After a short hiatus, we’re back in the saddle with another episode of Founder to Founder. This week, Teja talks with Yaron Ben Nun, CTO and Founder of Nostromo Energy, about building a company from a good solution, the best way to learn how to negotiate, and how sometimes the best ideas are the ones that can take you down.
(THE FRONTIER THEME PLAYS)
Yo, what’s up guys? Today we have a really fun and energizing interview with Yaron Ben Nun. He is founder and CTO of Nostromo Energy. I think you guys will dig this one. I had a lot of fun recording it. I think you guys will love the vibe and have a lot of fun listening. Thanks, and, as always, let us know what you think. (FRONTIER THEME ENDS)
So we have excellent people that work on the podcast, so I just like to start talking and I wish I had recorded the previous section, ’cause there was some good shit in there.
No, I’ll give you some of that, (Teja: Yes.) because the first question is, I started…from my bio, you see that I started as MarCom, marketing communication, but this is of course not where the story starts. This is just the middle of the story, because I was a filmmaker, and I was making films. I was a film director of music videos, and TV commercials, and documentaries, and I had some epiphany or some event like, life changing event that I’m not sure that we’ll want to go into that. Maybe, yes. It’s upon you, and…
It’s all good. Well, this is an organic conversation, so wherever you wanna go, I’ll follow.
Okay, so I’ll give you that. I don’t tell this story a lot, but like I said, you’re a curious person, so I will just say that getting like, 12 years ago, starting to work as a marketing communication manager in a company was my only getaway into the energy arena, or the startup energy arena, because I was a film director before, and I could convince somebody that marketing communicating manager is not that different, because I already, you know, understand media, (Teja: Yeah.) and whatever. I was a lecturer in some prestigious, you know, places. So I said, “Yeah, yeah, yeah, I know I’ll learn fast how to be MarCom manager.” But this was only the window, if I may say so, through [which] I could get into the scene otherwise, because I don’t have a resume.
I didn’t study, you know, in college. Well, I was, I’m just 12 years graduator, and then I started college. But we didn’t have then, it was the early ‘90s, we didn’t have the ADHD, you know, Adderall (Teja: <Laugh>.) and all these very fancy, you know, things that can put your ass into your seat. So I went to the university, but I was all over the place. I was like, acting crazy, and after like, two, three semesters, I just, you know, I just fell out, you know. I was saying, “I don’t, I can’t go into ancient Greek. I cannot do that. Leave me alone,” you know? (Teja: <Laugh>.) So I didn’t have any resume. I don’t have a proper CV.
When I wanted, when I decided after this life changing event that I will talk [about] in a moment, I came to, I was looking for a place to learn some things about the energy, the new energy realm or arena, whatever, and I found a great entrepreneur. That was before I knew the meaning of this word. Today, I still don’t know how to spell it, (Teja: <Laugh>.) but he was the first entrepreneur I met, and immediately he saw the I’m passionate and that I can actually take this, you know, part that he was in need for to become his marketing communication manager. But I knew nothing about what is the actual meaning of being a marketing communication manager.
And so the question, the original question that was written in the correspondence was how I started [as a] marketing communication manager, and now I’m CTO. So I’ll let you, I’ll give you that. I don’t really know what it is to be a CTO, as well, and everybody keeps on telling me that I’m not the best CTO I could choose for myself, but of course I’m joking, ’cause I know very well what I’m doing, but I cannot be a CTO in every company. I can be only the CTO of my company, ’cause I deeply understand what I’m doing here or what we are doing here, so I’ll tell you about this life changing event, because I think that that will be even more interesting than talking about ice storage.
Well, not more interesting, but at least, but good enough for your listeners. (Teja: Yeah.) Let us tell you, I was a film director, and I had a documentary about gigolo in Amsterdam. Yeah, I mean, I was young, I had time. I said, “Okay, I would like to do a documentary that will, you know, be fun to watch and interesting,” and I was researching in Amsterdam, and I met this very interesting guy. And so I had this documentary about the gigolo in Amsterdam. It was fun. And I went to Basel, the film festival in Basel, and I don’t know if you know, but if you’re a film director in a film festival that your film is being, you know, shown there, you get tickets to all the other, you know, screenings.
So I found myself, you know, wandering between different screenings. I got into one of these events, and that was like, you know, a gathering of shorts of students from all over the world. It was one and a half minutes shorts, some animation, some real life, you know, stories, whatever. So I was in this loop of many, many, many short films of students from all over the world, and I saw one clip that changed my life. But the thing is that I didn’t know that this clip is gonna change my life when I saw it. Only a few days later, from all these hundreds of films of shorts that I saw, this one stood alone, and it was so strong in my mind, and it was so frustrating, because I didn’t know the name of the director.
I didn’t even remember what language was it, because it was in Basel, so the film was in all languages. Russian, Dutch, you know, Croatian, Korean, whatever, you know, Spanish, (Teja: Yeah.) Italian. So I will tell you the story. I remember the story crystal clear, but I can’t tell you even if it was, it was animation. It was in classic animation. I think it was French. So let’s imagine that it was in French, and there was a very, very old man, (Teja: Right?) like, 90 years old. He’s standing in front of the camera in the, you know, tight closeup, and he’s holding, whatever, let’s say 10 francs coin, and he’s playing with coins, just throwing this coin and catching it, and throwing it, and catching it, and saying nothing. And he is like, there is a, you know, tension being built, and then he catches it again.
He says, in French, “I am 96 years old. From the day I was born until this morning, I ate 1,765 loaves of bread, and I ate 14 and three quarters sheep, and I ate 128 tuna fish, and I ate 900 pounds of tomatoes, and I ate…” and he just keeps on, you know. And once in a while, he stops, he looks at you, he’s throwing the coin and catching it, and he keeps on doing it. “…and I ate hundreds,” or whatever, “one thousand pounds of onion, and I ate…” and that goes forever, because, you know, he’s 96 years old. He ate a lot of stuff. (Teja: <Laugh>. He ate a lot.) And, at a certain moment, the whole scene is like, 90 seconds.
Okay? So a one and a half minute short. And the camera starts to pull back, and what you see when the camera is pulling back, that everything that this guy is saying is actually behind him standing. So you see the 14 sheep, the two and a half cows, the 400, you know, octopuses that he ate, the tuna fish, the onions, the tomatoes, the whatever. Everything. And the camera pulls back, and what you see is that there is a huge mountain of food behind this old guy. And you just get the perception, wow, this is what this one thin, you know, very thin old guy ate all his life. And then when he finished after, I don’t know, it was very, everything, when it was finished, the camera just dollied in, you know, zoomed into his face, and he said, “And you know what is amazing about this story?”
“That all this came through my asshole, which is not bigger than this 10 francs coin.” (Teja: <Laugh>.) Now imagine yourself, now it’s a cut, and the credit starts, you know, hey, camera man, whatever, you know, director or sound man, whatever, and everybody like, 400 people sitting there, and everybody thinks the same thought: was it horrifying or delirious? (Teja: Yeah.) What was it? (Teja: Yeah.) What did I just saw? And then, of course, it ends, and a new film comes, and you just forget about it, okay? Because it’s, you know, it’s a student festival, whatever, and they just throw at your face, something like a bad joke or maybe a funny joke, but the subject of the joke is quite terrifying. I mean, we are like worms inside an apple.
We are just consuming, consuming, consuming, consuming, and everything goes through our whatever, you know, tiny, 10, you know, francs coin-sized asshole. And I went out and, slowly but surely, like, weeks after, I got the notion, or the perception or the understanding that I’m in deep shit. I mean, I’m in a problem with one thing. If I died just today, and there will be some judge that will say, “Okay, okay, okay, you know, let’s see what you took and what you gave, and let’s just compare the two.” (Teja: Yeah.) I’m lost. I’m lost if somebody will check how much I took, and this guy was talking only about what he ate. He didn’t talk about the fuels he was burning, the clothes he was wearing, all the energy that, or the manpower that brought this food onto his plate, and whatever.
This is just the start of the story. We are consuming huge amounts of stuff all of the time. So I felt, you know, if I’ll die today, of course, I have no chance. Maybe I can do something with my life that will have a meaning that if I’ll be judged one day, I could stand there and say, “Yeah, yeah, you know, you’re right. I’m a mega consumer. I’m a super, whatever, but I did my best to do something meaningful with my life, with all this energy that I consumed or, whatever, demanded to myself. I did my best to do something with my life that has any kind of meaning in the long run for everybody else.” And from that day on, I knew that I wouldn’t keep on doing films.
Of course, you can do a big inflator with filmmaking, but for me, it was hard to make this my best, you know, tool, or to manifest these abilities through my filmmaking, and I was drawing to do something else. And energy was my choice, because that was 2009, and since 2007 or so, the solar panels started to go in, get into our lives, (Teja: Right?) and the solar power panels brought a really fresh, you know, thought. “Hey, we can do just the same with almost zero…well, not zero, but dramatically much less, you know, harm to the environment, to the next future, to the future generation, whatever,” and that sounds like the right thing to do. So I decided to move forward with my life, and my first child was born, my daughter, and I thought that it’ll be my last chance at an age of 38 or 9, to change the whole course of my life. And that’s when I joined this startup, which I knew nothing about energy. It was all about just general perception that energy is the next big thing. Clean energy, you know, and there must be a lot of opportunities there.
You’re so right in that like, it takes one event or one input to just dramatically change the trajectory that you think your life is gonna go. And you know, I’m even struck hearing you describe that movie, and I didn’t make the connection with the coin and the asshole until you articulated it. I’m like, holy shit. That’s crazy. I definitely, if I were there, I’d go, “What the fuck did I just watch?” And then you get onto the next film, you know like, whoa. How did you learn filmmaking? You probably were self-taught, right?
Yeah, yeah. So the story goes backwards. I was a pilot in the Israeli Air Force. I was a combat pilot. (Teja: Gotcha.) So I finished my seven years of service very late. I was 25 years old. (Teja: Yeah.) So I wanted to go to a film school and to learn this, you know, craft in a very methodological manner, but again, I was too old for that. At age 25, I didn’t want to go to start college all over again, and I decided just to jump in and swim. And I must tell you that today, when you look at people that decide to go to learn, many years in study with the all AI, you know, freaking movement, I don’t know if, today, I would’ve chosen, for sure today, I would not choose to go and study in a, you know, traditional way.
I cannot recommend on it. This is will be crazy to recommend on it, because still there are crafts and things you should learn in a methodological way, but it is already been proven that many successful entrepreneurs did not finish their course of studying, you know, normal studying. But I think that you need to be really a little bit crazy to throw yourself into this void with a belief that everything will be cool without a degree. So it’s not that I did that exactly, because I must be frank with you, the first video clip I did in my life, just when I finished my army, won a very prestigious like, prize or…it’s called the <inaudible> prize.
It’s a very prestigious prize here. So the first, and actually later on, that was one of my biggest, you know, time of my most, you know, my highest peaks in my career, the first thing I did. Everything I did afterwards was a little less <laugh>, you know, promising. But I had a feeling that I already knew enough to start and move forward. In Israel, being a filmmaker, this is the only way you can make a living is to do TV commercials. Otherwise, you don’t make a living. So that’s what happened to me. At certain time, I didn’t want to do anymore, you know, TV commercials, and I started to consume my own, you know, money.
So I decided that was part of me looking for something else to do without keeping on selling my soul, if you might say, to this big machine of promoting, you know, consumption. Yeah, I was fed up with the whole idea of consumption, not because I was so enlightened, because I was part of the machine that was actually promoting consumption. So energy, you know, when you want to redeem yourself, if you are in an over consumption environment, you know, serving the evil forces of promoting consumption, going into energy, clean energy, sounds now more logical. So, yeah, I went there in order to redeem myself, and so many amazing things happened since this choice that I couldn’t have wished for anything else to happen, but to be where I am now today.
So did you teach yourself about the industry, or did you learn through doing? Did you sort of like, kind of learn as you go? Or, you know, did this startup have like, a nice like, structured like, here’s who you meet, here’s what you should reach, here’s who you should talk to?
I’ll tell you, instead of saying whatever I have to say about me as a self taught person, which I don’t know really who can be really, you know, only a few can say that they’re really, you know, serious about self-taught. This is self-teaching. You know, I’ll tell you something. I’ll tell you one thing that, one tip, it’ll be a great tip for your listeners. So I’ll tell you with an example. It’s not that I’m self-taught or self-teaching, whatever you call it. Did you see Slumdog Millionaire? (Teja: Yes.) Okay, (Teja: Great.) so can you answer the question, if this amazing boy, was he self-taught?
<Sigh> That’s a difficult one. I mean, not really?
Not really, eh? It’s more like faith. (Teja: Yeah.) It’s a faith. (Teja: Yeah.) So what happened to him, that he was encountered with these different, you know events, that eventually he understood that they made his life. They were, you know, it’s not that he didn’t have choices in between, he had the many choices to do, but still, life and faith taught him. So I’ll tell you one thing that I think it’s important for entrepreneurs. So I was in my second company, that was after the first one. I went to a second company, which I already invested some of my savings, and the guy that was, I was, you know, making my partner, I was partnered with, he was very savvy. He was very, very, you know, into the lingo, you know, of business making and into all these terms and, you know, and contracts and, you know, shares and options.
He was very savvy. So when we were, well, he was doing it, I was just watching, there was a problem that we wanted to raise money, but we did not have a proper valuation, because the company did not have income. (Teja: Right.) I looked at him, and that’s how I learned about a convertible loan. Now, convertible loan means, okay, you know what? You like what we are doing. You’re an investor, and I have a company. I’m telling you a great story. You love the story. We need $1 million in order to run our operations for the next two years, or one year, or half a year, whatever, (Teja: Right.) and bring it to the next level that we can, you know, raise much more money and, you know, scale up. (Teja: Right.)
But you understand that we don’t have income yet, and if I will argue that we’re worth $10 million, we’re in a deep shit of trying to convince each other, but it will be that this is not the path we would like to take. So let’s agree that we don’t agree. Let’s agree that we cannot agree on valuation now. So let’s make this mechanism called [a] convertible loan, meaning you give me $1 million, and we will make a mechanism that in the next round, let’s say, next round, I will raise another $2 million in a way as referring to the evolution of $10 million. (Teja: Right.) So now the $1 million that you gave me worth, let’s say 10%, but you’ll get a discount, because you gave it now, and not later on, and the discount will be, let’s say 30%.
It’s the most generous discount before you sounds like, desperate. Nobody wants desperate entrepreneurs. So 30%, so the meaning of that, you get 30%, just roughly saying 30%, when I’ll raise the next one. So, (Teja: Right.) Okay, this is [a] quite simple mechanism that helps us not to argue on something that we cannot really prove. So now comes the more savvy investor, and he says, “Hey, but what if your next, you know, valuation won’t be $10 million? I know; I understand you are sure you can do that, but I’m not sure,” <laugh>. “So what happens if it’ll be $5 million?” So you say, “No problem, then you’ll get 20%, and you’ll get 30% on this 20%. So you’ll be, now, you’ll have a good 24% or whatever, I dunno, or it maybe becomes 30%, nevermind, you’ll get a bigger percentage if our valuation will be lower.”
So you said, “Okay, but what if there will be no, you know, next, how can I hedge my risk going forward with you?” (Teja: Right.) So the answer will start to be tough, because you have nothing. So how can you hedge his risk if the next stage will go wrong? (Teja: Right?) Then the lawyers of your investors will start to look for things, you know, below the rug or or below the ground. What do you have? Do you have IP? Let me have your IP. What do you have? Do you have any assets? Let me have your assets. So if something will get wrong, I’ll have your ass. You know, I’ll eat your head. (Teja: Yeah.) I’ll take your heart. You know, (Teja: Yeah.) I’ll kill you. (Teja: Yeah.) And looking at that always seems to me like, “Hey, you’ll have nothing to to eat.”
I mean, “You’ll get nothing out of it. If we’ll go down, you should be in a position to understand that we might go down, and it’ll be worth nothing. (Teja: Yes.) So my best kept advice to your entrepreneurs that [are] standing in front of this, and of course, this situation is ending with a 70 page contract on nothing. There is nothing to write contract, and there is 70 pages contract, which is your investors trying to hedge his risk. What if everything will go to garbage? (Teja: Right.) So my suggestion to you entrepreneurs is instead of hedging your risk, why not hedging your success? (Teja: Hmm.) Okay, so now it’s become interesting. So [the] investors said, “Well, what do you mean?” I said, “Look, we can go down this path, and you, you understand I have very little, and you’ll take my IP.”
“Let’s say my IP. Bullshit. I, you know, I applied for a patent. I didn’t get it yet. I’m just a young company. And even when I’ll get it, if I won’t be here, you’ll never be able to make anything with this patent or whatever. What IP do I have? I mean, I need to make it work in order that the IP will [be] worth something. So let’s look at the other side. What happenes if I will raise, now, in a valuation of $100 million? Let’s say I’m as good as you believe I am, and I, you know, what happens then? You just put $101 million, I will raise a valuation of $100 million. You just want 1%?” (Teja: Yep.) “Are you serious? Because of you, this company is existing, and you’ll take only 1%?”
“So I’m suggesting you leave all this hedging risk, be well with the idea that if it won’t work, it’ll go to garbage like 100,000 other startups.” (Teja: Yeah.) “But hedge your upside. Hedge our success, our mutual success.” And he says, “How can you do that?” So the answer is very clear. We will cap our valuation at $10 million. (Teja: Right.) Meaning, if I will rise with 20 million, you will still get 10% of the company and not 5%. If I’ll rise with valuation of $100 million, you will still get 10% and not 1%. So that, for the right investor and the right, you know, entrepreneur, this is something that can release a lot of steam and can keep, you know, let you keep a lot of steam, because otherwise you will wear out in trying to explain[to] the lawyers of your investor, how he can protect, he cannot protect himself. I am an idea. I’m an idea, walking and speaking. I’m not yet a company. That’s why you come to me at [an] early stage, you know? (Teja: Right.) So here is what you say: Am I a self-taught, you know, person, whatever. I just gave you one thing that one partner of mine taught me that saved my life later on. (Teja: Mmm <affirmative>.) So what I’m trying to tell you, actually, is just be there when things happen.
Yeah. And observe.
Pay whatever price you need like, to be there, be in the room where the real conversations are being made, and you will earn your study. I mean, you can be in a company, work your ass [off], but you are out of the room where the right things happen that you need if you want to keep on moving. You know, if you’re good with where you are, stay where you are, but if you would like to understand, no MBA will teach you the art of negotiation. (Teja: Right.) The only way you can be, you know, a good, you know, negotiator is if you sit as many hours as you can in rooms, that negotiation is being made. This is my advice.
Yes. That’s wonderful. And like, what a great example, too, because it, like, these sorts of arcane valuation stock, you know, negotiations, that’s something, you know, I have found it’s something that most entrepreneurs, you know, even really only are able to do two, or three, or maybe four times per company. You know, it’s like, you do it in six months. You maybe do a couple of pitches, you have a couple of term sheets, you negotiate, but you do that maybe three or four times, right? And unlike when you negotiate like, buying a car, or when you negotiate like, a house, you have a lot of reps at that, you know? But the arcane concepts of selling stock in exchange for money, painting a vision, that’s great advice. If you can get…
Okay, I have another one. You just you just made me (Teja: Yeah.) give you another one. You see, (Teja: Yeah.) because [of] you’re smiling face, because it sounds like you’re really interested in what I have to say to you. So I’ll give you another one. (Teja: Yeah.) There is a film that every entrepreneur must see, (Teja: I will watch it.) and it’s Glengarry Glen Ross.
Okay <laugh>. Yeah.
I’ll tell you why. I’ll tell you why. (Teja: Yeah.) Not because of the simple, you know, story. Amazing film. (Teja: Yeah.) Not only because of the classic, you know, criticism (Teja: Right.) that comes from the film or the salesperson life. It’s a heartbreaking movie on salespeople. Of course, it’s the best film you can ever ask for, so go see it. You know, “Put your coffee down.” These are lines, you know, “Only closers drink coffee. I said, put your coffee down.” “You have first prize Cadillac, second prize, set of steak knives. You know, what is [the] third prize? You are fired.” (Teja: <Laugh>.) So, okay, so you see this film, and you get into this, you know, really crappy, you know, place of salesmen and trying to sell things that do not exist. And, you know, all these con people selling, selling, selling.
But there is one thing there that is, the drive of this film is totally true. The drive, the seam, or the inner force of this film goes through, you know, and it’s very truthful. And it doesn’t really matter if you are on the right side or the wrong side of the sales craft, ’cause some of us [are] selling crap and some of us [are] selling, you know, the future. (Teja: Right.) But the same powers, or method, or theme is driving both crafts of selling, and this is “A, B, C”. You remember what is “A, B, C”? (Teja: No.) Oh, okay. You should. Okay, you must “always be closing”. (Teja: Yeah.) So “always be closing.” A, B, C: always be closing. What is the meaning of this sentence?
The meaning is this sentence: the negotiation on a deal is never being done in the room. (Teja: Right?) This is just like, the place that everything is getting, you know, being very condensed (Teja: Yeah.) and things, you know, mature, or manifest themselves as a contract. (Teja: Yeah.) But the relationship between an investor and an entrepreneur, or whatever, a buyer and a seller, and this is what this film is all about. These guys are trying to create this relationship with the buyers, which is false. These guys are selling nothing, okay? But in real life, it doesn’t matter. The craft of selling stays the same, and this is, you know, get interested in the life of the one that you’re making business with. (Teja: Right.) You know, be curious about him, for real. Don’t act.
If you act, you’re a conman. This guy is putting his money in your company. It’s like you mix your blood with him. (Teja: Right.) You’re gonna sell him a dream that you’re gonna pursue, and he’s a believer. He’s gonna believe that you will pursue this dream. You know, be careful building your relationship. Be truthful, be interested in his personal life. You are making a friend, if you want, if you’re a professional, you just making a friend, just get away, you know, mature. This is your friend, because he’s putting his money in your dream, (Teja: Right.) what better friend you can ask for? (Teja: Right.) So start, get interested in this guy’s life, because you are friends now, (Teja: Yeah.) and your liability is much more than than the lawyer’s liability in this. Your liability is to actually be the rainmaker you are, you know, you’re pretending to be, or you believe you are.
Okay. (Teja: Right.) It’s pretending it’s not. I believe I’m a rainmaker. Can I make sure you believe in that? Let’s go together and bring some rain. (Teja: Yep.) Now, yeah, sometimes the rain might, you know, be delayed, whatever. Still, I will sit down with you, and we’ll have a good, you know, conversation, and we’ll have a good laugh, because you’re a partner of mine to this journey. And I love every one of my investors, even the ones that doesn’t like me very much, and there are (Teja: <Laugh>.) very, very, very few, very few, no. They don’t like me. Not personally, because they had different expectations to how fast we will get where we are saying we will get there. (Teja: Yeah.)
They are impatient, but I can tell you, there are only two. I have many investors through, I mean, the company has raised $30 million to this day. (Teja: Wow.) I have more than a few investors that are involved in bringing my business into maturity, and only two, I’m less comfortable to talk with today, but I will be comfortable to talk with them a year from now. Only two resent me a little bit, a little bit. I didn’t do any wrongdoing, it’s just that I’m too slow for their own, you know, perception of how things should go. And since, you know, my company is trying to change the world, I’m saying whatever my sister told me. [She] says, “Your epitaph will say that ‘the hardest thing was to change the world’,” you know. That will be reading on my grave. So I’m telling my investor, “Look, we’re truly there. We truly have this like, ambition. I need to change the world. This is not nothing, you know, nothing small in it. It is a big mission. It takes time, but we’re succeeding in doing that.” (Teja: Right.) Slowly, but surely.
That’s powerful. How do you, so like, this is a constant refrain, right, like, between investors and entrepreneurs, and a lot of investors are, I guess, necessarily impatient. You know, how do you sort of deal with that? Do you just have to accept that they have different psychologies occasionally, or do you…?
So my father says, “Always under promise, over delivery.” (Teja: Yeah.) But this is bullshit, because it’s very hard. Well, when you try to raise money, you cannot go low on expectations.
No, you have to over-promise and exceed those promises, right? Like <laugh>…
Yeah, yeah, yeah, yeah. Of course. Keeping your story realistic. But no, I can tell you that the worst ideas are the mediocre ideas that make you fall in love with them, so they kill you. (Teja: Yeah.) You don’t want to fall in love with the mediocre idea. (Teja: Yes.) You know, you don’t want to fall in love with something, you know, foolish and stupid, because you will give three good years to any stupid idea. (Teja: That’s true.) It doesn’t matter. (Teja: That’s true.) Do you know those small, three leg, plastic caps that you put under the cardboard in pizza, so the cheese won’t stick to the cardboard? (Teja: Yes, yes.) You know this, so you know the story about the guy that invented that and became rich, like, filthy rich? (Teja: No <laugh>.)
You don’t know? (Teja: No <laugh>.) because there is no story. There is no story like that. That’s why you don’t know it, because nobody ever made himself rich from such a stupid idea. But you can imagine that the guy that had this idea did invest his life in it, (Teja: That’s true.) because the first one you need to do, you need to have a mold. A mold costs $10,000, $20,000, and believe it or not, this guy went and tried to write [a] patent on this bullshit, because this was an idea. It was a rightful idea. Nobody wants his pizza to stick to the cardboard. Nobody wants, so everybody needs it. So in the way of the mind of the guy that his pizza was smashed, and he said, “Hey, why don’t they have this little, you know, three leg alien that will hold the cardboard?”
Well, yeah. It’s [an] amazing idea, and let’s say he was stoned. He was a little bit stoned when he had his thought. This is the worst. If you have a good idea when you’re a stoned, he goes, “Yeah!” and people start to kiss each other, because they won the lottery. Then he goes to hell, like, three years of hell. He invested everything. He sold his house. He made moves; he still printed them. It’s such a good idea that [a] million Chinese people were doing that, you know, after two months. Yeah, and this guy is devastated. This guy found himself, you know, overdosed in a ditch, because (Teja: <Laugh>.) <laugh>, yeah, yeah. I’m sure this is the right story. So between the two stories of this guy that became a multi-billionaire because of this idea, the one that found himself overdosing in a ditch, I can tell you for sure I will gamble on this one: (Teja: <Laugh>.) overdosed in a ditch.
So you need to understand that good ideas might kill you. (Teja: Right?) They have the potential to take you down. (Teja: Right?) So choosing the right idea to go and, you know, makes a suicide with, because when you have a good idea, and you decide “I’ll make it work,” you give everything. You give your mother, your grandmother, your sister, your everybody that, everything becomes, you know, a resource to (Teja: Yeah.) help you pursue this megalomaniac, stupid idea that the whole world waits to hear what you have to say. Yeah. Yeah, right. And me, what I had to say to the world is, “Let’s freeze some water.” So we didn’t talk about Nostromo yet, but I can tell you, this is crazy. To grow and to open a startup, to start a startup and raise money with the, you know, the theme, or the idea, or the premise, I’m going to freeze water like no one ever froze water before. Yeah, man. If I was the one hearing myself saying that seven years ago, I would say, “Hey, man. Go, you know, treat yourself. You know, go to rehab. Do something with this. This is the most stupid sentence I’ve ever heard.” (Teja: Yeah.) You’re going [to] teach the world how to freeze water? Get away; leave me alone. You never have my money.”
So how did you, yeah, so how did you, I guess, discover the opportunity for Nostromo?
So the thing was that the first half a million dollars, which is the most hard to get, (Teja: Yup.) or the first, yeah, the first $200,000, which was a friend and family without friends, only family, was not presenting the solution, but presenting the problem and the potential of a good solution in this area. So I did it very well, because I just saw it. I saw three things I thought that air conditioning is the highest, one of the highest demands of the electric grid. Air conditioning. I knew that water changing phase from liquid to ice has, you know, immense power of storing cold energy. It’s called “latent heat”. You can go Google latent heat, the water. It’s an amazing phenomenon that when water changes phase, water, the water you drink every day, the 70% of your body, when they change phase from liquid to solid, they can hold a whole lot of cold energy in them when they change phase, becoming, you know, solid.
And then the third thing I knew that when the sun is setting down, all solar production goes away, you know, vaporizes like, into thin air, and solar is the future of this, you know, grid, because it’s cheap. Regardless, the fact if you hug or don’t do not hug trees, (Teja: <Laugh>.) solar is cheaper than everything. Okay? So now look at these three things. Solar is coming and going, and it’s becoming more and more, you know, [an] important production mean on the grid. The sun is setting down. When the sun is setting down, the grid, which relies on solar, is going through a huge, you know, emergency procedure, whatever. You know? This is a collapse of the main source of energy. Like, in California, every day, 18,000 megawatts of solar are gone, vanished through sunset.
Okay? This is one. The second one is that, so the biggest need now, after the solar has won the, you know, the contest, is storage, because only storage can balance all this instability and will help the grid continue in becoming [a] renewable resource [that can be] relied on. Okay? And then you have air conditioning, which is, by far, the one source, biggest energy consumer, well, in places which are hot, that now are just below, you know, just around between 30 degrees north and south of the equator, which is 80% of humanity lives under these conditions. And of course, there are places which are colder, that are getting hotter. If you heard what’s happening in Canada, in, you know, Siberia, whatever. Everybody is getting hot. So air conditioning, if the future of air conditioning is quite stable and promised, air conditioning will stay a main, you know, source for the user of electricity.
So, and now I’m telling you about water. So you think, okay, all these batteries, warehouse material, nickel, lithium, cobalt, you know, wars of China and America on African soil for these resources. Okay for my laptop, okay for my electric vehicle, you know, whatever. But for the grid, (Teja: Yeah.) yeah, but for the grid, I mean, if the grid’s biggest user is air conditioning, and water, tap water can actually take this burden. So the only thing I need now is a good technology that will freeze water in a way that buildings could use free, clean electricity, make a lot of ice with this technology, and then release this ice through sunset and avoid using electricity for their air conditioning uses. Wow. Okay, this is [an] equation I can understand. Every layman can understand it. This is an interesting equation, ’cause water is [a] quite available, abundant resource.
And water, it can be frozen and melted for [a] billion of times without losing this quality, because this is a physical phenomena and not chemical. So you have on one side, lithium, which you can charge and discharge, let’s say 10,000 times, before you can throw it to the landfill. Ten-thousand cycles. This is like, oh, sorry, sorry, 3,000 to 4,000 cycles. Like, 10 years of usage on a daily basis, okay? And then you have, well, and it’s lithium. It’s quite hard to handle, to mine, to, you know, and then end of life circle of this material. (Teja: Yeah.) Even avoid, you know, don’t look at the the nickel problem, the cobalt…leave it alone. (Teja: Yeah.) Only think about lithium. And then you have, of course, the self combustion, safety issues, whatever. Okay, lithium. Which is great, lithium. I love lithium. Every set of people should try lithium, if you know what I mean. I mean, lithium is being used to cure bipolar people. Nevermind, nevermind.
No, no, no. Was it lithium? Wasn’t it used to treat, yeah…
Yeah. Bipolar issues.
But is it still used now?
Yeah, yeah, yeah. Of course, of course, of course. Leave it alone. Let people Google it. Okay, so lithium is for sad people. Water is for happy guys. If you can avoid these lithium, cobalt, nickel resources and use water, and then make building, you know, grid interactive, like, thermal batteries, they can avoid the biggest use of chillers or, you know, cooling systems. Hey, now it starts to sound interesting, but I didn’t tell you what is the solution. I don’t have yet the cells, the technology, the control system, the software, the hardware, the stability, the efficiency. I have nothing. Okay, but when I told this story to my family, and I was very passionate about that I see something, you know, that was 2016, (Teja: Yeah.) I see something that is coming. They bought the potential, and I said, I told them, “Okay, and now, we’ll bring some really smart people. Not me, like, you know…really smart people, and they will understand how to do that in a way the building can actually incorporate it to their business.”
So of course, we’re designate, we’re aiming towards commercial buildings (Teja: Yeah.) and industry, big, big entities. And now, seven years later, we raised three $30 million. We are about to secure $300 million from the Department of Energy of the United States. Just, we’re just, (Teja: Wow.) yeah. We’re just on the verge of closing this deal, and we have a system which is running in the Beverly Hilton and the Waldorf Astoria in Beverly Hills, Los Angeles, and we draw a lot of attention, because this market is saturated with solar, and they have a lot of stability problems, and they’re really keen on understanding how they can incorporate such clean and sustainable technology into their buildings.
We hope we will change the grid as we see it, because as we speak, nobody really target buildings as a resource for the instability of the grid, and renewable, and storage, because lithium ion batteries do not go into commercial buildings because of the safety issues. And we can just walk, you know into these buildings and put our systems with like, [a] few weeks for permits like, very easy. And now while securing, and actually the CPUC, the California Public Utility Commission, just acknowledged us as a resource adequacy eligible, meaning that we now can get paid for service that we give to the grid, which is actually taking off power from the grid. So not many people know, but today, the challenge is not to produce more electricity.
The challenge is to mitigate and lower demand at peak demand times in order to lower the stress, because this is a much better way to control, you know, the supply chain of electricity, if you might look at it, in this very volatile, you know, environmental of renewable, which is crazy. It’s crazy that everything goes up and down, and then comes the, you know, the clouds, and all the solar goes down, and then the clouds pass, and all the solar goes up. This is crazy that the electric grid cannot, you know, mitigate that with little storage. The electric grid is waiting for a lot, lot more of the storage, and the big question is, are we going to put first sustainable means to stabilize, or [are] we gonna go green with means which are not sustainable and, you know, very like, contaminating like lithium ion, which is again, great for some usage and less for others. (Hmm <affirmative>.) So yeah, we bring this, so I must put a full stop to my sentence. Well, let’s do it now.
<Laugh>. You know what’s funny, is I can tell that when you’re in those rooms, and you’re closing these deals either from fundraising or, you know, in the sales dimension, I can tell that like, people are like, almost enamored with like, your level of energy. You know, it’s captivating. And I think that’s, I mean, I hope you don’t, I’m not saying that in a patronizing way, it’s just something that I personally admire.
So I was lucky enough to fall in love with the right idea, because, like I told you, I had other very stupid ideas that I’m so happy not to fall in love with them. (Teja: <Laugh>.) Exactly. I’m in Israel now; I’m usually in Los Angeles, but now I’m visiting for the Jewish holidays. (Teja: Yeah.) Sorry, I’m Jewish. So, yes.
<Laugh>. Yeah, I mean, Los Angeles is basically Israel, too, right? I mean, (Yaron: <Laugh>.) I grew up in Long Island.
<Laugh>. Yeah. Many Israelis there. (Teja: <Laugh>.) Yeah, too much. Yeah. Whenever I meet like, a real American there, I’m surprised, you know. (Teja: <Laugh>.) “Oh, seriously? You [are] born and raised? Oh, wow! You’re the first one today.”
A hundred percent. Yeah, totally. It’s an immigrant city and, you know, so I live in Nashville, Tennessee, and it’s very different than like, you know, ’cause my parents immigrated to New York City, (Yaron: Okay.) so that’s where I grew up, and so being in that…
Where are you from originally?
India. (Yaron: India, okay.) South India. Yeah, yeah, yeah. In fact, there’s a lot of similarities between Indians and Israelis, in terms of culture.
Yeah, yeah, yeah. So I need to tell you, in Hebrew, Indian is “הוֹדִי” and Jewish is “יהודי”. So “יהודי” and “הוֹדִי” has just one letter in, so they say there is connection, and you know that there are many Jewish people in the Manashe tribe in north of India. So there are, yeah, yeah. (Teja: Totally.) And we like money, so <laugh>. (Teja: <Laugh>.) Yeah, yeah.
So, you know, it’s so funny. So I’ll tell you one story. So, I mean, maybe this is maybe pre-pandemic, 2019, there was an Israeli company that we were, you know, gonna potentially sell to, and one of our investors at the time, he’s a Jewish guy. He is in Florida, but his wife’s Israeli, and I remember him telling me, he is like, “Dude, Israelis are extremely tough negotiators. Like, you need to be careful.” Like, he was telling me this. He’s like, “My wife’s Israeli, I love Israelis, but they are tough.”
No, the Indian people are the toughest.
<Laugh>. That’s what I said. I said, “Dude, I’ve been watching my parents go into fucking, you know, dealerships, car dealerships…”
I think that Indian and Chinese are the toughest negotiators, and they’re very good at it, but this is my perception. I’m not sure it’s something to write home about, my perception.
So, Department of Energy contract coming up, that’s insane. So I mean, that basically, I mean, from a valuation standpoint, you’ve achieved the unicorn status at that point.
No, no, no. So I’ll tell you a secret. We’re now being traded in the Israeli stock market, the Tel Aviv stock market at less than $11 million. This is how crazy it is, because the Israeli investor does not understand what we’re doing. We’re totally, it’s like Chinese. We were not the, nobody understands, “What they’re doing? They’re doing ice storage. Ah, leave me.” You know, so there is zero interest in our stock, butn this is before the DOE, and of course, we’re, I’m talking about it. It’s all public, of course, otherwise I’ll go to jail. But we are talking about that, that we just finished, you know, the last stage, or we’re close to finishing. The last stage, we finished very successfully. The second phase of the DOE LPO, we <inaudible> Loan Program Office for $280 million. Nobody cares. I mean, I put [an] announcement on the Internet, and the stock goes down 2%. Like, nobody understands what we’re talking [about]. [They] say, “Ah, they’re bullshitting again.” Nevermind. Soon enough. Call me; check [a] half a year from now, what’s happening with us, and I’ll tell you some good things.
Yeah, so you guys are publicly traded? (Yaron: Yeah.) How’s that like, working for a public company?
But this is not a recommendation to buy our stocks. (Teja: <Laugh>.) Guys, I don’t wanna go to jail. Just put aside everything I said and put like, a hint of pessimism on it. Don’t buy the stock <laugh>.
So you ran a private company, right? You’ve ran this company when it was private…
Because two years ago, when we became public, there was a great chance to be valuated at $50 million and raise about $20 million through a short process, and it was the pandemic, and said, “Okay, I don’t know where I bring money to the company.” But that was a very, it was a back wind in the sales of all the clean energy that of course turned against us after [a] half year, but we took advantage of this movement, and we did well, and now we’re struggling. But I’m totally, totally confident that everything will turn [out] right. I’m sure about it, in the next half year or so, and we are very bullish about, I mean, what we’re doing. Like I said, I live in Los Angeles, and we’re signing now, you know, companies on LOIs to join the LPO, the DOE fund financial scheme, and everybody is very, very enthusiastic about it.
And I’ll tell you something, the carbon liability of real estate and commercial users is coming. (Teja: Wow.) So there is a Local Law 97 in New York City, which starts kicking in at January 24, labeling every excess ton of CO₂ with a $268 fine for building owners in New York City, Manhattan, and people are totally, you know, they don’t understand what to do with it, but that’s going to kick hard. And what we are saying, this is called carbon liability. Nobody knows nothing about it as we speak. We’re in August or September of ‘23. I’m telling you, January 24, this is three months from now. The whole world of real estate going to deal with that, and we believe that California will be soon after, and other big, you know states in United States and other places will start to count the carbon emissions related to commercial and industrial entities, because it must be regulated.
It must be. Otherwise, we’re so behind with our carbon, you know goals. So we are [a] proactive carbon shield for our buildings. I cannot explain that to you thoroughly now, but I’m telling you, whoever puts our system is secured. He has a carbon shield, a proactive carbon shield, and he will be out of the hook for many years if he will choose our technology. And there are other technologies coming in, but we are the first safe technology for energy storage inside buildings, and we help our customers to choose when they take their power. And with carbon emissions, the win is the most crucial thing, because if you take your power at daytime in California, it has very, very little carbon related, you know, emissions.
If you take it at sunset, there is a huge carbon liability to what you’re doing because of the picker plant, because the whole grid is struggling with the sunset. So today, it’s all about take more power when the sun is up there and avoid as much power as you can when the sun is setting down, and you’re good. If you have the ability to choose between these two, you’re protected. If you don’t have this ability, you’re gonna pay a lot of fines, (Teja: Mmm <affirmative>.) a lot of fines in the next few years. So everything is coming to where, sadly, everything is coming towards us, because the situation is not very, you know, bright with all the climate change and what’s happening around us.
Yeah, But we actually offer a real proactive cure to help the grid.
That’s sweet. That’s exciting. I mean, it’s sad, at a climate level, but it’s exciting, because it creates new opportunities for growth and innovation and, you know, I think that’s actually why I’m like, quite optimistic about the climate. It’s like, you know, once capital markets and actual markets start reflecting the urgency of the climate problem like, I know human innovation can get us out of it. So where can people find you and your company on the interwebs?
Just Nostromo. It’s N-O-S-T-R-O-M-O, Nostromo Energy. Or come to the Beverly Hilton. It’s a very prestigious, you know, (THE FRONTIER THEME FADES IN) it’s an iconic building in Beverly Hills. You can come, you can call me before it. I’ll show you one of the most amazing, you know, energy storage systems. It’s there, open for the crowd. Just talk to me before you come, so we will give you the whole tour.
I will be in LA at some point, probably in the spring, and so…
I’ll be there. I’ll be there. (Teja: Yeah. I’ll give you…) Come, come, have a coffee with us. Yeah, we’ll have a selfie.
<Laugh>. Yeah, we got it.
Okay. Stay cool. “Stay cool,” as we say in Nostromo.
Yeah <laugh>. Awesome. Will do.
Faith, via previous recording (58:11):
Thanks for listening to the Frontier Podcast, powered by Gun.io. We drop two episodes per week, so if you like this episode, be sure to subscribe on your platform of choice, and come hang out with us again next week, and bring all your internet friends. If you have questions or recommendations, just shoot us a Twitter DM @theFrontierPod, and we’ll see you next week.
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