Impact Hustlers - Entrepreneurs with Social Impact

Creating the Future of Electric Car Batteries - Rick Luebbe of Group14

April 25, 2021 Maiko Schaffrath Episode 72
Impact Hustlers - Entrepreneurs with Social Impact
Creating the Future of Electric Car Batteries - Rick Luebbe of Group14
Show Notes Transcript
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Maiko Schaffrath:

You are listening to Impact Hustlers and I am your host, Maiko Schaffrath. I have made it my mission to inspire the next generation of entrepreneurs to solve some of the world's biggest social and environmental problems, and for this reason, I am speaking to some of the best entrepreneurs out there who are solving problems, such as food waste, climate change, poverty and homelessness. My goal is that Impact Hustlers will inspire you, either by starting an impact business yourself, by joining the team of one or by taking a small step, whatever that may be towards being part of the solution to the world's biggest problems.

For this episode, I spoke to Rick Lupa, the founder and CEO of group 14, a battery technology company that is promising to improve battery efficiency. By 30 to 50%. The future of transportation is clearly electric, but producing efficient and affordable batteries still makes electric cars a less affordable option with a lower range compared to petrol and diesel based engines with a similar price stack. Since Rick first came across the technology. He saw how it could change the trajectory for the adoption of electric cars, making them affordable and more efficient. In this episode, Rick highlights the challenges connected with running an engineering driven company, building partnerships of corporates and shares advice for entrepreneurs working on innovating in spaces that require a long development cycles and a high level of engineering expertise. I hope you enjoy the episode. It's really good to have you on the show today. Thanks, Becca. Really glad to be on and looking forward to talking about batteries and hopefully we'll, we won't get too technically complex. We'll just keep it fun and interesting. Let's start early on. So you've actually spent some time in the army at the beginning of your career. You a vacation officer in the U S army, you spent seven years in the army. And after that you slowly made your journey into business. Tell us a bit more about your personal journey and how you actually became an entrepreneur and eventually actually yeah. Setting up multiple companies selling your last startup to PASF. Tell us a bit more. Sure. So the I did start my career out of college is an aviation officer. Great experience really enjoyed my time there but recognized to do something a little bit more independent and and needed to get more of a business background in order to be successful in business. So what business, the school out of after leaving the army? And from business school again, I recognized I needed experience in business to some extent before I could really choose a entrepreneurial journey. So did a couple of years of consulting, some management consulting, so got some great experiences looking at a wide variety of different industries and different business problems in those industries. So it was a good foundation to think about how to to build and run my own business. So probably back in about 1999 or 2000, I started my first startup, which is a company called hub span, and it was basically an it services business. So that was back when XML was just becoming popular. And so we were focused on connecting buy-side systems with sell side systems for online transaction very much in the early days of business to business. Internet connectivity did that for a couple of years, but but recognized that as a founder and CEO of a startup, it really consumes a lot of life energy. And it doesn't always work out the way you want. And so looking back on that experience I recognize that, my next startup venture had to be something that I was so passionate about. That fail or succeed. I wanted to know that my life energy was well-spent if that makes any sense. Spend some time, really soul searching about what area of business would I find that kind of that satisfaction regardless of how what the outcome was and decided it was in renewable energy. This is before clean tech had been coined as a term and really recognize that renewable energy was something that I. I had a passion for it. And so met up with some other guys that had similar passions and we started looking for technology. And so we started the university of Washington in the different technical departments and ended up in material science and working with a professor there named Doug who's on ciao. And he had a PhD student named Aaron fever. And Aaron was working on some really interesting technology at the time for storing hydrogen on beds of carbon. And since 2000. Three 2004 and the hydrogen economy is going to be the next big thing. So we started energy to to store hydrogen and we had great visions for how we're going to support the automotive industry and the utility industry with all these amazing solid state hydrogen storage systems. It didn't work out. So we pivoted the technology of the company to sort of natural gas and it actually works really well for that application. But at the time, after gas was still relatively expensive and it wasn't a good wasn't a good choice for fuel the way it is now. It's very inexpensive now in very popular. Yeah. So that from a market perspective, wasn't working out. So we pivoted again and started looking at the technology. So for ultracapacitors which is a kind of electro elect Crispy storage device, between a battery and a traditional capacitor and and really got funding in launched energy to be an anode material producer for the ultra cap industry. And that eventually grew into let us battery additives and some other interesting applications. And and that's the technology that we sold to VASF in 2016 and they've got great interest in the automotive industry and recognized the the value. The value add from that material in traditional lead acid batteries to improve their performance, particularly for start stop in micro hybrids. But just as we were selling that technology to, to be ASF, we had been developing this really interesting lithium-ion battery technology that we now call lithium Silicon, and it fundamentally replaces the traditional graphite anode. Lithium-ion battery with a Silicon based anode. So much higher energy density, but a lot of technical problems. And so we we identified a couple of really interesting ways to solve those problems with the fundamental technology platform we learned in energy too. And and we're able to apply those to group 14. And so we spun that out of energy to just before the acquisition. And NBSF was our first investor. And so we've been on that ride ride since 2000, you're looking at 2015 when we spun it out of energy to I find it very interesting. What you mentioned that actually. You really took a step back at some time in your career and thought, okay, I'm going to do something that I'm really passionate about because as most entrepreneurs know this is really taking 24 seven of your life. So you better be passionate because otherwise you're gonna be ground to the ground doing something you don't even so I love that piece of advice there as well for entrepreneurs that are starting out, but also you were basically an entrepreneurial, it was quite clear that you were passionate about sustainable technology, but you didn't have the technology at the time. So you had, were sure what you wanted to do roughly like what sector you wanted to be in, but you had to scout for the technology to commercialize. Is that right? That's exactly right. And it was a, my, my partner at the time was was a guy named Chris Wheaton and we both were business school graduates. Both had similar passions, both wanted to get in renewable energy, but but neither of us were really technologists by training. We were business guys and it was a really interesting path to try to find a a technology. That number one we were interested in and then number two was actually commercializable. And so that was our filter at the university of Washington, is we looked different opportunities was number one. Is it renewable energy technology that we could be passionate about building a company around and number two, was it a science project or was it really a technology that had a commercial appeal? And so using those filters is how we ended up in this in it's engineered carbon. Technology that ended up changing many times over the course of energy too, but eventually led us to report to you. What's been exciting. Yeah. Do you think this is part of the issue? Why maybe from a consumer perspective that doesn't seem to be that much progress in battery technology? Is there a lot of technology sitting in universities that's not being commercialized or. What do you think is one of the biggest challenges around that? Yes, part, chemistry is hard in batteries are fundamentally they're chemical reactions. And there's so many aspects of the chemical reaction that are difficult to optimize. And and so it just takes a long time to find an innovation that works and then build the rest of the battery concept around that innovation. So a battery has a cathode and it has an anode and has electrolyte and separator and current collector and in different additives for each one of those components and in a D in a device design and manufacturing process, all of those affect performance. And we need to start changing one. It has a ripple effect on all those other components. And so the complexity is significance. And so it's a hard problem. And I think that's one of the reasons why we see. Typically incremental improvements as opposed to step-change improvements in battery technology. Got it. Now let's dive a bit deeper into technology. And how is it in simple terms? How is it different to what's already out there? In terms of battery technology, how do you, yeah, so lithium batteries have been around now for you're coarsely speaking for maybe 40 years or something like that. And most of the innovation has happened on the Catholic side. And so the Catholic is a side of the battery that has all the materials that people talk about being rare earth materials, like cobalt and nickel, et cetera, et cetera. And that's the part of the battery that holds initially holds the lithium. So that's where the capacity is coming from. And so mostly innovation has been developing different Catholic materials. And now there's a yeah. Folio. Catherine Mitchell is you can select for your battery depending on whether you want to emphasize energy density or power performance or maybe safety is most important for certain applications. And so there's options in each one of those options has different advantages and disadvantages, but they all use graphite as the anode, the opposite electrode. And so the purpose of the anode is to accept the lithium ions when you charge the battery. And so when you charge it, but with my aunts, leave that chemical compound, the cathode grew through the separator and they just settled into the layers of graphite in the ener. And for 40 years Catholic focus, no real improvement on the anode. Now we're looking at the end of it. We recognize that there's a kind of reaching marginal return on capital improvement. There's just not that much more to do on the Catholic side. So now let's see what we can do on the anode side. And so we're using completely different material. So graphite has a certain advantage and a certain stability. But Silicon holds 10 times more lithium by weight than graphite does. So if we can make lithium, so if we can make Silicon work, we can make Silicon work to hold the lithium. Instead of graphite, we have an opportunity to tremendously enhance the energy density of the battery. And that has a secondary advantage. If we can improve the energy density of the battery without really changing the battery very much, we can reduce the cost on a, on an energy basis. So dollars per kilowatt hour. And that's what really drives the electric vehicle industry, for example, is that cost right? Got it. What do you say cost is actually the biggest challenge in the industry right now? It's getting the energy density number one, but then also getting the energy density in a way that allows costs to actually come down. Because for example, right now in electric vehicles maybe about a third more expensive than an internal combustion vehicle. Just because of the battery cost. And our technology has the opportunity to reduce those costs, the cost of those batteries by about a third. And so we can actually enable cost parody between electric vehicles and internal combustion. And that's really exciting to me. So imagine you go to buy your, your Toyota Camry or your Chevy Malibu, and you have an option of an all electric version for 300 mile range. Or internal combustion version with about 300 miles range. And they're both exactly the same cost. I think that's really going to accelerate the adoption of EVs and and that's really exciting to us to grow 14. And now this isn't a technology that is maybe going to be around in 10 years. This is something you already having and that you are starting to commercialize right now. Is that correct? That's right. There are EVs out there. There are battery systems, all the automakers have some version of you've used that now using batteries from the standard battery makers, they virtually all have graphite nanos. We are we're scaling up our our Silicon based anode technology right now. And we'll have it ready to go in the next couple of months for consumer electronics, but the technology is ready to put into cars today. We like to say, this is this is not tomorrow's technology. This is today's technology. It's just a matter of getting getting our scale install, getting our manufacturing systems installed and getting through the qualification processes at the battery manufacturers. Are there any other applications for this battery technology beyond electric vehicles that you think will really change the game for our transition to renewable energy? Is there anything, a use case that you're thinking about that you could enable with your materials? So just like electric vehicles, the adoption of storage for the integration of renewables into the grid is also an economic question. So today storage of electricity is more expensive than generation typically. And so utilities, they have an economic responsibility to deliver low cost power. It's cheaper for them to regenerate the power later than to try to store it and save it and have it available later. So in other words, because storage is expensive, it's cheaper to waste it and make it again than to put it in some kind of a storage system. Typically. So if we can make batteries cheap enough. So the cost of storage is cheaper than the cost of regenerating. That power then storage makes and utilities will invest in storage. And that enables the integration of renewables into our electrical. Right now we're practically limited to, some folks say about 20% integration of renewables into the grid because renewables are unpredictable. It's not like running a coal plant or a natural gas plant where you can turn it off or turn it off and turn it off or turn it on. If you're looking at a solar plant or a wind plant, it generates when nature decides that it will provide that power. And you have to accept it when it's being produced and that doesn't always match up to what we want to use it. And so in order, really to have broad integration of renewable energy into the grid, we have to have storage and that's going to happen faster. When the storage is cost effective. And we think we can do that in this battery technology. Do you see any other promising developments in renewable energy, such or specifically in battery technology outside of what you're doing that you think will help us get to a renewable energy adoption faster? So the really cool thing about this space is there's a lot happening and there's a lot of companies out there really pushing limits of all aspects of not just battery energy storage, but other types of energy storage. And it makes it exciting. So it creates a really dynamic industry a lot of competition for us in our mind and a lot of challenges, a lot of encouragement. But I think we're going to see just a revolution in the way we think about storing energy just in the next 10 years. I'm really excited about the next decade. Let's talk a bit further about your entrepreneurial journey and some advice that you may be able to share with founders. As we just established earlier, you actually co-founded and led to very engineering, heavy companies. Obviously you will have a great team of scientists and the CTO. Is that right at a kind of working with you to make these technologies happen? What do you think has been in your journey to toughest challenge and running? Companies that require so much capital and know-how and patience to actually make it work. What challenges did you have to overcome in that journey? Two big challenges come to mind. One is there, there is always a different in, in the space people call my crossing the chasm. Like you have this point in the developing development of an entrepreneurial company where you need capital to get to the next stage. But then to get that capital, you need to be at the next stage. So you're often with this chicken and egg promise. How do I show the progress if I don't have the cap put all to invest in, in the processes of the testing of the development in order to to get that that data, for example, generating. That's hard and that's really hard for a technology intensive company. And so it requires a lot of creativity to find ways to get across that chasm. And so it can be maybe non-institutional funding, it can be government grants. It can be partnerships but typically you have to find ways outside of just a traditional venture capitalist to get the technology over those chasms in order to, to show a reduced risk profile. So it's more comfortable for more of the financial investors that, that people are more familiar with in this space. Got it. And your strategy was actually to seek out strategic investors, I think, BSF that you sold your previous company to their investing as well. And I'm sure that helps with the confidence to what's mainstream VC investors to also get the confidence to put some money in, absolutely. And we learned that at energy too. We really learned how to work with strategic investors. And many companies I think are a little intimidated by working with a, a global multi-billion dollar manufacturing or technology company. But it interesting, we learned how to do that particular with our long relationship VASF and and we really embraced those partnerships. Now our strategic investors include, BAS AF. ATL who's the world's largest producer of batteries for consumer electronics show Danco is a large materials company based in Japan and a big supplier of Android Mitchell's to lithium-ion space and Cabot corporation, Boston based materials company make conductive additives for batteries. And and SK materials is a part of the SK group based in Korea. And so we've got this great syndicate of strategic investors that really know our space and really know how to scale a business and how to manufacture at scale. And so we're able to embrace the syndicate of, and in some respects, these companies compete with each other. But they're all drawn to our technology and we're able to work closely with them to to accelerate our learning. Leverage their experience. And at the same time, to your point, it validates the technology. So these guys really know how batteries work and how materials companies need to work. And when we see their partnership as a good validation for what we're trying to do you think the VC industry has to evolve on maybe more tech knowledge has to get into the VC industry so that even understand what they're investing in? I think that seems like a bit of a. Challenge that most VC investors will probably not understand the space enough to be able to have the confidence to invest in this. Is that the limiting factor or what do you think needs to happen for more money, smart money to be available for companies like yours? That's exactly. The problem is you look at your traditional venture capital investors and they don't really have typically they don't have the technical background to. To have confidence in one technology over another. It's very hard for them to see and predict which technology will win because they just don't have the technology expertise. And so they tend to go in directions they understand and it's easier to judge. Some VC firms focus on marketing based companies. Some VC firms might focus on Business to consumer products, things like that. There aren't a lot out there that really understand things like chemistry and battery materials. And typically those, when you do see those investors, they're often linked to big chemical companies. And so they have that expertise in house. And I think I don't know what the solution is for the venture capital industry to make this space go faster. But the solution we've identified is just bypassing the venture capital industry completely and going right to the companies that understand the technology. Let's see what we can share with early stage founders that are early on in that journey. Maybe they find themselves in a similar position as you were a few years ago where. You are passionate about this sector of renewable energy, but you are looking for the right technology to work with. What is your main advice to founders breaking into the space? How can they set themselves up for success? Maybe specifically non-technical founders that have some business background, but are trying to make a difference here in those industries? So the first I think that the first, most important bit of advice is pick your market carefully. And so if you pick a market that's too small or isn't growing or as high risk even if the technology works, it will be very difficult to make the company successful. Conversely, if you pick a market that's growing like crazy. There is some truth to a floating, a rising tide floats all boats. You really just want to get that technology in that fast growing industry. It'll be much easier to fund it and raise it. Cause it'll get lots of excitement, lots of attention. So picking the market is really important. And that was one of our challenges, energy too. The market we really focused on was the ultra capacitor space. And as it turned out, that space just didn't grow the way we had anticipated. And so it, energy too, but we didn't get the growth that we we thought we'd ride on the back of the industry, as it grew so rapidly. Conversely, now we're looking at lithium ion technology and that market is growing like crazy. It's about it's about a 40, 40 to $45 billion industry today, but when all vehicles are electric, it will be a trillion dollar industry. that's the kind of growth I think entrepreneurs need to look for when they're deciding what kind of technology path they want to take, because that's the most important. It just makes your life a lot of user. If the market is extremely excited about what you're doing. Got it. And then I really love the insight that you shared on collaborating with big players that have to know how and can share a lot of knowledge with you as well. And you obviously working with your internal teams that have developed this technology that everybody seems to want to access in some way. Do you have any advice for founders in terms of how to effectively collaborate with these massive players? I think I've met a lot of founders that I'm rather scared of working with them. Maybe first of all, are they going to steal my technology? Second of all Are they gonna slow me down? Any corporate has always gone to take a lot of time and be slower than a nimble startup and trying to sell to them or work with them can sometimes take years and years until you've got actual results. So what would your advice be of properly working with big corporates? Like BSF? The key is personal relationships. It really is. It sounds easy, but you need to find people at those corporations who. You have a good connection with and develop trust quickly. Because in order to go down a path with a partner like that, you have to have mutual trust. I'm not saying that you should necessarily trust everybody. You need to be a little bit thoughtful about about the reputation and the intentions, et cetera. But you need to have a fundamental basis of trust and that starts with a good personal relationship. And in, in our example just working our networks to get introduced to companies and we have our list of investors, but there's a much longer list of other companies that we've engaged with and talked to. And so there's a filtering process where you select which partners do you think you want to to bring into the company and which partners, maybe aren't a good fit. And I guess don't force it if it's not a good fit. But but you need to have a fundamental level of trust in order for it to be successful. And how do you make sure you can actually compete with a desk? Plenty of companies out there. Obviously some of them that you're partnering with, they have much more resources than you'll have much more know how traditionally from years and years of operating, why couldn't they come up with this? Or what's the risk to you of Having competitors that could crush you. And how do you look at that risk or managing that. It's an interesting question. How did we come up with this and our partners didn't or other companies haven't had these innovations. And I think about that from time to time. And what really excites me about group 14 is our innovation engine. If you will. And it comes down to the technologists in the company, And they all share the same personality if they are incredibly passionate about what they do. They're brilliant. We really do try to bring in the very best in their fields to do what we're doing. They're amazingly collaborative and very open no, no pride of ownership. People are very happy to drop their idea and jump on somebody else's idea if they recognize that it's better. And so that environment just, it just fuels innovation and it just it, the challenge for me then becomes trying to filter all the ideas into something that we should really focus on. And and what's practical and what's commercializable, but I don't know if that's a culture in that. That spirit is easy to generate at a big company just because they tend to be more bureaucratic and more process focused and et cetera. And I think that's one reason why big companies like to partner with with startups. They like to plug in to that passion, that energy and that spirit, and and use that to help drive innovation internally. how do you navigate those different speeds of operating in terms of the ability of the Stelvio company to operate fastest? Probably much better than a lot of large companies that just take a lot of time. How do you make sure that you're not moving a completely different paces and slowing each other down? Yeah. Yeah. So again, it comes down to Part of it is just that the trust that you'll respect each other's capabilities, it pays et cetera. And you find ways to make it work. I'd say the other observation is, at the individual level our partners can move very fast. So if we're working with a specific researcher at one of our partners, they can turn experiments quickly and get feedback quickly in the exchange is very collaborative and relatively quick, what things get slower is when you start to get to at the project level. And approvals and direction, direction, find that kind of thing. And and that is more my job to try to keep that going quickly and efficiently. And I'd say I give our partners a lot of credit because they across the board, maybe we've just been lucky with the partners we've ended up with, but they are all very good at working with us, respecting what we can do and the pace that we can support. And and also understanding where our strengths and weaknesses are and and offering to help where we need it, but also giving a space where it is. It is more of our area of expertise. So I think, to make those kinds of relationships successful event, again, it comes down to those individual, the relationship at the individual level, right? So how our researchers interact with their researchers. How our managers interact with our managers and that kind of how I might interact with the decision makers of those partners. It's all at that individual level that keep things efficient and and smooth. And then I was recording actually earlier this week. I was recording an episode with a founder of energy companies. What they are doing, it's actually converting waste into hydrogen. So again, quite engineering, heavy space something that requires it's not the software startup that you can grow to a massive size within a year, but at the request is patients. And what what he was saying is really your need to really get to a point where you can move fast on the micro level, but you have to have this. Macro patients. Pay don't confuse patients with slowing down on the micro level. Is that very much the philosophy you're trying to follow as well? I think that's a great way to phrase it. Yeah. So it is, we move as quickly as we can at the micro level, and then we just have to manage the process at the macro level. So I think patience is a good way to think about it. It's a good way to describe it now. Let's talk about the next 10 years. I'd love to hear. When do you think the first cars will have your technology built in? What is your guests or your plants? I've done second old how does the world look like in 10 years? If you succeed, if your company effect 14 is successful. So we hope to have our our large scale facility online in early 20, 23. And I would hope to be in electric vehicles probably in early 20, 24. So that's pretty fast, admittedly. So that's, that's three years, maybe three and a half years from now. So that's pretty rapid adoption qualification cycle for. The automotive industry. But we're off to a headstart with a number of automotive companies already. So we've got some experience behind us already, sometime between 2023, by 2025, for sure. We're hoping open to be widely adopted in the UV space. So what does that mean? 10 years from now we have projections to, to to be a significant contributor, to the electrification of the automotive industry and really be like the patient of everything. And it will start with consumer electronics in 2021 this year and grill one 22. They simply adopt faster than automotive and then we'll transition mostly that scale can really start to grow as we did in the automotive space. Mid decade, by 2030 we're talking about millions and millions of EVs running on our lithium Silicon battery technology. And I think the exciting thing there is those EVs will be the same cost as in talk about from vehicle. And that's going to make that, that not adoption decision, that, that transition decision for our consumer really easy. Okay. really looking forward to that moment in time. I think the days of fossil fuel based transport counter it's really. And it's really great to talk to people like you that enabling the the renewable energy transition to happen. So thanks very much for joining me today. What's really great to chat. Thanks, man. I appreciate it. That's good, Tom.