclear as well.

00:59:54 - I hope that's true.

00:59:56 Once you've built a dozen of these in Eastern Europe,

01:00:01 do you think the NRC might just wanna rubber stamp it

01:00:04 and say, "This is good for the US too?"

01:00:06 - I think after we've built a few of these in Eastern Europe

01:00:09 and Western Europe as well,

01:00:11 we're gonna see interest from around the entire world.

01:00:13 And it's gonna be a race to see who can get their hands on

01:00:16 as many of these as soon as possible.

01:00:17 - That'll be a good problem for you to have.

01:00:19 Okay, how many of these do you think

01:00:21 you could build over the next decade?

01:00:23 - Our goal is to completely decarbonize

01:00:27 Earth's energy production, period.

01:00:29 We wanna make energy abundant and affordable

01:00:32 because of the effects that it has for every other industry.

01:00:36 I mean, if you think of data centers

01:00:38 or if you think of material production,

01:00:41 if you think of all of the modern wonders of life,

01:00:43 they all have energy as a root input to them.

01:00:47 And so by us making energy cheaper,

01:00:49 we're gonna help fill the visions

01:00:51 of every other industry as well.

01:00:53 - There's certainly some institutional inertia

01:00:55 that has slowed down from a bureaucratic perspective

01:00:58 the development of new nuclear installations

01:01:00 in this country.

01:01:01 It applies less to us because we're focused on Europe.

01:01:04 And in Europe, we've had a lot of success

01:01:06 working with the NRC equivalent regulators.

01:01:08 So the ONR out in the UK, ChENICON in Romania,

01:01:11 and the PAA in Poland have been great partners

01:01:14 in helping us regulate and implement

01:01:17 our nuclear technology abroad.

01:01:19 - When you're talking tens of thousands of reactors,

01:01:21 that seems like an awful lot of material,

01:01:23 a lot of uranium and everything else.

01:01:27 Is that gonna be a limiting factor at all?

01:01:30 - One of the beauties about a system as simple as ours,

01:01:33 us not moving towards these radical new physics innovations

01:01:37 that require new materials,

01:01:39 is that our plant is essentially steel,

01:01:42 copper, water, and uranium.

01:01:45 All of some of the most abundant and available materials,

01:01:48 especially in terms of the power production

01:01:50 that they end up creating,

01:01:52 there's more than enough from a material perspective

01:01:54 for us to not only satisfy global energy demand,

01:01:58 but for us to 10X it.

01:01:59 - For wind turbines and solar panels,

01:02:02 they need a lot of exotic materials,

01:02:05 rare earth metals and stuff like that.

01:02:08 You don't need any of those?

01:02:09 - There is a challenge in these systems

01:02:11 that require big magnets

01:02:13 with some of these more exotic materials,

01:02:15 but they also require steel and cement

01:02:18 and other things too that are material concerns.

01:02:21 The key is with nuclear,

01:02:22 you get so much more for so much less input.

01:02:27 And so for us to produce that exact same megawatt hour

01:02:30 of energy as a renewable system,

01:02:32 we'd be using between 100 and 1,000 times less material.

01:02:36 - For the same amount of electricity?

01:02:38 - For the same amount of electricity.

01:02:40 You're looking at a facility right now

01:02:42 that can supply energy for 20,000 homes.

01:02:46 If you were to think of all the solar panels you'd need,

01:02:48 you'd have a great visual representation

01:02:50 of just how much more material and land renewables require.

01:02:54 - You have some competitors out there.

01:02:57 Other companies have spent hundreds of millions of dollars

01:03:01 and many more years

01:03:03 to try to get through the regulatory process,

01:03:06 and they don't really seem to be any further along than you,

01:03:09 this guy who only got into the field four or five years ago.

01:03:14 What are they missing?

01:03:16 What do you attribute your success to so far?

01:03:19 I mean, for sure, you haven't built this yet,

01:03:21 but you've made some great progress.

01:03:23 - One of our core theses is to always make sure

01:03:27 that you're solving the right problem, not the fun one.

01:03:30 And so we went around and we interviewed

01:03:33 both people from industry, government, scientists,

01:03:37 and former startups in the nuclear sector itself.

01:03:41 And one thing that we realized was everyone was just

01:03:43 so focused on redesigning the reactor.

01:03:45 And come on, it's fun,

01:03:46 especially if you're a nuclear physicist,

01:03:48 that's what you're trained to do, redesign the reactor.

01:03:50 - What do you mean, like new kinds of fuel

01:03:52 or new configurations?

01:03:53 - New fuel, new material science.

01:03:55 - Fusion, everyone loves that.

01:03:56 - So fundamentally new physics as well.

01:03:58 - Forbes, of course, we cover the world of billionaires.

01:04:02 When it comes to fusion, I'm amazed at how many billionaires

01:04:05 wanna have a piece of one fusion development or another.

01:04:09 It's like it's their pet rock right now.

01:04:12 Do you have any billionaire backers yet?

01:04:14 - I don't know if I should be speaking

01:04:15 to the personal finances of our backers,

01:04:17 but we've got an amazing cohort of investors

01:04:20 and board members.

01:04:22 All of our investors were former entrepreneurs

01:04:24 and operators themselves.

01:04:26 And yes, they've done extremely well over the years.

01:04:28 - So what's 2023 going to hold for Last Energy?

01:04:32 What are your milestones to reach this year?

01:04:35 - 2022 was incredible,

01:04:37 between getting head of state endorsements

01:04:39 and selling dozens of units abroad,

01:04:41 it was just like a whirlwind year.

01:04:43 So now it's time to get to brass tacks,

01:04:45 ramp up our manufacturing capabilities

01:04:47 and start actually serving these energy systems.

01:04:49 - And your manufacturing is gonna initially be done where?

01:04:52 - Right here in Texas.

01:04:53 - Here in Texas.

01:04:54 Thanks a lot for being with us today.

01:04:56 - Yeah, thank you so much.

01:04:57 - Bolt is a ride-hailing company, just like Uber,

01:05:04 you can book a taxi through them.

01:05:05 Now you can also rent electric scooter

01:05:08 or have your groceries or your takeout order delivered.

01:05:11 You can even book a rental car through them.

01:05:14 And Bolt is mainly competing with Uber

01:05:16 in Africa and in Europe.

01:05:19 There are a couple of things that stood out to me

01:05:21 about Bolt and Markus Willig

01:05:23 when I started reporting on this story.

01:05:25 Markus was unusually young when he started this company,

01:05:28 he was only 19 years old.

01:05:30 So what I saw in Markus Willig and Bolt

01:05:33 was something of a sort of David and Glass story.

01:05:35 You have a much smaller startup and a young founder

01:05:39 going head to head against a much larger,

01:05:41 a much better resourced American rival in the form of Uber.

01:05:46 Uber also play very, very tough.

01:05:48 We're seeing Markus and Bolt at times winning

01:05:52 despite the odds being stacked against them.

01:05:54 - Starting any business is hard,

01:05:57 but it's especially hard if you're starting

01:05:59 as a 19 year old kid in a small country like Estonia

01:06:02 with very limited experience and funding.

01:06:04 So the first months were brutal.

01:06:06 I was coding the app myself during the summer.

01:06:09 I was going on the streets of Tallinn

01:06:11 signing up taxi drivers one by one.

01:06:13 And 90% of them immediately said, "Get out of my car.

01:06:16 "You're just a young kid.

01:06:17 "What are you gonna offer me?

01:06:18 "It makes no sense."

01:06:20 So it was very, very tough.

01:06:21 And it was just persistence and very hard work

01:06:23 that got us to where we are today.

01:06:26 - So Bolt has grown very quickly in recent years

01:06:28 and to date has raised $1.8 billion for venture capitalists.

01:06:32 At its last round last year,

01:06:34 that valued the company at $8.3 billion.

01:06:38 But when we look at corporate filings for 2021,

01:06:41 you can see that they generated

01:06:42 around $570 million in revenue.

01:06:46 How does that compare to Lyft or Uber?

01:06:49 On a revenue basis, that means that Bolt

01:06:52 is around five times smaller than Lyft

01:06:54 or around 50 times smaller than Uber.

01:06:57 Markus Ville grew up in Tallinn, the capital of Estonia,

01:07:04 a small European country on the Baltic Sea

01:07:07 in Northeastern Europe.

01:07:09 He founded this business right out of high school.

01:07:12 So he had a few entrepreneurial ventures beforehand.

01:07:16 He was web designing and he started a small ed tech app.

01:07:21 Kind of quickly realized it'd be very difficult

01:07:23 to scale that and sort of started looking around

01:07:25 for sort of new ideas, new opportunities.

01:07:29 And I think a big inspiration was Skype.

01:07:31 Skype was Estonia's kind of pioneering unicorn startup

01:07:35 that created a pre-Zoom online video

01:07:40 and online call-in software

01:07:42 that ended up being acquired by Microsoft.

01:07:45 Several of his early investors came through Skype

01:07:49 and his older brother, Martin,

01:07:50 who helped co-found the business

01:07:51 and also worked at Skype as well.

01:07:54 Estonia actually has an interesting background

01:07:56 where due to the Russian occupation for 50 years,

01:07:59 all entrepreneurship was outlawed.

01:08:00 So nobody could start the business.

01:08:02 And that was the environment I was first growing up in.

01:08:04 But also, of course, as soon as the occupation ended

01:08:07 and Estonia gained its independence,

01:08:08 everybody wanted to start something new.

01:08:10 So actually starting a company

01:08:12 seemed like a very popular, new, trendy thing to do.

01:08:14 And what also happened

01:08:15 was there was no other big companies to join

01:08:17 because the economy was so new.

01:08:19 So it wasn't like you could go

01:08:20 and join a large corporation.

01:08:21 What many young people exactly wanted to do

01:08:23 was start their own business.

01:08:24 So it was actually a pretty natural environment

01:08:26 for me to grow up wanting to be like that as well.

01:08:29 Marcus talks about having been in to see

01:08:31 many of the kind of leading venture capitalists

01:08:33 across Europe and beyond,

01:08:36 and was met with the same answer, "No, thank you."

01:08:38 Investors were intrigued by him and what he builds,

01:08:42 but when they were looking at the opportunity

01:08:44 of this very young founder from this very small country

01:08:47 to build a product that could compete with Uber,

01:08:49 which already raised over a billion dollars,

01:08:52 investors were not optimistic about his prospects.

01:08:55 As a result of that,

01:08:56 Marcus had to learn to do things his own way

01:08:59 on a very small budget.

01:09:00 This meant that Marcus and Bolt had to find new ways to grow

01:09:03 and had to find smart solutions to do that

01:09:06 and to beat Uber.

01:09:08 Some of these examples would be looking at Africa

01:09:11 where Bolt was very quick to offer cash payments.

01:09:14 This meant that you could book a taxi through the Bolt app,

01:09:19 and instead of making a payment via Apple Pay or with a card,

01:09:24 you would hand your driver cash

01:09:26 and the driver would settle up with Bolt

01:09:29 at the end of the day or the end of the week.

01:09:31 This may sound like a small thing,

01:09:32 but around 25% of people in South Africa

01:09:35 don't have access to a bank account or credit cards,

01:09:38 and that's even higher in other parts of Africa

01:09:40 where Bolt operates.

01:09:42 I'd say the hardest part of our journey so far

01:09:46 were the first five years,

01:09:49 because we were barely able to raise any funding at all.

01:09:52 We managed to raise about 1 million euros

01:09:55 and we built the company into more than 10 countries

01:09:58 with that limited amount of funding,

01:10:00 while our competitors were raising more money

01:10:02 than any company in the history of technology.

01:10:05 So we were completely outspent by all these other players,

01:10:10 and the only way we could succeed was by being smarter.

01:10:12 So we were really focused on making sure

01:10:14 that the team is very focused on frugality

01:10:17 and we count really the impact of every euro that we spend.

01:10:21 It's a common playbook for startups in Europe

01:10:23 that as soon as you start to build some traction,

01:10:26 you should go to the US,

01:10:27 which is the largest possible market.

01:10:29 However, Marcus was relying on his own data there.

01:10:32 He started looking at the stats

01:10:33 and saw that the greatest possible potential

01:10:37 was actually in Africa,

01:10:39 specifically in South Africa, rather than the US.

01:10:42 He also knew that he would face less competition there

01:10:46 than he would do where he had to go head-to-head

01:10:48 with Uber or Lyft in the US market.

01:10:51 You need to expand only to the cities

01:10:54 where you can actually offer something better

01:10:55 than the incumbents do.

01:10:56 Otherwise, you're just generating no value there.

01:10:59 So we realized very early on

01:11:00 that Central and Eastern Europe was underserved.

01:11:03 Other platforms didn't really understand

01:11:05 the local customer as well as we did,

01:11:07 and that translated into many things.

01:11:08 For example, local payment methods.

01:11:11 They didn't work with all the drivers in these markets.

01:11:13 They didn't necessarily focus on safety

01:11:15 and some other aspects that were important here.

01:11:17 After years of running Bolt on a very tight budget,

01:11:20 Markus was able, in the pandemic,

01:11:22 to raise some really large sums of money from investors.

01:11:26 That supercharged the growth of Bolt

01:11:28 and helped it expand into new areas like scooters,

01:11:32 like food delivery, like groceries,

01:11:34 and even offering rental cars,

01:11:36 but it's been really expensive.

01:11:38 E-scooters are a tough business, though.

01:11:39 Investors around the world

01:11:40 have invested around $5 billion into startups like Bird,

01:11:45 but many of them still don't turn a profit

01:11:47 and are aggressively burning money.

01:11:49 Most companies can barely build one product

01:11:52 that reaches millions of customers,

01:11:53 and even less companies are able

01:11:56 to actually build multiple products

01:11:57 that ever work really well.

01:11:59 So we were always very conscious

01:12:00 that we don't want to expand into products

01:12:02 that are not centered around our core mission.

01:12:04 But with electric scooters, we realized very early on

01:12:06 that there's many synergies that we can benefit from

01:12:09 by having the leading ride-hailing service in the city

01:12:11 and by also having the leading

01:12:12 scooter-sharing service in the city,

01:12:14 because it's largely the same customers anyway.

01:12:16 So we don't need to spend nearly as much money

01:12:18 on marketing to acquire those customers,

01:12:20 but we can take that money

01:12:21 that other companies spend on marketing

01:12:23 and actually invest that into having a better product

01:12:25 and cheaper prices.

01:12:26 Paul's mission from day one has been

01:12:29 that we want to build better cities,

01:12:31 and we believe the best way to do that

01:12:32 is to replace private cars.

01:12:34 So it's never been that we only want to be

01:12:36 a ride-hailing company.

01:12:37 I don't even have a driver's license.

01:12:39 So for me, it was always, how do we expand the product set

01:12:42 so we can truly replace the private car?

01:12:44 And electric scooters were the next obvious place

01:12:47 for us to expand into,

01:12:48 because most of the trips in cities are short

01:12:50 and electric scooters are one of the best ways

01:12:52 to replace those trips.

01:12:54 Ride-hailing is a tough business.

01:12:55 It's hard to make money here with very tight margins.

01:12:58 Bolt has got a lot bigger,

01:13:00 but the business also burnt through $600 million in 2021.

01:13:03 And investors will be watching Mark's

01:13:06 and Bolt's numbers very closely,

01:13:08 but also Uber and Lyft,

01:13:09 which have still yet to turn an annual profit.

01:13:13 Our mission is to make cities better

01:13:15 by replacing private cars.

01:13:16 And we think that we're truly

01:13:17 at just the very early stages of that.

01:13:19 We already have more than 100 million customers

01:13:21 across Europe and Africa.

01:13:23 But when you look at the potential,

01:13:24 then we think there's more than a billion people

01:13:26 that we can address over these two continents

01:13:28 over the next 10 years to come.

01:13:29 On November 27th, 2020, Zappos founder Tony Hsieh

01:13:36 died from injuries he sustained in a house fire

01:13:39 at the age of 46.

01:13:41 At the time, David Jeans and Angel Ahlyung

01:13:45 led coverage for Forbes

01:13:47 on the tech mogul's mysterious passing.

01:13:49 They uncovered a tragic story of a downward spiral

01:13:53 fueled by drugs, mental health issues,

01:13:56 and a never-ending search for happiness.

01:13:58 An exclusive excerpt of their new book,

01:14:01 "Wonder Boy, Tony Hsieh, Zappos,

01:14:03 and the Myth of Happiness in Silicon Valley"

01:14:05 appears in the April 2023 issue of Forbes,

01:14:08 in which the authors chronicle the final months

01:14:11 of Hsieh's life in Park City, Utah,

01:14:13 and the circle of sycophantic friends

01:14:15 and family members who milked millions from him.

01:14:17 The book excerpt focuses on a very small window

01:14:25 of Tony's life in 2020 when he was in Park City.

01:14:29 And this particular episode focused on the friends

01:14:33 and people who he surrounded himself with,

01:14:35 which included family members,

01:14:37 it included longtime friends,

01:14:39 and it also included people who had just entered his life.

01:14:41 And what we were trying to document

01:14:43 in this particular chapter

01:14:45 was how some of those people

01:14:46 had entered business agreements with Tony

01:14:49 at a time when he was spiraling with drug use.

01:14:53 Essentially, he had spent years living in downtown Vegas.

01:14:57 And when COVID-19 hit,

01:14:59 he decided to move to Park City for various reasons.

01:15:03 We heard a lot of different stories

01:15:04 about what he was trying to do in Park City.

01:15:06 He was trying to build world peace.

01:15:09 He was trying to solve the COVID-19 crisis.

01:15:12 But in many ways, it seemed like him going to Park City

01:15:17 was just a way for him to run away from the efforts

01:15:21 from friends and family to try to get him the help

01:15:25 that he needed at that time.

01:15:27 In the moments Shade did spend with his family,

01:15:30 he left them struggling to connect with him.

01:15:32 During one moment with his mother, Judy,

01:15:34 he said he would be open with her

01:15:36 if she would act like his friend.

01:15:38 If she acted like a family member,

01:15:40 then he would hide information from her.

01:15:42 After Judy told him he needed to see a therapist,

01:15:45 he said he would, but only if,

01:15:47 for every minute he was in therapy,

01:15:49 she would sit in an ice bath.

01:15:51 When she pressed the therapy point once more,

01:15:53 mentioning his issues with attention,

01:15:55 Tony left the house in a rage.

01:15:57 He bought mansions, a ranch, multiple houses,

01:16:03 and essentially told his friends

01:16:05 that if you move to Park City,

01:16:07 I'll double your most recent W-2.

01:16:10 He started to send the word out far and wide,

01:16:12 come and join me here,

01:16:14 and the offer was too good to pass up.

01:16:17 And often the mandate was just come here and create, build,

01:16:20 do something that gives you purpose

01:16:23 and helps you find your meaning in life.

01:16:25 At first, some people who were old friends of his

01:16:28 may have arrived in the city just because they were curious

01:16:31 and he was their friend

01:16:32 and they were trying to see what it was all about.

01:16:35 Once they got there, some people turned around

01:16:37 and walked away and left.

01:16:39 Other people stayed and continued to draw salary from him

01:16:43 and take money from him and enter business deals with him.

01:16:47 Often people justified remaining in Park City

01:16:50 by saying they were there to help their friend,

01:16:52 which sometimes came into conflict

01:16:54 with the payments they were receiving

01:16:55 from him at the same time.

01:16:57 And at the end of the day,

01:16:58 it felt like money really muddied that situation.

01:17:02 I think that some of Tony's friends

01:17:03 who chose to move to Park City did move

01:17:06 because the offer was too great.

01:17:09 And you have to remember that this was during

01:17:11 the first year of the pandemic.

01:17:14 And a lot of people who didn't have nine to five

01:17:17 office jobs, they were nervous about job security.

01:17:21 And Tony Hsieh was essentially offering them a lifeline

01:17:25 during a period of huge uncertainty.

01:17:28 So to have somebody like that

01:17:29 offer to double your best W-2,

01:17:32 I can see a scenario where people would choose

01:17:36 to drop everything and move to Park City because of that.

01:17:40 Hsieh had become focused on the study of biohacking

01:17:42 to increase his personal output.

01:17:44 He became convinced that inhaling nitrous oxide

01:17:47 was a way to heighten his blood oxygen levels

01:17:50 and eliminate the need for sleep.

01:17:52 In between cigarettes, Hsieh was inhaling

01:17:54 from Whippet canisters like he was drinking water

01:17:56 from a bottle.

01:17:57 By one estimate, he was using more than 50 a day.

01:18:01 His spiral with nitrous oxide came at a time

01:18:03 when people were finding new ways to spend his money.

01:18:06 And Hsieh seemed all too willing to spend himself broke

01:18:09 thanks to a nonsensical incentive scheme

01:18:12 he had devised called 10X.

01:18:14 So 10X actually started as a noble idea,

01:18:18 which was Park City was reeling from the COVID-19 pandemic.

01:18:22 And it was an initiative that he and some of his friends

01:18:26 tried to launch to help restaurants in Park City reopen.

01:18:30 And the idea was that he would run an open bar tab

01:18:34 on Main Street in Park City,

01:18:36 and then people in town could spend $10 buying like a van

01:18:40 that would get you free food and drink

01:18:42 at all these really nice restaurants in Park City.

01:18:45 And it went well for a very short period of time,

01:18:49 but the state of Utah quickly realized what Tony was doing

01:18:52 and shut the program down

01:18:53 because you can't legally just run an open bar tab

01:18:56 on an entire street in Park City.

01:18:59 And so when that business plan fell apart,

01:19:02 10X morphed into something else

01:19:04 that Tony started to implement with some of his friends

01:19:08 and assistants and associates.

01:19:10 - It became an incentive scheme in which Tony would say,

01:19:14 if you spend, you know, $1,000 of my money,

01:19:18 you'll get 10% of it on top of that.

01:19:21 So if you were able to recruit someone

01:19:24 and they get $100,000 salary, then you would get $10,000.

01:19:27 If you take your people out to a restaurant,

01:19:29 you spend $1,000, you'll get $100 back.

01:19:32 - The nature of 10X program

01:19:34 obviously stoked a lot of infighting amongst people

01:19:37 who were carrying out Tony's business finances

01:19:40 and carrying out Tony's wishes.

01:19:42 There was one contract in particular that Mimi Pham,

01:19:45 who had been Tony's assistant and confidant

01:19:48 for over a decade minimum,

01:19:50 had fought over with Tony's brother, Andy Shea.

01:19:53 Tony had this idea to bring Paula Abdul,

01:19:55 who he knew from a friendship level, to Park City

01:19:58 and basically have her play shows for people

01:20:02 to essentially encourage folks to come back to Park City

01:20:05 during the pandemic.

01:20:06 And the size of the contract would have been $9 million.

01:20:10 And whoever buttoned up that contract

01:20:13 would have gotten that 10% commission,

01:20:15 which meant that $900,000 was on the line.

01:20:19 - In total, through an LLC she controlled,

01:20:22 Pham sent invoices for what amounted

01:20:24 to more than $20 million.

01:20:26 In one case, she "managed a contractor

01:20:29 "who was being paid $83,333.33 a month

01:20:34 "for 'assistance and management of various projects,'

01:20:39 "earning her $8,333 every time he was paid."

01:20:44 - As time went on, it became very clear

01:20:46 who was profiting from it

01:20:48 and who was sort of taking advantage of him

01:20:50 and also who was trying to help.

01:20:53 And as we saw, his brother, Andy, arrived in Park City.

01:20:58 And Andy initially would tell a lot of friends

01:21:01 that he was there to keep an eye on his brother.

01:21:03 And also, he figured that he wanted

01:21:05 some financial due diligence being done.

01:21:08 And that meant that he brought in an old friend of the Shea's

01:21:10 whose name was Tony Lee,

01:21:12 and he was a renowned financial advisor.

01:21:14 And when Tony Lee came in, he started looking at the books

01:21:19 and realized pretty quickly

01:21:20 that there was a lot of nonsensical transactions occurring.

01:21:24 Despite Andy setting up like a safety net

01:21:26 and trying to do right by him,

01:21:28 Andy did end up taking a $1 million salary from his brother.

01:21:31 He also ended up spending and trying to spend

01:21:35 more of his money and setting aside

01:21:37 millions and millions of dollars,

01:21:38 which was disrupted by other people

01:21:41 who were living with Tony at the time.

01:21:43 - Unfortunately, the people that I remember the most

01:21:50 in reporting the story out

01:21:51 are folks who spoke to me anonymously.

01:21:55 And I'm so grateful to them for trusting me with their story

01:21:59 and trusting that I won't ever break that trust.

01:22:03 But in terms of the people who spoke to me on the record,

01:22:06 I think one person that really jumps out at me

01:22:10 is a woman named Michelle Adetileo.

01:22:12 She was a woman who met Tony years and years before

01:22:16 and actually dated him

01:22:18 and ended up working with him and working for him.

01:22:22 And she just had a really unique perspective of Tony

01:22:26 and she understood Tony in a way that most people didn't.

01:22:31 Michelle was present for a lot of the events

01:22:33 that happened in 2020.

01:22:35 And there was one anecdote that she shared

01:22:38 where she and Tony were having a conversation

01:22:40 on the front steps of one of the properties in Park City.

01:22:43 And Tony Hsieh basically told Michelle,

01:22:46 "I'm thinking about stepping down as CEO of Zappos."

01:22:50 And at the time, Michelle wasn't sure

01:22:52 whether he was getting pressure from Zappos executives

01:22:55 or if he just didn't want to do the job anymore.

01:22:59 And she told me how she looked at him in the eyes

01:23:01 and saw how thin he was and saw how gaunt he was

01:23:05 and just how tired he looked,

01:23:07 how tired one of her longest friends looked.

01:23:10 She said to him at that moment,

01:23:12 "You've done so much for other people.

01:23:14 You just need to take care of yourself now."

01:23:17 - He always felt from a very young age

01:23:20 that he never quite fit in,

01:23:22 whether it was racially, socially, economically.

01:23:26 You know, he was a genius level intellect

01:23:29 and he was always trying to make sure

01:23:32 that he wasn't seen as the genius.

01:23:34 He wanted to be seen as the normal person.

01:23:36 And he was always just trying to strive

01:23:38 for the normal person who we all are.

01:23:42 - Tony was somebody who was singularly obsessed

01:23:44 with finding happiness for himself.

01:23:47 And in many ways, for Tony,

01:23:50 that seemed to mean adding things to his life.

01:23:55 Whether that meant building a community for his friends

01:23:59 in the form of putting $350 million

01:24:02 into revitalizing downtown project or building businesses,

01:24:07 it was always about adding something to his life.

01:24:11 What's so tragic about Tony's story

01:24:13 is that if you ask his friends, his colleagues, his family,

01:24:18 they'll tell you that Tony was more than enough,

01:24:22 but he just didn't realize that.

01:24:24 If there was one takeaway

01:24:25 that I would want readers to take from it

01:24:27 is to just take stock of what you have

01:24:29 and like understand that it's not about adding more

01:24:33 to your life, it's just realizing what is

01:24:35 and being okay with it.

01:24:37 (upbeat music)

01:24:40 - I think one thing about technology

01:24:49 is that there's this idea that sort of culture

01:24:53 is separate from technology

01:24:55 and that people are separate from technology

01:24:58 and that these things are on two sides of a line.

01:25:01 I think that's really not only incorrect,

01:25:04 but it's often damaging.

01:25:06 Technology is to further humanity, full stop.

01:25:10 (upbeat music)

01:25:13 I started Kindred Ventures in 2014 as a solo capitalist

01:25:20 and one of the first investments

01:25:22 that I made from that was Coinbase.

01:25:25 I had come from consumer software and consumer internet

01:25:29 and I learned a ton about how to build

01:25:31 these much more heavyweight industries

01:25:34 like marketplaces and logistics.

01:25:37 Moving forward, I started angel investing more and more.

01:25:41 I had not only invested in 30 or 40 startups by that time,

01:25:45 but I had also learned so much about how to help startups,

01:25:50 how to help founders as another founder,

01:25:52 as a fellow founder.

01:25:53 And I really enjoyed that zero to one stage

01:25:57 that going from like one or two people

01:26:00 and coming up with a concept

01:26:01 that they were very excited about

01:26:03 and then being able to help them,

01:26:05 not only as a angel investor with some capital,

01:26:07 but also as someone who can empathize with their experience.

01:26:11 At this time period,

01:26:15 this is when there was sort of a shift in thinking

01:26:18 about founders and operators being investors

01:26:21 might be a good thing.

01:26:23 And that seems sort of obvious today,

01:26:25 but back then it was unclear.

01:26:28 San Francisco and Silicon Valley and California,

01:26:32 this progressive mentality that it harbors

01:26:35 has been a great driver.

01:26:37 This is why people from around the world come here

01:26:39 because they know that they're in a place

01:26:41 that embraces them.

01:26:43 We can't lose that in California.

01:26:45 And we certainly can't lose that in San Francisco.

01:26:47 - Our company is called Humane.

01:26:57 We are about 220 people now based in San Francisco.

01:27:02 And we've been building since 2019

01:27:04 on the belief that AI will be the base

01:27:08 of the next generation of compute.

01:27:10 And we knew back then that we felt

01:27:12 that there needed to be an entirely new device

01:27:15 and an entirely new platform to allow for the mass consumer

01:27:19 to really be able to experience it

01:27:20 and become super powered by AI.

01:27:22 - I think the thing that really attracted us to Steve

01:27:27 was his approach to building companies

01:27:31 is similar to the way we build product.

01:27:34 We have a philosophy that really starts

01:27:37 with what the experience of the product should actually be.

01:27:40 And we work our way back from that.

01:27:42 - He gives very direct and open and honest feedback

01:27:45 and guidance and advice.

01:27:46 And sometimes in the moment,

01:27:47 I'll like walk away thinking,

01:27:49 I wonder why he's thinking that.

01:27:51 And then later realize that, you know,

01:27:53 he has the long view.

01:27:54 He's thinking, what does this mean for Humane

01:27:56 10 years out, 20 years out?

01:28:00 - It's hard for a lot of people to articulate

01:28:03 what exactly they're looking for,

01:28:04 but it's up to founders to build that.

01:28:07 It's just been a pleasure to back teams like that.

01:28:09 And we want every investment to feel like

01:28:12 they're not just following what the future may hold,

01:28:17 but actually helping create and shape

01:28:20 what that future might look like.

01:28:21 A friend of mine had moved from Canada to San Francisco

01:28:28 and his name was Garret Camp.

01:28:30 And he had an idea about a black car with a driver

01:28:35 being able to pick you up based upon you requesting it

01:28:37 on your phone.

01:28:39 And this app idea was a side project.

01:28:41 And he asked me one day to help him work on it.

01:28:45 And so I helped him start the company as an advisor.

01:28:47 So it was called Uber Cab in the very beginning.

01:28:50 Those early days was so, so important to later on

01:28:54 how I sort of built a framework for myself on

01:28:57 how startups can come from many different origin points.

01:29:00 I feel grateful to have been a very small part

01:29:05 of that journey in the beginning

01:29:07 and to be able to stay close to the company.

01:29:09 But I'm mainly in awe of the startup journey

01:29:13 and that it can result in a company like this.

01:29:16 It's still a pleasure to see the company grow

01:29:20 as a global service under the new management.

01:29:23 And I think Dara and team here

01:29:26 have done an amazing job of continuing the growth.

01:29:29 One of the things that I really loved about

01:29:39 moving to San Francisco was the art, the music,

01:29:42 the food culture, all of that.

01:29:45 And it wasn't just for wealthy people.

01:29:47 It was for people, entrepreneurs, and creative folks

01:29:50 that wanted to do something differently

01:29:52 and wanted to be the best at what they were doing.

01:29:55 And so one of the things that I've tried to do

01:29:57 is support the arts here.

01:30:00 I think it's really important.

01:30:01 I've backed restaurants, local street artists, music venues.

01:30:05 I think part of what we do in Venture

01:30:09 is to pay it forward to new founders

01:30:12 to help them build out their vision.

01:30:14 I also think we should be doing that with our community.

01:30:23 Tosca is a place to convene people.

01:30:26 We brought the CEO of Gucci

01:30:28 and the caring group management team here

01:30:30 to talk about Web3 technology, and they loved it.

01:30:33 And that's a very San Francisco thing,

01:30:36 to take a craft, take that attention to detail,

01:30:39 take inspiration from everyone else out there,

01:30:42 and from their own lives, wherever they came from.

01:30:45 So it just got into my head that,

01:30:48 hey, we enjoy all these things.

01:30:50 They're entrepreneurs too.

01:30:52 We are investing in each other

01:30:53 so that we can improve our community's life.

01:30:57 San Francisco is going through its problems

01:31:01 as any big city is today,

01:31:03 but I think the best thing that we have for each other

01:31:07 is a smaller, tight-knit community.

01:31:09 We can invest in each other, through thick and thin.

01:31:11 One of my old startups a long time ago,

01:31:19 I used to go to this restaurant next door

01:31:22 and people would frequently come by

01:31:23 and tap me on the shoulder on their way out

01:31:25 and say, "Really love the food tonight.

01:31:28 "Thank you so much."

01:31:29 I was kind of confused, and the manager told me that,

01:31:33 "Hey, I think it's because the chef looks like you,

01:31:36 "the chef de cuisine at the CDC."

01:31:38 And I laughed, I said, "You gotta introduce me to him."

01:31:41 His name's Brandon Ju.

01:31:42 He's born and raised in San Francisco, Chinese-American,

01:31:46 and an amazing fine dining chef,

01:31:49 but really wanted to break out on his own

01:31:51 and start his own restaurant.

01:31:53 And at that time, there was not much happening in Chinatown,

01:31:56 so he was really the first.

01:31:57 And he helped revitalize it by creating Mr. Ju's,

01:32:01 which is both a restaurant, a lounge,

01:32:03 a banquet hall for the community,

01:32:05 and a bakery shop and a cafe, all in one.

01:32:18 Where we are right now is the very first Blue Bottle Cafe.

01:32:21 It's really just a garage and a cart.

01:32:23 And it's the very first one.

01:32:25 I think it opened in 2004, and I lived up the street.

01:32:29 It really opened my eyes up to the idea of third-wave coffee,

01:32:34 this new, sort of more thoughtful,

01:32:36 in terms of where the beans were roasted

01:32:38 and how the beans were roasted

01:32:40 and where the beans were sourced and things of that nature.

01:32:43 So I was able to invest early with them,

01:32:46 and that's been a great experience.

01:32:48 As an investment in not only, you know,

01:32:51 what they provide to the city and our community,

01:32:54 it's somewhere that I can go to in Tokyo now,

01:32:56 in Seoul and London and New York and L.A.,

01:33:00 and that's been an amazing journey to watch.

01:33:02 I ended up being able to help them enter

01:33:07 and expand into Japan and Korea,

01:33:09 which was really exciting and fun.

01:33:11 My family is originally from Korea

01:33:13 with also some roots in Japan.

01:33:16 And so it was really fun to help them launch

01:33:18 in Tokyo and Seoul and enjoy that.

01:33:20 I think it's putting our industry to task

01:33:26 to say, "Don't just complain.

01:33:28 Don't just give us your wishlist,

01:33:30 but support creators, entrepreneurs, artists,

01:33:34 builders, real builders, like atomic builders, right?

01:33:38 Designers, restaurants, chefs.

01:33:40 Be able to support them

01:33:42 in the community that you choose to be in."

01:33:45 (upbeat music)

01:33:48 Steve does this for love.

01:33:56 In fact, I bet Steve would pay to do this.

01:33:59 That's how much he loves it.

01:34:00 And when I say it, I mean, just working with founders.

01:34:03 He loves rolling up his sleeves

01:34:05 and getting into the muck

01:34:07 and really trying to help early teams figure stuff out.

01:34:11 And so as a result, his passion

01:34:14 and his enthusiasm is pretty authentic

01:34:16 and it's very organic.

01:34:18 And that really resonates with me

01:34:20 because we can sustain ourselves through hard times

01:34:24 when you're doing it for love.

01:34:26 And then the second, I guess,

01:34:28 is he's been doing this a long time.

01:34:29 And so he is, I always refer to him

01:34:32 as like a Marco Polo of startups.

01:34:34 He's tried every spice.

01:34:36 And so as a result, he can bring some real wisdom to bear

01:34:39 on behalf of startups across different areas of technology.

01:34:43 Every conversation that we have with Steve

01:34:45 is always so inspired, energized, and always so helpful.

01:34:50 In these early days,

01:34:51 when we actually started to build a company

01:34:53 and it was just a small crew,

01:34:54 even now he's been a big part of our series C as well.

01:34:59 He's just got such a really precise vision

01:35:02 of how to execute alongside founders.

01:35:05 It's, there's really just no other way to describe it.

01:35:08 We're grateful to be involved

01:35:11 when they're ultimately successful.

01:35:14 And we're also grateful to them if they're not successful

01:35:16 and they have to shut their company down

01:35:18 'cause we also learn so much along the way.

01:35:21 We're just fired up to be able to have that relationship

01:35:24 for the long haul,

01:35:26 from starting the company all the way to,

01:35:29 hopefully after IPO.

01:35:31 But even if not IPO,

01:35:34 if the company doesn't work out

01:35:36 and they start a new company,

01:35:38 we wanna, again, be their ally

01:35:40 and help them on that journey.

01:35:42 So this is a lifelong commitment

01:35:45 that we're making to our founders.

01:35:47 It's a true partnership.

01:35:49 And this is really why, you know,

01:35:51 we named the fund Kindred Ventures.

01:35:53 How do we understand the psychology of our founders

01:35:57 so that we're not sort of one size fits all in our approach?

01:36:00 How do we understand the type of product or technology

01:36:03 they're working with?

01:36:05 How do we play the right role, right?

01:36:07 And how that great investor and founder fit

01:36:10 that we're looking for?

01:36:12 So these are the things that we can control.

01:36:14 These are the things that matter to us.

01:36:16 The rest is up to the founder.

01:36:18 - Vanta is a company that basically automates

01:36:29 other companies' security and compliance processes.

01:36:32 So the security part is like making sure a company

01:36:35 is managing and storing customer data

01:36:37 in a way that's safe.

01:36:39 - So a lot of the software we use, right,

01:36:44 has all this customer data,

01:36:45 it knows so much about us.

01:36:47 And we sort of found that when, you know,

01:36:49 that there's a data breach or there's a security hack,

01:36:52 right, and that data is everywhere,

01:36:53 it has real consequences for people.

01:36:55 I'd feel like about like Equifax or Target

01:36:57 or these big breaches.

01:36:58 And so there's just so much scrutiny

01:37:00 on whether companies are kind of doing the right thing

01:37:03 and securing the customer data they have.

01:37:05 And there's kind of rightly a lot of scrutiny on that.

01:37:09 - A notable thing about Vanta's investment strategy

01:37:11 was Christina, the founder and CEO,

01:37:14 like worked in venture as her first like institutional job

01:37:19 out of college, basically.

01:37:21 And from that, there are two, I guess,

01:37:24 lessons that she likes to talk about.

01:37:26 One is that companies are the best at like raising money

01:37:30 when they don't need it.

01:37:30 And the other is that it's like easy

01:37:33 to confuse fundraising success

01:37:35 with like company product success.

01:37:38 And I think she's been really conscious

01:37:40 about trying like not to fall into those traps.

01:37:43 Christina actually waited until Vanta reached 10 million

01:37:47 in annual recurring revenue,

01:37:49 which is like the way Vanta measures revenue

01:37:52 because it's a subscription-based company

01:37:55 to raise its first like big institutional funding round

01:37:58 at Series A.

01:37:59 Most companies usually try to raise a Series A

01:38:03 when it's like 1 million at that metric.

01:38:05 So Vanta waited until much later.

01:38:07 So that was in May of 2021.

01:38:10 They raised 50 million in a Series A led by Sequoia.

01:38:13 And then a year later,

01:38:15 they announced a Series B in June of 2022.

01:38:18 It was an 110 million round led by Kraft Ventures.

01:38:22 And that round valued the company at $1.6 billion.

01:38:27 So when Vanta launched in 2018,

01:38:30 we launched this category of automated compliance.

01:38:33 So helping companies get compliant and secure quickly.

01:38:36 Since then, we've grown with our customers

01:38:38 and now offer a broader trust management platform,

01:38:41 but still staying core to helping technology companies

01:38:45 secure the customer data they have,

01:38:47 and then go demonstrate and prove that they're, you know,

01:38:50 have reasonable security to their customers

01:38:53 so they can go grow their business.

01:38:54 When I was a product manager at Dropbox,

01:38:56 trying to take a new product to market,

01:38:58 and we were really excited about giving the product

01:39:02 to big companies, enterprise customers.

01:39:04 And then, you know, the legal team kind of correctly told us

01:39:07 we couldn't do that.

01:39:08 We couldn't show that the product was secure and compliant.

01:39:11 You know, we thought we had reasonable practices,

01:39:13 but we couldn't demonstrate them

01:39:15 in the way the enterprise has expected.

01:39:17 And I didn't know anything about the space,

01:39:19 but as more and more I learned,

01:39:21 the process itself for getting the product

01:39:23 to market, the process itself, or the goal made sense, right?

01:39:27 It's like, of course, we should show we're trustworthy

01:39:29 to big customers and do the right thing.

01:39:32 What that scrutiny ends up meaning

01:39:34 is these companies have to, one, have reasonable practices,

01:39:37 and two, then go through these pretty onerous processes

01:39:40 to prove they have good security practices, right?

01:39:43 And they're actually securing the data.

01:39:45 And historically, that was like spreadsheets

01:39:48 and manual audits, and like everything was one-off,

01:39:52 it took a ton of time and effort,

01:39:55 and also was like pretty inefficient,

01:39:57 'cause we were like talking about software

01:39:58 and we're taking it into, you know,

01:39:59 pieces of paper almost literally.

01:40:02 But companies would still go through it,

01:40:04 'cause it was so important to them

01:40:06 to show that they were good stewards of customer data

01:40:09 and their customers wanted that, you know,

01:40:10 almost before they'd make the purchase, right?

01:40:12 So it was like such an important thing to prove

01:40:14 and felt, you know, kind of like a large problem

01:40:18 and an important one to solve,

01:40:19 because as someone who builds software,

01:40:22 I actually do believe,

01:40:25 I still believe in the transformative power of software,

01:40:27 but, you know, we can't do that if we don't trust it.

01:40:29 I think in the beginning, you know,

01:40:33 because we created the category,

01:40:35 because we created the product,

01:40:37 we didn't have software competition.

01:40:39 We truly were the only thing,

01:40:40 and so the trick in the kind of sales

01:40:43 or go-to-market processes was convincing someone

01:40:46 they could rely on software for something.

01:40:48 We had a bunch of manual processes before,

01:40:51 as like kind of 2020 and 2021 went on

01:40:54 and just more startups got funded.

01:40:56 There were more entrance into the space,

01:40:59 people copied what we did, took it to market.

01:41:02 And I think that just, you know,

01:41:03 breeds some amount of resilience.

01:41:05 It deeply shows that in software,

01:41:08 you're sort of only as good as your last release

01:41:11 in a lot of ways.

01:41:12 And you may have created the category

01:41:14 and brought this new product to market

01:41:15 and done this innovation,

01:41:16 but if that happened two years ago, right,

01:41:19 it's much more about, well, what's, you know,

01:41:21 what are you doing this quarter, next quarter?

01:41:23 How are you continuing to show

01:41:25 that you're useful to customers

01:41:27 and not sort of resting on the laurels of a prior success?

01:41:31 I think waiting until we were 10 million in ARR

01:41:35 to raise our Series A instilled a lot of discipline

01:41:37 in the company.

01:41:38 It forced us to think about,

01:41:40 are we doing the right thing?

01:41:41 Do we have a good business?

01:41:42 Not does some VC think we have a good business, right?

01:41:45 It's kind of made it more insular in a helpful way there.

01:41:49 I also think it forced some discipline around practices.

01:41:52 Like we charge customers annually upfront

01:41:54 and these like cashflow things

01:41:56 that actually helped us not need funding for longer.

01:42:01 And in those ways that, you know,

01:42:02 those sort of smaller decisions

01:42:03 helped us build a stronger, more resilient business.

01:42:06 And I think finally, the answer was like,

01:42:08 we didn't need the cash.

01:42:11 And again, some of it was things

01:42:12 like charging annually upfront,

01:42:13 but we certainly had problems to solve,

01:42:17 but they weren't problems where it felt like it was,

01:42:19 you know, more money would solve them.

01:42:20 It felt like more money actually might make it

01:42:22 more complicated or raise the stakes or do other things.

01:42:24 And so, you know, why don't we solve those problems first?

01:42:27 And then when we get to the problems

01:42:29 where it seems like money can solve them,

01:42:31 you know, go pursue investment.

01:42:34 Two things came across really clearly

01:42:36 when I was talking to Christina

01:42:37 and like her former and current business partners

01:42:41 and investors.

01:42:43 One is that she's like super scrappy

01:42:45 and really prioritizes like product over ego.

01:42:48 Like when I was asking her,

01:42:50 oh, like was Vanta the category creator,

01:42:52 she was like visibly uncomfortable.

01:42:55 Like, I don't want to like claim credit

01:42:57 for this kind of thing.

01:42:59 And that's definitely something that carries

01:43:00 into like how she runs a business.

01:43:02 The other thing is that she's like clearly someone

01:43:05 who like will learn anything for the sake of learning it.

01:43:12 - So prior to Vanta,

01:43:14 I worked at an early stage investment firm,

01:43:16 like VC firm in New York, Union Square Ventures.

01:43:18 I think working at the early stage VC firm

01:43:21 and interacting with like seed stage founders,

01:43:23 I very much wanted to be one of them and start a company.

01:43:26 I didn't quite know in what yet.

01:43:28 I got into beanie babies when I was like in fourth grade

01:43:32 'cause my mom's family lived in Chicago

01:43:34 and they found out about them a little earlier

01:43:36 than everyone else and collected beanie babies,

01:43:40 still have hundreds of them in my mom's basement,

01:43:43 much to her chagrin.

01:43:44 And then got to like buying and selling them on eBay,

01:43:49 like early eBay and putting them together

01:43:54 in different like groupings

01:43:56 and trying to sell them that way

01:43:57 and riding my bike to Kroger,

01:43:59 which is like the local grocery store to get money orders

01:44:02 'cause this was before there were many credit cards

01:44:04 in the internet and I definitely didn't have a credit card

01:44:07 at this stage.

01:44:08 So I'd like go to Kroger and like slide quarters

01:44:11 across the counter and get a money order basically

01:44:14 to go pay for them.

01:44:15 I think one thing from when I was a kid to now

01:44:19 is kind of a deep curiosity

01:44:21 and I really do like to learn things

01:44:23 for the sake of learning things, sometimes to a fault.

01:44:26 As a college student, it meant I changed my major

01:44:30 like 12 times, I like couldn't really settle on something.

01:44:33 So there's definitely too much,

01:44:35 but I think in this role,

01:44:37 it's been really helpful because

01:44:39 for the first couple of years of a quickly growing company,

01:44:42 you're sort of doing all of the different roles

01:44:44 in a company until you can sort of do them well enough

01:44:46 to convince someone who is much more experienced

01:44:48 and much better than you to come in

01:44:50 and do it better than you were.

01:44:51 And going into each of those new roles

01:44:55 and being like, well, I didn't know what customer success is

01:44:58 when I'm gonna go talk to the people

01:44:59 and do the things and learn about it.

01:45:02 And figuring out how to have joy in that

01:45:04 versus just feeling like it's another hill to climb.

01:45:07 I think that curiosity piece has been helpful.

01:45:11 - So Imad Mustaq is the founder and CEO

01:45:16 of the AI startup Stability AI.

01:45:19 He launched the company back in 2019

01:45:21 and he went through a couple of different business ideas

01:45:25 for it, none of them really ended up generating

01:45:28 much revenue, if any,

01:45:31 and eventually Imad just kept going,

01:45:35 kept searching for a business that would work.

01:45:38 It was summer 2022 that Stability really broke out,

01:45:44 had its big sort of almost overnight viral moment.

01:45:49 And this came with the launch of the generative AI,

01:45:53 a text to image generator called Stable Diffusion.

01:45:57 This is a model which allows you to type in a phrase,

01:46:01 anything from your imagination

01:46:03 and can generate almost instantly an AI generated image.

01:46:08 I interviewed him three times,

01:46:12 once in San Francisco last October

01:46:15 when Stability had its public launch party.

01:46:19 And then again in January in San Francisco

01:46:21 and then in London.

01:46:23 I think I picked up pretty early on that

01:46:26 he's a very charming and charismatic guy

01:46:29 and he talks a very large game,

01:46:33 I think compared to most Silicon Valley founders.

01:46:36 He has high ambitions and is very open about sharing them.

01:46:42 And I think that's really inspired a lot of people,

01:46:46 both investors and collaborators,

01:46:49 but also his own employees and just the general public

01:46:54 that has gravitated towards AI.

01:46:56 So he's developed a bit of a cult following,

01:46:58 I think in a sense, through that.

01:47:00 During the fact checking process,

01:47:04 we found that a lot of things that he said

01:47:07 were just very difficult to fact check.

01:47:09 So I think this was kind of the first,

01:47:12 maybe not red flag, but yellow flag that set things off

01:47:15 and made us start to have some skepticism

01:47:19 and want to look further into the claims that he was making.

01:47:22 As we dug in further,

01:47:24 we started talking to investors who had met with Stability,

01:47:27 started talking to former employees.

01:47:30 We started to piece together more of the facts,

01:47:32 we started to gather some documents.

01:47:34 Ahmad has, at least since 2017,

01:47:38 been claiming that he holds a master's degree

01:47:42 from Oxford University in math and computer science.

01:47:46 He had this on his LinkedIn

01:47:48 at the time that Stability raised their $100 million

01:47:52 last summer.

01:47:53 That LinkedIn has since been deleted,

01:47:55 but we found further traces of that

01:47:58 dating back to his past companies,

01:48:01 going back to 2017, where he claimed this Oxford degree.

01:48:05 But in reality, we contacted Oxford,

01:48:07 and Oxford told us that he does not hold a master's degree.

01:48:12 He only holds a bachelor's degree.

01:48:15 (gentle music)

01:48:17 I think one of the big unlocks

01:48:29 was we got a fundraising pitch deck from summer 2022

01:48:34 that had a list of, I think, about 50 employees on there

01:48:39 in one of the slides of the document.

01:48:40 And what I found was that there were many people

01:48:44 that were listed on that slide

01:48:46 that did not have stability on their LinkedIn,

01:48:50 did not have any publicly searchable connection to stability

01:48:54 but they were on this document.

01:48:56 And one of the people was this person named Eric Hallahan

01:49:01 who went on the record and talked to us

01:49:03 about his experiences at the company.

01:49:06 Eric had been an intern at the company.

01:49:09 He spoke through the chaos of the company a bit.

01:49:12 He had been slated to work 300 hours

01:49:16 with the company over last summer.

01:49:18 And ultimately, 181 of the hours,

01:49:23 he sent an invoice to stability in August.

01:49:27 And eight months later, he had not heard back.

01:49:30 He had not been paid for it.

01:49:31 (gentle music)

01:49:34 (gentle music)

01:49:37 I contacted stability's collaborators

01:50:00 that are on stable diffusion, their image generator.

01:50:03 And I ended up getting in touch with the professor

01:50:08 at the German university

01:50:09 called Ludwig Maximilian University of Munich.

01:50:13 And it turns out that this guy,

01:50:17 this professor had overseen the initial research

01:50:20 to create the AI model that served as the basis

01:50:23 for stable diffusion.

01:50:25 He had a lot of gripes about the way that stability

01:50:27 had marketed itself and positioned itself

01:50:31 as being, they had said in public marketing materials,

01:50:35 the company behind stable diffusion.

01:50:37 As this professor told me,

01:50:39 stability would sometimes take an outsized amount of credit

01:50:43 for being the company behind this work.

01:50:46 And then sometimes it was only after he had reached out

01:50:51 to the company that the company dialed it back

01:50:55 or gave the university some credit.

01:50:59 (gentle music)

01:51:02 One thing that was really memorable to me

01:51:10 that he had said during the call was that

01:51:13 if you have a large enough press department,

01:51:16 then you can rebrand history in your interests.

01:51:19 And got the impression that that's exactly how he felt

01:51:23 about what stability had done.

01:51:25 So we also got our hands on fundraising pitch decks.

01:51:30 So these are like PowerPoint presentations,

01:51:33 essentially that the company presents to investors

01:51:37 that they hope to put money into the company.

01:51:39 It claimed that it had partnerships with organizations,

01:51:43 including the United Nations, the World Bank,

01:51:47 the World Health Organization.

01:51:49 They claimed a partnership with Amazon Web Services

01:51:52 that in these slide decks,

01:51:53 they described as a quote unquote, strategic partnership.

01:51:57 They claimed that Amazon had supplied a vast amount

01:52:00 of AI chips at a 80% discount to the market value.

01:52:05 When I talked to Imad in January,

01:52:08 he told me that Amazon had cut stability,

01:52:12 a very attractive deal that he said came with quote unquote,

01:52:16 certain personal guarantees.

01:52:18 When I asked him for more information about this,

01:52:21 I was sitting in the room with him

01:52:22 as well as his wife, Zara Qureshi,

01:52:24 who was the company's head of PR at the time.

01:52:28 She shot my question down and they just would not go further

01:52:33 on that conversation point until we changed the topic.

01:52:36 We spoke to a vice president at Amazon who said,

01:52:40 stability is in fact like any other Amazon customer

01:52:45 when it comes to cloud computing.

01:52:48 And he shot down the notion

01:52:51 that there was a strategic partnership.

01:52:53 It was unclear like what exactly the arrangement was.

01:52:56 And until we finally found a couple sources

01:53:00 who were able to independently verify,

01:53:02 it turns out that stability actually was millions of dollars

01:53:06 in debt to Amazon and that the strategic partnership

01:53:10 that Imad had claimed was not really a special deal

01:53:15 for stability.

01:53:17 To investors, he had said that stability had

01:53:20 as much as a 80% discount on AI chips from Amazon

01:53:25 through this partnership.

01:53:27 But after reaching out to stability for comment,

01:53:31 they told us that this 80% discount is actually

01:53:34 a standard discount that Amazon offers

01:53:35 to anybody who wants to be its customer.

01:53:40 With a story like this,

01:53:41 you always want to reach out to the company

01:53:43 to give them a chance to respond to everything

01:53:46 that you plan to say about them in the story.

01:53:48 So we reached out to them in early May.

01:53:50 They responded to a lot of our questions,

01:53:53 but pushed back on certain things.

01:53:57 But I think more unusually,

01:54:00 a key element of our story is not just Imad, the founder,

01:54:05 but that his wife, Zahra Qureshi, who was the head of PR,

01:54:10 she also had claimed on business cards

01:54:13 that she was the chief operating officer.

01:54:15 And we found that she was sitting

01:54:19 on the company's board of directors

01:54:20 after they obtained their $100 million of VC funding.

01:54:25 Imad took to Twitter and he also wrote a blog post

01:54:43 addressing some of the claims that we had made in the story.

01:54:47 I think Stability has had some kind of skepticism

01:54:51 from a certain portion of the AI community,

01:54:53 I think, even prior to us publishing the story.

01:54:57 Some of the feedback we've gotten afterwards

01:54:59 is just people being glad that this story is out there

01:55:04 with concrete facts, rather than being limited

01:55:08 to hearsay and backchannel.

01:55:10 I think it really speaks to what's going on in AI right now

01:55:14 because of how popular generative AI has been.

01:55:17 Investors out here are just flocking to fund companies

01:55:22 at very lofty valuations, throwing around tens of millions

01:55:27 or hundreds of millions of dollars.

01:55:29 Historically, Silicon Valley investors have spent weeks,

01:55:33 if not months, doing due diligence

01:55:37 and researching a company and researching the founder

01:55:39 and ensuring that there are no red flags

01:55:42 and they're comfortable to invest.

01:55:44 I think the big question will be,

01:55:46 with AI being as hypey as it is now,

01:55:51 how mindful will investors be of performing due diligence,

01:55:57 of taking a bit more time to check

01:55:59 for potential red flags at a company

01:56:02 before going in on an investment?

01:56:04 (gentle music)

01:56:06 As corporations move more of their apps and data

01:56:21 to the cloud amid an AI boom,

01:56:23 creating a market expected to reach $1 trillion,

01:56:26 the need to properly secure those assets

01:56:29 is only becoming more important and challenging.

01:56:31 This is where cloud security startup, Wiz, comes in.

01:56:34 Wiz connects to storage providers

01:56:36 like Amazon Web Services and Microsoft Azure

01:56:38 to scan everything a business is exposing

01:56:40 to the outside world,

01:56:42 flagging and prioritizing security risks.

01:56:45 Picture the doors and windows in an office,

01:56:47 hundreds of doors and thousands of windows.

01:56:49 Are they all properly locked?

01:56:51 Wiz's security graph would tell the company

01:56:53 the four or five at highest risk,

01:56:55 say the windows facing a fire escape,

01:56:57 and give tips on how to fix the vulnerabilities.

01:57:00 One of our Forbes Cloud 100 list biggest movers this year,

01:57:03 soaring 67 spots to number 15,

01:57:06 Wiz is arguably tech's highest flying unicorn,

01:57:09 at least the highest flying not directly

01:57:11 in the AI model race.

01:57:13 It was the fastest software company ever

01:57:15 to reach 100 million in annual recurring revenue,

01:57:17 and then doubled that in just nine months.

01:57:20 And it reached a $10 billion valuation in just three years,

01:57:23 making its founders new billionaires.

01:57:25 But critics say Wiz runs a hyper-aggressive strategy

01:57:27 of raising and hiring big and spending even bigger,

01:57:30 with the sharp-elbowed sales tactics to match,

01:57:32 that recalls the profligate tech spending

01:57:34 of a bubble that's long since burst.

01:57:37 So as it helps some of the world's big corporations,

01:57:39 like LVMH and Morgan Stanley,

01:57:41 catch this crazy cloud wave,

01:57:44 all eyes are on Wiz and its CEO, Asaf Rapoport.

01:57:47 First, tell me, how long have you been working on Wiz?

01:57:57 Where was it founded?

01:57:59 What's the origin story?

01:58:00 - So actually we started March 2020.

01:58:03 And if you remember March 2020,

01:58:05 it was like when COVID hit.

01:58:07 Like basically when we understood

01:58:08 that COVID is like a true pandemic.

01:58:10 It didn't feel like the right timing to start a startup,

01:58:14 not in security, not at all.

01:58:16 But probably that was the perfect timing

01:58:18 for a cybersecurity company doing cloud security.

01:58:21 - And when someone who doesn't know anything

01:58:23 about technology security is thinking

01:58:25 about the different areas that could be under attack,

01:58:28 that need security, what kind of information

01:58:32 or work is going into the cloud

01:58:34 that would need to be protected?

01:58:36 - Everything, think about it, think about organization.

01:58:38 Almost everything new that they're doing,

01:58:40 they would build it already in the cloud,

01:58:43 in the new technology stack.

01:58:45 Even look at AI.

01:58:46 Like AI is definitely gonna be revolutionary,

01:58:49 but it's also a cloud revolutionary,

01:58:50 in a way, if you think about it.

01:58:52 And everything new is building there.

01:58:54 So definitely if you look at the cloud today,

01:58:56 it's probably 10%.

01:58:57 That's kind of what we're estimating

01:58:59 as the penetration of the cloud.

01:59:01 But it's still like this is the most advanced

01:59:04 and the new stuff that are going,

01:59:05 like all the applications,

01:59:06 everything that basically we're doing today

01:59:08 has a cloud attachment in a way.

01:59:10 - And so you split time between New York and Tel Aviv,

01:59:14 and that's kind of similar to the company,

01:59:16 has hubs in different places, right?

01:59:18 - I'm based in New York,

01:59:19 but we have a large R&D center in Tel Aviv.

01:59:21 That's where we started the company.

01:59:23 We have offices nowadays also in Washington,

01:59:26 in Denver, in Austin, and we're growing.

01:59:28 We're trying to grow also outside of the US

01:59:31 to EMEA and APAC.

01:59:32 Yeah, we're, in one way, we're still a toddler,

01:59:34 in a way, and still growing.

01:59:35 - Okay, and this is not your first startup.

01:59:38 Can you tell me a little bit about what you did before?

01:59:41 And I believe it was with the same crew of co-founders,

01:59:44 give or take, as this one.

01:59:46 - So we actually met in the 8200 unit.

01:59:48 The 8200 unit is kind of the Israeli NSA.

01:59:51 So in Israel, we have a mandatory service.

01:59:53 That's where we, you know, we're the,

01:59:54 probably one of the people that can say,

01:59:57 "Hey, we didn't choose to work for cybersecurity.

01:59:59 "Cybersecurity chose us."

02:00:01 In a way, so we got drafted to that,

02:00:03 and that's how we met.

02:00:04 And since then, we're working together.

02:00:06 So we've been together in 8200.

02:00:08 That's where we learned everything about cybersecurity.

02:00:12 After that, we founded together Adalom,

02:00:14 which was a player in the CASB market,

02:00:17 which is more of like cloud applications security.

02:00:20 It was a short run, a very fun one.

02:00:24 Two and a half years, got acquired by Microsoft.

02:00:27 Came to Microsoft, spent there five years,

02:00:29 more than expected in a way.

02:00:30 We found out that Microsoft is a great place,

02:00:33 also for entrepreneurs, like to study

02:00:35 and to learn how to scale.

02:00:37 That's where we led the, basically the cloud security group.

02:00:40 So everything that is cloud security for Microsoft,

02:00:43 we had the opportunity to lead this business in a way,

02:00:47 from almost zero to billions of dollars in ARR,

02:00:50 which was truly amazing.

02:00:52 It's kind of the golden era of Microsoft,

02:00:54 and we learned a ton.

02:00:55 And then March 2020, back then it sounded like,

02:00:59 hey, great timing to leave the mothership

02:01:02 and to start a new company.

02:01:03 - Did this feel like a big acquisition

02:01:06 and a big win at the time when you sold the business?

02:01:08 - Definitely.

02:01:09 It was, again, it was personally a big win,

02:01:12 but also kind of for our ecosystem

02:01:14 and going back to Israel.

02:01:16 One of the things that Microsoft did with the acquisition,

02:01:19 they acquired something like seven startups in Israel

02:01:23 doing cybersecurity, and that's the way

02:01:24 Microsoft kind of leapfrogged to the amazing business

02:01:28 that they have today in cybersecurity.

02:01:30 So I think it's a great case study

02:01:32 about how a company get into a new market,

02:01:35 doing some acquisition,

02:01:36 and becoming a leader of that market.

02:01:38 - Times have changed, right?

02:01:40 And what seemed big back then would not seem big necessarily,

02:01:44 at least to you today, right?

02:01:46 So how does the size that we're talking about

02:01:49 at Adalama Acquisition compare to now the approach

02:01:52 and what you're building with Wiz?

02:01:53 - Unlike first timer, you're like,

02:01:55 you know what's the journey gonna look like in a way.

02:01:58 You know it's not like, hey, as you see in the movies,

02:02:00 I'm gonna be a startup or something.

02:02:02 You know it's gonna be like a bumpy road

02:02:04 and a very stressful one.

02:02:05 So going back a second time,

02:02:07 it truly was a decision that we needed to make.

02:02:10 Like, are we gonna do that again?

02:02:12 But definitely when we made the decision,

02:02:13 we knew we were gonna do something different.

02:02:15 We don't wanna do like, hey,

02:02:16 let's do another quick round and acquisition,

02:02:19 get acquired by amazing companies that are out there.

02:02:23 We thought, hey, this time we wanna take it all the way,

02:02:25 like to build Microsoft.

02:02:27 You know, to build like what we learned from Microsoft,

02:02:29 all about the scale, what we knew from Adalama,

02:02:31 a lot about like the startup way

02:02:33 and how to be nimble and agile,

02:02:36 to put this together, and that's kind of for us.

02:02:38 This is Wiz.

02:02:39 - So you get bought by Microsoft.

02:02:41 You talk to Satya Nadella.

02:02:43 What does he tell you and sort of

02:02:45 what do you learn from him?

02:02:46 - One of the things that Satya did tell me

02:02:49 in the first meeting was I'm here to set the rule

02:02:52 and you're here to break the rules.

02:02:54 And this is super inspirational in a way.

02:02:56 Think about it, a CEO that is truly

02:02:59 a lot about management and manage,

02:03:01 you know, one of the largest organization in the world.

02:03:04 And here like how much confidence he has

02:03:06 like in companies and the acquired companies.

02:03:08 He said like, I'm here to, you know,

02:03:10 not to teach you what Microsoft should do,

02:03:13 but I'm here to learn what Adalama

02:03:15 can teach us in Microsoft.

02:03:16 That's kind of, you know, the learn it all mentality.

02:03:20 I was amazed.

02:03:21 Like that gave me truly energy for the next,

02:03:24 you know, to the next round.

02:03:26 - So with Wiz, what was the first step?

02:03:30 Was it to bring together your co-founders

02:03:32 who you worked with for a long time

02:03:34 and say, hey, let's start something new?

02:03:36 How does it start?

02:03:37 - When we started the company, we weren't named Wiz.

02:03:40 Our name was Beyond Networks.

02:03:42 We were thinking about doing network security in the cloud,

02:03:45 something that is very, very advanced.

02:03:47 But definitely we started with the people we talked to.

02:03:50 We were customer obsessed.

02:03:51 We talked to so many customers.

02:03:52 And first of all, we understood that,

02:03:54 hey, this is a great idea.

02:03:57 Like what we're thinking about,

02:03:59 like doing a network security in the cloud,

02:04:01 but it's too futuristic.

02:04:03 Actually, what we were,

02:04:04 actually I would say we're surprised to found out

02:04:07 that the problem that we thought is already solved,

02:04:10 organizations are struggling,

02:04:12 are not able to operationalize what they try to build.

02:04:15 They have so many tools in their cloud,

02:04:17 doing cloud security,

02:04:19 but they're not getting any results from that.

02:04:20 And that's kind of wowed us.

02:04:22 And we're like, okay, we truly understand the problem.

02:04:26 Let's jump into that.

02:04:28 - This business has grown pretty fast, right?

02:04:30 Can you give us any sense of sort of

02:04:32 how fast from your perspective,

02:04:34 and was this something that you anticipated or planned for?

02:04:37 - I think nobody planned, like, you know,

02:04:39 one of the things that we got $200 million after 18 months,

02:04:43 we then crossed another, the $200 million,

02:04:46 and still growing super, super fast.

02:04:47 So nobody's planning like, hey, I'm gonna do that.

02:04:50 I'm gonna, so it wasn't our mindset.

02:04:53 Having said that, we had the agility, like to,

02:04:56 hey, when we see things are working,

02:04:58 we're building more and we're scaling.

02:04:59 We had the right funds.

02:05:00 We had the right investors, by the way, as well,

02:05:02 to support us.

02:05:03 And also I must admit that being a second timer helps

02:05:07 in a way that, because you know how to navigate,

02:05:09 you know some of the things

02:05:10 that you're gonna struggle with.

02:05:12 So it gives you some of the experience

02:05:13 and enable you to be, I would say,

02:05:15 more bold in your decision versus a first timer.

02:05:18 But that's maybe only me.

02:05:20 But that's kind of what helped us to navigate

02:05:22 and take the tailwind and run with that.

02:05:27 - What would you say your reputation is today?

02:05:29 At a 10 billion valuation,

02:05:31 obviously super fast growing revenue,

02:05:33 is Wiz still a challenger?

02:05:35 Is it now big enough that people are chasing you?

02:05:39 How does it feel?

02:05:40 - I never feel like big enough.

02:05:41 Like in a way, I still feel like,

02:05:43 hey, lots of things ahead of us.

02:05:45 I think that in a way we're a startup

02:05:48 that is only three years old in many, many aspects,

02:05:51 but also business-wise grew like at 10 years old

02:05:55 or even sometimes 15 years old.

02:05:56 So it's kind of, I kind of like this ambiguity in a way

02:06:00 that you're still a startup, still even super small

02:06:02 to even to the revenues that we have.

02:06:04 But at the same time, you know,

02:06:05 you're facing the biggest problems of the world

02:06:08 and tackling the, you know,

02:06:10 and beating the biggest giants in the security space.

02:06:14 - You think you can grow so fast

02:06:16 without having sharp elbows and kind of upsetting some people

02:06:20 because talking to third parties,

02:06:23 some people think that Wiz has a reputation

02:06:25 for being a little cutthroat, a little aggressive in sales,

02:06:29 not so nice, which again, it's business.

02:06:31 So you could argue that's totally fine.

02:06:33 But I am curious if that's something that you think about

02:06:36 or you think even matters

02:06:37 in kind of that pursuit of market share.

02:06:39 - Of course it matters.

02:06:40 And I'll tell you, I'm sure that we've done

02:06:42 so many mistakes in the way.

02:06:44 So definitely, you know,

02:06:46 maybe we sometimes mistreated someone and stuff like that.

02:06:49 So I'm apologizing for that.

02:06:50 And this is an opportunity for us to learn.

02:06:52 So definitely this is part of that.

02:06:54 But as a company, I don't think this is the culture.

02:06:56 It's very, very, very different than what you described.

02:06:59 - In visiting your offices in Tel Aviv

02:07:02 and talking to people around you,

02:07:04 one thing that seems to stand out about Wiz

02:07:06 is that you have taken a stance on social issues

02:07:10 and sort of wanted to have an impact outside of Wiz

02:07:13 while still building the company.

02:07:15 You know, sometimes we see business leaders

02:07:17 do that more after their business,

02:07:18 but not necessarily at the same time.

02:07:20 Can you talk a little bit about where that comes from

02:07:22 and sort of what your focuses are?

02:07:25 - I think that what we're seeing more in the US

02:07:27 that like the involvement of companies,

02:07:29 this wasn't existing in Israel.

02:07:32 And I think that bringing that kind of,

02:07:33 that, hey, companies can take a stand

02:07:36 and companies sees themselves as part of the society

02:07:39 that they actually part of, this is important.

02:07:42 I think that eventually, you know, it's not about me.

02:07:45 It's not about even the company.

02:07:46 It's about the people that are in the company,

02:07:48 that they care.

02:07:49 It's their friends, it's their family,

02:07:51 it's where they live.

02:07:52 That's why it's so important.

02:07:53 Not something I can say,

02:07:54 hey, forget about work on what you're doing.

02:07:57 Forget about your friends,

02:07:58 forget about your family or your neighborhood.

02:08:00 It's here and now.

02:08:01 So that's why, you know, you need to be part of that

02:08:04 and you cannot disconnect.

02:08:05 And that's kind of the view that we have.

02:08:07 One of the privilege I had like as the first timer was like,

02:08:10 hey, to move to San Francisco for the first time,

02:08:12 leaving there.

02:08:13 I remember, you know, going to the pride parade in SF

02:08:17 and I was shocked.

02:08:19 I saw all these companies like parading,

02:08:22 like, you know, from United to Salesforce

02:08:24 to every company that you can basically,

02:08:26 the big banks, the insurance company.

02:08:29 I'm like, none of that happened in Israel ever.

02:08:32 When you went back then to the Israeli parade,

02:08:36 it would be, sorry for that, it would be condom companies,

02:08:40 it would be, you know, clothing companies and beers.

02:08:43 That's kind of, that's the sponsors for the parade.

02:08:46 And seeing that, you know, one of the first things

02:08:48 that I, when I started in Microsoft,

02:08:50 one of the first things that we've done,

02:08:52 we did a float of Microsoft with all these companies

02:08:55 that I just described in Microsoft as part of that.

02:08:58 And that started to change.

02:09:00 And by the way, like last parade in Israel,

02:09:02 you're seeing TikTok and eBay

02:09:04 and you're seeing part of the change.

02:09:06 And that's, I think that's super important.

02:09:09 - You've also caused a little bit of controversy

02:09:11 or at least made waves already with Wiz, right?

02:09:15 There was something you did a few months ago,

02:09:17 I think with your funding,

02:09:18 that at least was big news in Israel.

02:09:20 Could you share that with our audience as well?

02:09:22 - It's never boring in Israel.

02:09:24 So one of the things that we're facing today

02:09:28 is more about what's the future of Israel as democracy,

02:09:32 the judiciary, is it gonna be independent?

02:09:35 So lots of things like that.

02:09:37 One of the things that was very important for us,

02:09:39 and by the way, also for our investors, to be fair,

02:09:42 is making sure that we're keeping our company safe.

02:09:46 And it's a much more risk being in Israel nowadays.

02:09:50 And one of the things that we made,

02:09:51 we decided not to bring like the new funds that we raised

02:09:54 and to keep it outside of Israel

02:09:56 until we were getting more certainty

02:09:57 about where Israel is facing.

02:09:59 You know, super sad for Israeli to say,

02:10:02 hey, we're gonna hold and we're gonna look

02:10:04 what's gonna happen.

02:10:06 But truly this is one of the biggest risk in my mind,

02:10:09 at least on the Israeli tech scene,

02:10:12 on the cyber nation in a way that we've built,

02:10:15 like if we're not be able to keep our judiciary independent

02:10:19 and continue being a democracy.

02:10:20 - When you think about Wiz in the future,

02:10:22 what gets you excited to go to work?

02:10:24 - I think when you look at the cloud security market

02:10:26 and the potential of that,

02:10:27 it's one of the biggest markets gonna be in security.

02:10:30 And the race is still open in a way,

02:10:32 unlike endpoint security,

02:10:33 where there might be a clear leader

02:10:35 and network security, there might be a clear leader.

02:10:37 Cloud security gonna be probably bigger than those two.

02:10:41 And the opportunity is still open.

02:10:43 So definitely that's exciting,

02:10:45 when you think about racing and making sure

02:10:47 that we are becoming kind of the undisputable market leader

02:10:50 of the cloud security opportunity, that's huge.

02:10:53 The opportunity to build a $100 billion company

02:10:56 from cloud security, that's what's on stake today

02:10:59 for all of us.

02:11:01 And I think that when you look at Wiz,

02:11:03 when you look at the people,

02:11:05 at the team that we've built,

02:11:07 at the investors that we have,

02:11:09 at the customers that we want their trust,

02:11:12 I think we had like kind of the best hand in the table,

02:11:15 maybe to win this challenge.

02:11:17 - So what is winning for you when you declare victory?

02:11:20 - Yeah, so building a big company.

02:11:22 I think that's what we're trying to do.

02:11:24 - But it's already a big company, right?

02:11:25 - We can be bigger, but IPO is part of that.

02:11:30 Every entrepreneur has the dream one day to go public.

02:11:34 But we need to remember, this is like a milestone.

02:11:36 This cannot be the goal.

02:11:38 This is another funding event,

02:11:40 a different funding event than what we're used to.

02:11:42 We're gonna have that, but the journey is much bigger

02:11:46 than, hey, going to IPO.

02:11:47 Never put a milestone as your end goal.

02:11:52 (upbeat music)

02:11:53 - Launching an agricultural equipment company is tough.

02:11:56 It's capital intensive,

02:11:58 and cash-strapped farmers tend to be a conservative lot.

02:12:01 But California-based Monarch,

02:12:03 which has raised $116 million in equity from investors

02:12:07 and reached a valuation of $271 million in November 2021

02:12:12 at its latest equity funding,

02:12:14 seems to have hit a tipping point.

02:12:15 Last year, it booked 22 million in revenue,

02:12:19 up from just 5 million in 2021.

02:12:21 This year, co-founder and CEO Pravin Panmeta

02:12:25 expects revenue to increase three to five fold.

02:12:28 As it expands, he expects that more of its revenue

02:12:31 will come from software subscriptions,

02:12:33 which cost up to $8,376 per tractor per year.

02:12:38 The software gives farmers real-time alerts

02:12:41 about things like sick plants and safety risks,

02:12:44 and it gathers and crunches a ton of data

02:12:46 to improve crop yields.

02:12:49 Those numbers helped Monarch make the cut

02:12:51 for this year's Forbes Next Billion Dollar Startups list,

02:12:54 our annual showcase of the 25 companies

02:12:56 we think most likely to reach a $1 billion valuation.

02:13:00 (upbeat music)

02:13:02 - Every farmer around the world is under tremendous pressure

02:13:08 because of lack of labor.

02:13:11 With this labor shortage,

02:13:12 they're also being asked to do more

02:13:14 because a transition to sustainable,

02:13:16 regenerative farm practices requires farmers

02:13:20 to do more operations in the field.

02:13:22 Instead of spraying once with dangerous chemicals,

02:13:26 they have to do more mechanical operations

02:13:28 like mowing or weeding.

02:13:30 That is gonna cost them more in diesel, more in labor,

02:13:33 which is what is holding that transition back.

02:13:36 So that's the second big challenge that farmers are facing.

02:13:39 The third big one is people asking for data from the farm,

02:13:44 whether it's regulatory agencies, certifying agencies

02:13:47 that are looking to certify organic sustainable practices,

02:13:50 or even consumers like you and me wanting to know more

02:13:54 about how this fruit or vegetable that I bought was farmed.

02:13:59 All of this means that now the farmer has to go

02:14:01 and collect data on the farm

02:14:03 at a time when there's no labor,

02:14:05 and collecting data is gonna result in more emissions

02:14:08 from diesel equipment.

02:14:09 (upbeat music)

02:14:13 - Monarch targets vineyards and fruit and vegetable farms

02:14:16 for its tractors.

02:14:18 These require smaller machines than the giant ones used

02:14:21 by those who raise corn or soybeans.

02:14:24 - We are the only all electric, smart driver optional

02:14:27 tractor in the world that farmers can buy today.

02:14:29 And the fact that it's all electric really helps

02:14:32 the farmers out in reducing their fuel costs.

02:14:35 It also helps us in reducing emissions

02:14:38 that comes from farming.

02:14:40 - The way we view the system is kind of three main elements.

02:14:43 So there's a fully electrified and by wire platform.

02:14:47 In some sense, it's actually the lower half of the tractor

02:14:49 is fully electric and fully by wire controlled.

02:14:52 So that means that we have electronic control

02:14:55 over everything that the tractor does.

02:14:57 We are enabled to learn what a human operator,

02:15:00 a skilled human tractor driver is doing

02:15:02 because we see all the inputs that they are putting

02:15:04 into the system when they are doing a specific operation

02:15:07 out on the farm.

02:15:09 And that knowledge then we can feed up

02:15:11 into the autonomy system to say,

02:15:14 this is how your skilled human operator

02:15:16 ran a mowing operation or ran a spraying operation.

02:15:19 And that information now we can encode

02:15:22 and start to learn from.

02:15:23 So that some of the artificial intelligence

02:15:26 is really learning what the human operators are doing

02:15:29 and then applying that to allow the system

02:15:31 to recreate those same operations,

02:15:34 but in a fully autonomous fashion.

02:15:36 So the base platform is electrified

02:15:39 and fully by wire controlled.

02:15:41 And then that connects to the roof

02:15:42 or kind of the top half of the tractor.

02:15:44 And in the roof, we have all of our computation

02:15:47 and communication and sensors.

02:15:50 The understanding of what the system is doing

02:15:53 and all of the heavy computation

02:15:55 to decide what to do with the tractor,

02:15:57 where to go, how to stay centered in a row,

02:16:00 turning around at the end of a row,

02:16:02 all of that detail, how to get from point A to point B,

02:16:05 how to do an operation correctly,

02:16:07 all of that is encoded in the roof

02:16:09 and in the software that's running at the edge in the roof.

02:16:13 The third layer in the system

02:16:15 is the digital elements of the system

02:16:17 or the cloud-based elements of the system.

02:16:19 That data from one tractor in a fleet

02:16:22 is reported up to the cloud.

02:16:24 Lessons that we learn from one tractor

02:16:26 from watching one driver,

02:16:27 we can learn that lesson, transmit it up to the cloud

02:16:30 and then reapply that lesson

02:16:32 across the entirety of our fleet.

02:16:36 A big, I think, like huge opportunity

02:16:39 is this autonomy feature.

02:16:41 We as farmers, every single day during the growing season,

02:16:45 when there's fungal pressure,

02:16:46 which there is in every farm region around the world,

02:16:48 we have to put on hazmat suits

02:16:49 and to spray chemicals to deal with fungal pathogens.

02:16:53 And even with organic contact sprays, right,

02:16:55 you still have to wear a mask and all this.

02:16:57 Just with a safe day by day, everything going smoothly,

02:17:02 you're exposing yourself a lot.

02:17:04 Then there's also the dangers of terrain

02:17:06 and things that could happen.

02:17:06 So by being able to automate farming,

02:17:09 we're removing the operator

02:17:10 from the most dangerous place on the farm

02:17:12 and we're elevating them into a much happier, healthier,

02:17:15 cleaner, safer lifestyle.

02:17:16 So data is massively important.

02:17:19 There's a great McKinsey and Company study

02:17:21 that has come out and said that by 2050,

02:17:24 farms will be 70% more productive because of data.

02:17:26 So it's reactionary,

02:17:28 it's the ability to implement changes.

02:17:30 Like if you have disease pressure in a part of your vineyard

02:17:33 or part of your farm, your orchard,

02:17:35 you can catch that earlier and hopefully mitigate a plant

02:17:38 from potentially having to be replaced

02:17:39 to actually just having to make a couple of cuts

02:17:41 and you're fine, that plant will survive.

02:17:43 The greater data that we can get,

02:17:46 the more productive we can be as farmers.

02:17:49 The farm owner now is seeing the big picture view

02:17:52 and they are saying, okay, I've offset, you know,

02:17:54 this many kilograms of CO2.

02:17:56 I have these five issues in my field

02:17:58 that have been automatically identified.

02:18:00 You know, I'm seeing the beginning of a pest

02:18:02 or of a fungus or something.

02:18:04 I'm starting to see the beginning of that

02:18:05 because that data is starting to be reported back.

02:18:08 So kind of at all three of those levels,

02:18:09 at the operator, at the kind of farm manager

02:18:12 and at the farm owner,

02:18:13 the insights that the system is providing

02:18:16 are enabling all three of those people

02:18:18 to do their jobs better

02:18:20 and to basically spend less time to get more work done.

02:18:23 (upbeat music)

02:18:26 - What we are seeing with our farm customers

02:18:30 is for the first time in agriculture as well.

02:18:33 A lot of them have purchased multiple tractors.

02:18:36 Some of them have bought 10, 17 tractors at a time

02:18:39 in their first year.

02:18:40 That tells us two things.

02:18:41 The fact that they're willing to buy a number of tractors

02:18:44 in the first year of production

02:18:46 tells us that their challenges are real and huge.

02:18:50 Where number two, they're also looking at a tractor

02:18:52 as a solution for some of these challenges.

02:18:55 And the fact that we can actually address these challenges

02:18:58 for them, I think is the game changer.

02:18:59 So we're essentially creating new revenue streams

02:19:02 for the farmer in this new world of sustainable farming

02:19:05 and carbon credits for agriculture.

02:19:07 We are saving them OPEX in terms of diesel savings

02:19:10 and also in terms of labor efficiencies.

02:19:13 I come from a world when, you know,

02:19:16 phones used to cost 20, $30.

02:19:19 Now all of us are comfortable paying

02:19:22 more than a thousand dollars sometimes for a phone.

02:19:24 The same thing has happened with smart devices

02:19:27 when we think about thermostats

02:19:29 or, you know, security doorbells,

02:19:33 smart ones or security cameras.

02:19:35 Once we digitally transform a machine,

02:19:37 the value provided to the end user is a lot higher.

02:19:41 So we actually feel that our tractor is affordable

02:19:44 in terms of fruits and vegetables,

02:19:47 farmers being able to access the tech and get the savings.

02:19:50 But long-term, there's nothing on this tractor

02:19:53 that prevents us from continuing to drive the cost

02:19:56 of the device down to where every farmer in the world

02:19:59 can eventually buy a tractor powered with Monarch technology

02:20:03 or a Monarch-like tractor.

02:20:04 Hydrogen is the universe's most abundant element.

02:20:09 It's everywhere, it's in anything.

02:20:11 It's number one on the periodic table,

02:20:17 but actually getting it and using it

02:20:19 as a form of clean energy has been very tough.

02:20:23 For the last 30 years,

02:20:24 a lot of big companies around the world

02:20:26 have been trying to figure out

02:20:28 how to make hydrogen attainable,

02:20:31 use it as a power source for a fuel cell,

02:20:33 as a stationary energy source, a way to power buildings.

02:20:37 It hasn't really worked out up to this point,

02:20:39 but the last few years, things are beginning to change.

02:20:42 Excitement is building up

02:20:49 specifically around green hydrogen.

02:20:51 This is a way of making hydrogen

02:20:55 that uses zero carbon inputs

02:20:57 and produces no emissions other than oxygen.

02:21:00 In the US, nearly all of the hydrogen used in oil refining,

02:21:04 food processing, and other industrial processes

02:21:07 is considered gray.

02:21:09 This means it is extracted from natural gas

02:21:11 using processes that generate carbon dioxide.

02:21:15 If green hydrogen can be used at large scale

02:21:18 instead of gray hydrogen,

02:21:20 this would make it a powerful tool against climate change,

02:21:23 an unlimited source of energy,

02:21:25 and a very lucrative business internationally.

02:21:28 We're in Rochester, New York, at Plug Power,

02:21:32 which wants to be one of the leaders

02:21:34 in this new emerging technology,

02:21:36 manufacturing both fuel cells,

02:21:38 which can power a vehicle

02:21:40 or generate electricity on a stationary system,

02:21:43 and also making electrolyzers,

02:21:46 devices that take water and electricity

02:21:50 and make hydrogen to power those fuel cells.

02:21:53 And we're speaking with Dan O'Connell

02:21:55 here at the Gigafactory that Plug runs.

02:21:58 And tell me a little bit about what we're looking at here.

02:22:01 This is an electrolyzer,

02:22:03 and what does the electrolyzer do exactly?

02:22:05 How does this work?

02:22:07 This is an electrolyzer, and this is a one megawatt unit.

02:22:09 And what this means is

02:22:11 we can put a megawatt of power into it

02:22:13 and make 420 kilograms of hydrogen.

02:22:16 What we do is we put electricity in,

02:22:18 we put purified water in,

02:22:20 the catalyst inside splits apart,

02:22:22 the hydrogen and oxygen in water,

02:22:24 and we capture that hydrogen and use it to fuel vehicles.

02:22:27 Depending upon the capacity of the hydrogen on board storage

02:22:30 inside the vehicle,

02:22:31 but they usually use around 20 kilograms.

02:22:34 So you could probably fill about 20 vehicles

02:22:37 off of one megawatt electrolyzer,

02:22:39 or you could think of it as like 400

02:22:42 standard sedan vehicles.

02:22:44 Next to you, we have the fuel cell,

02:22:46 the fuel cell stack.

02:22:47 What is this doing?

02:22:48 Yeah, you can think about the electrolyzer

02:22:50 splitting the water into hydrogen and oxygen

02:22:52 and requiring power.

02:22:54 Here we want to take that hydrogen

02:22:56 and turn it back into water by combining it with oxygen

02:22:59 and thereby generating electricity

02:23:01 and use that electricity to do some work for us.

02:23:03 Plug Power's technology supplies hydrogen

02:23:10 for a number of applications,

02:23:12 including as a fuel for stationary energy generation

02:23:15 and fuel for trucks.

02:23:17 But the company's primary market is material handling

02:23:20 in the form of hydrogen-powered forklifts.

02:23:22 Plug Power says about 65,000 forklifts

02:23:25 are being powered by their hydrogen

02:23:27 at large companies such as Amazon, Walmart, and Home Depot.

02:23:31 Well, a forklift driver will drive up to a pump,

02:23:35 just like you do today, make a couple of connections,

02:23:37 and once those connections are made,

02:23:39 you'll be able to put a kilogram of hydrogen

02:23:41 on board the forklift and be able to run for eight hours.

02:23:44 And the hydrogen's coming out in what form?

02:23:46 Is it liquid? Is it gas?

02:23:49 No, it comes out as gas at 350 bar or 5,000 psi.

02:23:54 We take the water off, and when we get all the data off,

02:23:57 every time it refuels, we monitor everything going on

02:24:00 with that stack inside of that fuel cell unit

02:24:03 to be able to determine what's going on.

02:24:06 We can predict life.

02:24:07 We can predict component failures.

02:24:09 So it's really a wealth of data

02:24:10 that we get every single time it refuels.

02:24:12 When did the transition really happen

02:24:14 where you started to see fuel cell,

02:24:17 hydrogen fuel cell-powered forklifts

02:24:20 replace other types of technologies?

02:24:22 Yeah, about eight or nine years ago,

02:24:25 we started a small fleet at Amazon,

02:24:28 and we had half of them with batteries

02:24:30 and half of them with fuel cells.

02:24:32 The forklift drivers loved the fuel cell ones

02:24:34 because of what we talked about,

02:24:35 the power, the range, and the recharge time.

02:24:38 So the fuel cells started to win out.

02:24:40 We've seen probably around a 10% efficiency improvement

02:24:43 at those warehouses

02:24:45 when we've converted over to fuel cell.

02:24:47 Another big player in the green hydrogen race

02:24:49 is a company most people would probably not expect,

02:24:52 Cummins, the world's largest diesel engine maker.

02:24:56 Its clean tech division is known as Accelera,

02:24:58 and we had the chance to visit its Canadian operations

02:25:01 in Mississauga, Ontario.

02:25:03 At this facility, we actually have a number of buildings.

02:25:06 The building that we're in right now

02:25:07 is a building we kind of refer to as the fuel cell building

02:25:10 or the fuel cell technology building.

02:25:12 In this particular building, we do have a small

02:25:14 manufacturing cell that makes fuel cells

02:25:17 for general use in various industry,

02:25:21 as well as we develop the next generation of fuel cells.

02:25:23 We have a large R&D component to the folks that work here.

02:25:26 About 30 years of history

02:25:28 we tried to capture in this small museum.

02:25:30 And what you're seeing here, Alan, across the shelving

02:25:32 is a progression of fuel cell technology development

02:25:36 that started off way back in the mid-1990s

02:25:39 when we became, first of all, a test station company

02:25:42 that was building test stations,

02:25:44 which people who were developing fuel cells would need.

02:25:46 And then we started to test people's fuel cells

02:25:49 until we finally ourselves decided to go

02:25:50 into the fuel cell business

02:25:52 with special focus on commercial vehicles.

02:25:54 So we were not a fuel cell for passenger car company.

02:25:58 We were a fuel cell for commercial vehicle company

02:26:00 as Hydrogenics.

02:26:01 And in the shelving units here,

02:26:03 you see a number of years to the 2000s, the early 2000s.

02:26:07 In these days, we were making fuel cells

02:26:09 that when they lasted an hour or a day,

02:26:11 we'd pop champagne bottles, if you will.

02:26:14 - So here at this facility,

02:26:16 you're developing high-powered fuel cell power systems

02:26:20 and electrolyzers, but on the fuel cell stack,

02:26:23 the fuel cell motor, or engine, I guess,

02:26:26 if you want to call it,

02:26:27 you're developing something that would be very powerful,

02:26:29 powerful enough to actually operate a class eight semi truck.

02:26:34 Tell us a little bit about what we're looking at right here.

02:26:37 What is this unit exactly?

02:26:38 - Yeah, this is a powerful one paired with its brother,

02:26:43 another one just like this.

02:26:44 So it's twin, I will say.

02:26:46 This is our fourth generation fuel cell,

02:26:49 which really shows the commitment

02:26:50 that Commons and Accelera have had

02:26:52 to continuing to develop this technology over time.

02:26:55 We started with our first generation of fuel cells

02:26:58 and second and third in the 30, the 40,

02:27:01 the 45 kilowatt spaces.

02:27:03 Those were low pressure technology.

02:27:05 As we advanced the technology,

02:27:07 what we found was that we needed to move

02:27:09 to a variable pressure,

02:27:10 which allows for more power density.

02:27:12 This is a 150 kilowatt stack,

02:27:15 and as I mentioned, it will be paired with another.

02:27:18 We're taking a modular platform approach

02:27:21 to have 300 kilowatts of power

02:27:23 to commercialize the system for heavy duty vehicles,

02:27:28 class eight in North America.

02:27:30 - Obviously, you know, Commons is a giant

02:27:32 in the trucking industry.

02:27:33 It's the world's largest diesel engine manufacturer.

02:27:36 Is it a little curious that it's also pivoting

02:27:39 into something like hydrogen fuel cell,

02:27:41 which would seem to be a competing technology eventually

02:27:43 with its diesel?

02:27:45 - We actually see the diesel technology

02:27:47 as an enabler to get to more advanced technologies

02:27:50 because we're leveraging the innovation of Commons,

02:27:53 which is a company that's over 100 years old.

02:27:56 We have significant experience

02:27:58 in terms of understanding applications and duty cycles

02:28:02 and how the products work in the real market,

02:28:04 and then we take that,

02:28:06 and the system integration skills we apply

02:28:09 to the hydrogen fuel cell.

02:28:12 So we actually think that the core technology

02:28:14 is a huge enabler as to why we're able to be successful

02:28:18 in the longterm with our destination zero strategy.

02:28:21 - To see some of Xceler's hydrogen trucks being worked on

02:28:23 and driven on public roads,

02:28:25 we toured its facility in West Sacramento, California.

02:28:28 - Here at the West Sacramento facility,

02:28:30 we do powertrain integration,

02:28:32 and we focus on fuel cell powertrains.

02:28:34 So we install fuel cells, we install batteries, motors,

02:28:38 everything to make the trucks run as a fuel cell vehicle,

02:28:40 and then we do testing out of this facility,

02:28:43 and we do support for service and validation.

02:28:46 So the range we're hoping to get varies by application,

02:28:49 but when we look at long haul trucking, for example,

02:28:52 we're targeting at least 500 miles,

02:28:55 preferably even 600 or 700 miles in the long run,

02:28:57 maybe after 2030, but in the near term,

02:29:00 we know we can get 450 miles in a trucking application,

02:29:03 a class A truck.

02:29:04 That's really exciting because there are battery vehicles,

02:29:07 class A trucks, that can get around 300 to 400 miles,

02:29:11 but when you put the full weight and the full drive cycle

02:29:14 that these trucks are gonna be put into,

02:29:16 they don't get 450 miles,

02:29:18 contrary to what some battery electric vehicles might say.

02:29:21 And so for those really intense applications,

02:29:24 450 miles is a really big deal

02:29:25 for a zero emission powertrain.

02:29:27 - In addition to long distance trucking,

02:29:29 Xceler is also involved with hydrogen powered trains.

02:29:32 It already has a number of clean trains running in Europe

02:29:35 in a partnership with Alstom.

02:29:37 And recently, it helped power the first hydrogen train

02:29:40 in North America.

02:29:41 - This is what we call an FCC, a fuel cell composition.

02:29:46 This fuel cell composition also goes in pairs.

02:29:50 There are two that are mounted

02:29:52 to the roof of passenger trains.

02:29:55 And Xceler is actually powering

02:29:58 the world's first hydrogen fueled

02:30:01 commercial passenger train in operation in Germany.

02:30:04 We've already delivered already over 40 trains.

02:30:08 We have another 10 that are being delivered later this year

02:30:10 and then several next year as well.

02:30:12 So our European fleet will actually

02:30:13 be very substantial in size.

02:30:15 Just this summer here in Canada, up in Quebec,

02:30:18 we ran a demonstrator train for three months,

02:30:22 from June just until the end of September

02:30:24 when it concluded from Quebec up to Charlevoix.

02:30:29 And it was the first North American passenger train

02:30:33 powered by hydrogen fuel.

02:30:35 And the reason we wanted to do this demonstration project,

02:30:37 which is also in partnership with our key customer

02:30:40 in Europe, Alstom Trains, is to show the marketability

02:30:44 and the capability of hydrogen propulsion technology

02:30:48 across different environments and different duty cycles.

02:30:51 And one of the things that made

02:30:52 that demonstrator project really unique

02:30:55 was that it encompassed the whole

02:30:57 end-to-end hydrogen ecosystem.

02:31:00 The hydrogen that was powering that train

02:31:02 was created by an electrolyzer purchased

02:31:04 by another one of our partners, Harnois Energies.

02:31:07 Xceller was able to provide the electrolyzer,

02:31:10 which generated the hydrogen,

02:31:12 which then powered the hydrogen fuel cell train.

02:31:15 The train we brought to Quebec is one of the test trains

02:31:20 that we had for the testing campaign

02:31:23 for the first generation,

02:31:25 because we wanted to make sure we actually demonstrate

02:31:28 its operability here in North America.

02:31:31 The feedback has been great.

02:31:33 And frankly, passengers,

02:31:35 but also we've had a lot of delegations,

02:31:37 international delegations coming,

02:31:39 having interest in the train.

02:31:41 Governor of Massachusetts and Vermont and Maine

02:31:46 came to actually tour the train.

02:31:48 And everyone realizes that first it's real.

02:31:53 It actually carries passengers.

02:31:55 It's smooth.

02:31:56 It's very quiet.

02:31:58 It's an enjoyable ride.

02:31:59 So we've had tremendous feedback.

02:32:01 To get a closer look at Xceller's electrolyzers,

02:32:09 Alex Savelli, the company's managing director

02:32:12 for hydrogen technologies,

02:32:13 walked me through an assembly area.

02:32:16 He tells me one of these machines

02:32:17 uses about five megawatts of input power

02:32:20 and produces about two tons of hydrogen per day.

02:32:23 So that would be, to put in perspective,

02:32:25 would be enough to run about 60 buses,

02:32:29 like on a type of transit application for a day.

02:32:31 Okay.

02:32:32 But then you have some customers

02:32:34 that want sometimes three, four, five of these machines.

02:32:37 One customer that we have, Air Liquide,

02:32:42 up in Baconcour, north of Quebec,

02:32:45 has actually four of these machines.

02:32:48 And they're basically using it

02:32:50 for industrial gas production.

02:32:53 But that plant has been running for almost three years now.

02:32:56 It's actually the largest PEM plant

02:32:58 operating in the world today.

02:33:00 Who are your primary customers?

02:33:02 Who is buying these?

02:33:04 In the short term, a lot of the industrial gas companies,

02:33:07 the merchant gas companies,

02:33:09 folks like Air Liquide, Lindi, Air Products.

02:33:12 But we also have also done a few projects

02:33:16 with folks in the power generation space.

02:33:20 So the first five units that we produced out of here,

02:33:23 they're in the process of being commissioned

02:33:24 at Florida Power & Light.

02:33:26 And they're gonna basically be producing green hydrogen

02:33:29 to decarbonize power production.

02:33:31 So they're gonna blend some of this hydrogen

02:33:33 in a combined cycle turbine that today uses natural gas.

02:33:36 They'll start blending hydrogen

02:33:39 to decarbonize electricity production.

02:33:42 We also have sold quite a few of these,

02:33:44 some of these semiconductor plants

02:33:46 that are being insured back into the US

02:33:49 from the CHIPS Act.

02:33:50 Hydrogen is one of the gases you require to produce chips.

02:33:54 And then more recently,

02:33:56 there's a lot of interest in e-fuels.

02:33:58 So if you think about sustainable aviation fuel,

02:34:02 e-methanol, ammonia,

02:34:04 all the way from smaller projects to very large projects

02:34:08 for that type of application.

02:34:10 The beauty of hydrogen, if you think about it,

02:34:13 it's a very versatile molecule, right?

02:34:15 'Cause it can be used as a fuel for mobility,

02:34:18 but then it can also be used as an energy carrier.

02:34:21 So if you wanna move molecules from North America to Europe,

02:34:25 sort of help with some of the energy crunch

02:34:28 that Europe is going through,

02:34:29 you can also use hydrogen for that.

02:34:31 So with all of its potential,

02:34:33 what are the remaining obstacles for green hydrogen

02:34:35 to be more widely used?

02:34:37 One significant factor that Accelera, Plug Power,

02:34:40 and other hydrogen companies are waiting on

02:34:42 is a production tax credit for clean hydrogen,

02:34:45 in section 45(v) of the Inflation Reduction Act.

02:34:49 In particular, they're waiting

02:34:50 for the US Treasury Department to clarify guidelines

02:34:53 on what forms of hydrogen fuel will qualify as clean

02:34:57 and low or no carbon enough to receive a tax credit.

02:35:01 The cleanest methods of hydrogen production

02:35:03 would qualify for up to $3 per kilogram.

02:35:06 But if the guidelines are made too lenient,

02:35:08 there is a fear that less clean hydrogen production

02:35:10 could create millions of tons of greenhouse gas emissions

02:35:13 and undermine the cleanest hydrogen producers.

02:35:16 Another factor to consider

02:35:18 is the US Energy Department's recent designation

02:35:21 of seven hydrogen hubs across the country

02:35:23 that will share $7 billion in government funding

02:35:26 and $43 billion in commitments from companies.

02:35:30 At Plug Power, I asked the company's VP

02:35:32 of Electrolyzer Technology, Courtney Mittelstadt,

02:35:35 for his thoughts on hydrogen's future.

02:35:37 What do you think needs to happen

02:35:38 and what's going to happen

02:35:39 to sort of build out the hydrogen economy

02:35:42 and make it a more widely used energy source

02:35:46 in a range of applications beyond what it's going into today?

02:35:49 - Yeah, absolutely.

02:35:50 That's a great question.

02:35:52 And what will happen and what it comes down to is the cost.

02:35:55 Of course, it's absolutely the cost.

02:35:58 So originally, we're using the hydrogen

02:36:00 where Plug was able to find a niche for hydrogen

02:36:03 right from the beginning was for the forklift trucks.

02:36:07 So there even electrolysis can be competitive right now

02:36:10 because the hydrogen has to be at high pressure

02:36:12 and it has to be very, very pure to operate in a fuel cell.

02:36:15 So in that small market, we can compete today.

02:36:20 We're getting, as our costs come down,

02:36:22 we're getting the next area

02:36:25 that's willing to pay a little bit of a price premium

02:36:28 is hydrogen as a chemical, not hydrogen as a fuel.

02:36:30 But what's also coming down,

02:36:31 what affects us even more than our costs

02:36:34 is the cost of the renewable energy.

02:36:36 Renewable energy, as you know, solar and wind,

02:36:38 those costs continue to come down and down.

02:36:41 So for instance, in some areas,

02:36:43 the cost of solar is as low as 2 cents a kilowatt hour.

02:36:47 Now it takes 50 kilowatt hours

02:36:49 to make one kilogram of hydrogen.

02:36:51 And one kilogram of hydrogen is about the equivalent

02:36:53 of a gallon of gasoline.

02:36:56 So again, you get that green solar hydrogen

02:37:00 for 2 cents a kilowatt hour,

02:37:01 and you use 50 kilowatt hours

02:37:04 to make a kilogram of hydrogen.

02:37:06 So you can see how quite quickly we can get under $2

02:37:10 for the cost of a kilogram of hydrogen.

02:37:12 The Department of Energy has a goal

02:37:14 for it to get all the way down to $1.

02:37:16 And at $1, we are competitive in so many areas.

02:37:21 And that's why you see the enthusiasm

02:37:23 for hydrogen so high now.

02:37:24 - Certainly one of the challenges

02:37:28 is understanding the adoption curve,

02:37:30 understanding the demand and how fast that will grow.

02:37:33 And I think the factors that are affecting that adoption

02:37:36 are price of hydrogen and infrastructure, so availability.

02:37:39 So the customers aren't going to say order 1,000 trucks

02:37:42 if they don't have a fueling station for 1,000 trucks.

02:37:45 So infrastructure is one of the main challenges.

02:37:48 The other is cost.

02:37:49 Right now, the material to make fuel cells

02:37:52 and the other parts of the fuel cell electric vehicle

02:37:54 are still a little bit expensive.

02:37:56 And so there's a cost premium over a diesel

02:37:58 and even over a battery electric.

02:38:00 But that cost is coming down,

02:38:01 and that's partly what we're trying to do,

02:38:02 is get that cost down.

02:38:03 And so when the cost comes down

02:38:06 and the infrastructure is available,

02:38:07 then the TCO, we call it,

02:38:09 the total cost of ownership for our customers,

02:38:11 will make sense, and they'll be able to basically replace

02:38:14 their whole fleets with fuel cell electric trucks.

02:38:17 - There are still a number of things that need to happen

02:38:19 to make that a reality in North America.

02:38:23 On the infrastructure side,

02:38:25 production of hydrogen, for example,

02:38:27 is high on the agenda across US and Canada,

02:38:33 but investments have to be made

02:38:35 to really produce hydrogen, green hydrogen.

02:38:38 It's better, obviously,

02:38:40 it's coming from renewable electricity.

02:38:42 And then there's discussions that have to happen

02:38:47 around distribution of hydrogen,

02:38:50 the network and stuff like that.

02:38:52 And then the incentivization of that kind of initiatives

02:38:57 against keeping kind of the old diesel trains.

02:39:02 We have in North America, 27,000 diesel locomotives,

02:39:07 and the territory is pretty much not electrified.

02:39:11 1% of the tracks are actually covered by catenaries,

02:39:15 and that's to be compared to 60% in Europe.

02:39:18 So there's a huge fleet,

02:39:21 which needs to be replaced at some point,

02:39:24 and there is a very low electrification rate.

02:39:26 So in essence, that could be really a perfect match

02:39:31 to trains like that,

02:39:33 which are basically running without catenary

02:39:35 at zero emission.

02:39:36 But there's a lot of things that need to happen,

02:39:40 and some states are moving faster than others,

02:39:44 definitely something that we're watching,

02:39:46 and we want to match the technology

02:39:48 and make it fit for the conditions

02:39:51 that we have in North America, the long distances.

02:39:55 The big freight trains, for example,

02:39:57 require a specific design that we're still maturing.

02:40:01 - Clearly, there's still a lot more that needs to happen

02:40:07 before green hydrogen is as present in our lives

02:40:10 as gasoline or batteries.

02:40:12 As other large economies, such as Japan and Australia,

02:40:15 set their strategies for competing in the hydrogen space,

02:40:18 the U.S. will have to make sure it can ensure its role

02:40:21 as a major player, and the decisions it makes now,

02:40:25 particularly around how to define clean hydrogen,

02:40:28 could determine future jobs, pollution levels, profits,

02:40:32 and whether or not America will hit

02:40:34 its net zero emissions targets by 2050.

02:40:36 (upbeat music)

02:40:39 (electronic humming)

02:40:42 (upbeat music)

02:40:45 [BLANK_AUDIO]

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