#127 Scalable Carbon Capture, Building as a Non-Deeptech Founder, Creative Business Models, & Navigating Funding Challenges w/ Luke Shors (Capture6)

Why you should listen:
**Learn about a new breakthrough carbon capture model 
**How you can build a deep tech company as a non-deep-tech founder
**How to raise from both public and private funding sources

Show Notes:
In this episode, Silas Mähner (@silasmahner) and Somil Aggarwal (@somilagg) interview Luke Shors, co-founder of Capture6. Capture6 is a direct air carbon capture company, applying its innovative technology and business model to revolutionize the way that carbon capture takes place. One of their claims to fame is their approach on being efficient with water usage and creating beneficial byproducts from their capture process. Luke himself is not a deep tech founder and shares great insights on how he navigated building a deep tech company in climate.

Overall, a super good episode packed full of insights.

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Topics:
**6:53 Starting as a public benefit company
**12:50 Being a climate founder without deeptech background**16:28 Capture6 differentiator**20:01 Economic advantage of direct air capture
**31:15 Price of Capture6's carbon
**36:11 GTM
**40:22 Messaging in public vs. private funding
**50:37 Advice for founders
**54:00 If he started a company today

Links:
**Connect with Luke: https://www.linkedin.com/in/luke-shors/
**Capture6: https://capture6.org
**Follow CleanTechies on LinkedIn:
**HMU on Twitter: @silasmahner, @somilagg

You might enjoy:
**Most Recent Episode: #126 The Value-add of Specialist VCs, Engaging with Corporate Partners, Advice to Founders & Aspiring VCs, Defending Your Moat, & More with Grant Allen (SE Ventures)
**Similar Topic: From Restaurants to ClimateTech: Building a Carbon Capture Concrete Company w/ Tim Sperry (Carbon Limit)
**Something Totally Different: #93 Hard Truths About VC, Raising Advice, & Small Fund Limitations w/ Susan Su (Toba Capital)

Transcript

Somil Aggarwal: 0:08

Welcome back to the Clean Taggies podcast, where we interview climate tech founders and VCs to discuss all things building and investing to solve the biggest challenge of our generation climate change. On this episode, we had the chance to speak with Luke Shores, co-founder of Capture Six. Capture Six is a direct-air carbon capture company applying their innovative technology and business model to revolutionize the way that carbon capture takes place. One of their claims to fame is their approach on being efficient with water usage and creating beneficial byproducts from their carbon capture process. Luke himself is actually not a deep tech founder and shares great insights on how he navigated building a deep tech company in climate. This episode gave us a lot to think about regarding the ways that we can think outside of the box of traditional approaches to things like carbon capture and combine it with other processes that can create extra revenue streams that ultimately help scale the business. Generally speaking, a really fascinating episode. Let us know your favorite parts when you finish listening. Enjoy the show.

Silas Mahner: 1:09

All right, welcome. Welcome to the show, luke. How's it going today?

Luke Shors: 1:14

Great Spylas, Thank you.

Silas Mahner: 1:16

We are pretty excited to have you on. I'm trying to think I don't know when the last time we had a peer carbon capture type of play on here. So this is going to be interesting. It's been a second, but I guess let's just kick right into things. Give us a quick kind of background on who you are, what you're doing today.

Luke Shors: 1:34

Sure. So my background is pretty broad. I've worked in a lot of different countries. I've kind of spent my professional career in health, education and climate and I recognize that's a really broad range. But I've kind of always been interested in these challenges that straddle multiple domains. So you know, for instance, one of my first climate projects was on soot and that was really interesting to me because you had cooked stoves in low income countries that were made in soot. It was, you know, landing on snow, changing surface, albedo, and it was this problem that encompassed health, climate and education. Because at an education level, you know, villagers often weren't familiar or were, they didn't have the ability to appreciate that this soot was harmful to their health. I say they didn't have the ability to appreciate because they didn't have the economic privilege to do so. You know it was a health problem because it was responsible for emphysema and asthma, and it was a climate problem. And so these sorts of issues where do they fall? Like who owns that issue in kind of? You know, worlds that are siloed in different agencies. So you know, these kind of complex problems that encompass different domains have often found interesting.

Luke Shors: 3:17

This company came to be just during the COVID era I met some friends. We, you know, rented a house in Utah and we were doing some hikes. And you know, just a friend of mine, I just kind of on a hike, said we should collaborate on something sometime. And it was just one of those comments that just kind of emerged from a good conversation but it didn't have a, you know, a particular focus or you know, let's do something tomorrow. But I think that comment kind of there, that was a seed.

Luke Shors: 3:57

And you know, he reached out about three months later and said you still want to collaborate on something. I said, sure, you know, I was doing some consulting at the time for the World Bank and we just started talking about the direct air capture space. And you know, we sort of began with this kind of process of thinking about what we didn't want to do in that space, you know. So we didn't want to create a DAC solution that consumed lots of fresh water. We didn't want to do a DAC solution that operated at high temperatures, because we knew that operating at high temperatures meant that we wouldn't be able to use fully intermittent renewable power. We didn't want to do a DAC solution that required complex supply chains or had very weird proprietary materials that you know might be really cool at a lab but might be difficult to scale in the near term.

Luke Shors: 5:06

So we sort of started with, you know, let's avoid this, and then, by kind of backing into you know what we didn't want to do, we eventually emerged with what we did want to do, and so that was kind of the origin of Capture Six. The backstory to that name, which is just kind of random and funny, is I had to save a Word document when, you know, before we even launched this, and you know, the word processing prompted me for a name and I just, you know, thought of Carbons, you know Atomic Number Six. So I just wrote Capture Six and I sent it to my friend and his name is Ethan Cohen Cole, and he just went and just incorporated the company under that name. So we didn't have any like grand séance in the desert or, you know, didn't do a focus group, but in many ways that was like I think that was a good thing. It's like there's so many decisions to make as a startup and you can't agonize over every decision if you want to make progress.

Luke Shors: 6:20

So Capture Six was, you know, kind of born on paper as a public benefit corporation and that was kind of our attempt to create a structure where we could have the incentives of a for-profit company but kind of retain the mission of you know, a not-for-profit and so you know we incorporated as a for, as a public benefit corporation, like you know, patagonia, and it started as a hobby project and I was still doing all my consulting and then you know, within two months we had raised $3 million and you know I dropped all of my other consulting and it, you know, it's been kind of off off to the races ever since.

Ana Konstantinova : 7:10

Impact brands represent the choice to live our lives in alignment with planetary action and our values, to preserve our amazing home for generations to come, be it through solar panels, how you travel, where you're sourcing your materials, the choices we make matter, and I know you know that if you're listening to this podcast. My name is Anna Konstantinova and I'm on a mission to make impact brands our next paradigm. I believe that marketing can be used for us rather than against us, and I want to help you build the best brand possible so we can all pour our strength into solving the biggest issue of our time. Whether you're a founder or an investor representing portfolio companies, let's work together to make sure your brand is safe and sound. Let's work together to make sure your brand is seen, heard and remembered the way it deserves to be. And as a thank you to the Clean Techies community, I'm offering 20% off my newest launch branding sessions with code Clean Techies.

Ana Konstantinova : 8:04

One word We'll take 60 or 90 minutes to solve one specific problem, whether it be a naming issue, strategy, development, business growth or beyond. Let's put our minds together and move forward with renewed energy. Can't wait to hear what you're working on. Find me at anacodeco. That's a-n-a-k-o-dot-c-o. Talk soon.

Somil Aggarwal: 8:23

You know, before I get into that good stuff, I definitely think Capture Six it's a cool name. It's cool that you guys are able to get it so quickly and that it started off that way. I feel like sometimes the name makes a big difference, even like in remembering episodes, remembering companies. You'd be surprised how far away that goes. So Capture Six definitely rules out the tongue I feel like you talked about.

Somil Aggarwal: 8:47

You know, it's really interesting how you started talking about the things that you eliminated when you were looking at the potential solutions. Right, and that probably takes some understanding of the current landscape. I'd say that's a pretty unorthodox process. I don't know if every founder really considers that. In doing that, I'm guessing there becomes a gap where, okay, you've understood what you don't want to do, but now the question becomes what do you want to do? And because you've eliminated what likely is a large number of solutions, you're left with kind of this whole and what I would assume is maybe a lack of confidence. So my question is, to that point, using this approach, because I think it's actually a very interesting contrarian approach, how did you become confident in the solution that you were going to pursue?

Luke Shors: 9:28

Yeah, I mean. Some of this, of course, just gets to. You know, our background is founder. So my co-founder, ethan, is an economist by training. He was a Federal Reserve regulator, he was a professor of finance at the University of Maryland and then he ran a financial advisory firm that he, you know, grew up and sold. So you know, we're not material scientists. We didn't come out of a material science lab where we discovered a new, you know, a new particular Sorbent or something like that, a new, you know, organic framework for capturing CO2. So we instead approach this as a business problem, which is there's, you know, a demand for permanent carbon removal. Now we know, for instance, you know, companies like Microsoft have 2030 net zero commitments. They're buying carbon removal. So we know the demand exists now, even if it's among a, you know for the moment.

Luke Shors: 10:41

Maybe that's concentrated in a number of kind of benevolent corporates, but that demand exists and that demand is not for a, you know, a one kilogram of removal from a lab. Right, if you go to one of those big companies and say here's my you know box and I can remove a kilogram of CO2, you know they're not going to be interested because that's not going to help them meet their targets. So we came at this at what you know what exists at a high technology readiness level that can be deployed today that you know can be brought into a different configuration to accomplish this kind of novel goal of direct air capture. So it was more thinking from a, you know, an industrial perspective and an economic perspective than it was coming from a R&D perspective.

Silas Mahner: 11:47

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

Silas Mahner: 12:16

Can you talk more about this? So you're both neither of you are materials people, right? This is always what I think. I'm like. Yeah, if I want to start a climate startup someday, I don't know how I'm going to do that. I'm not an engineer, I'm not a scientist. How do you go about? You obviously have some understanding of the landscape, of how things are working. You know there's demand, but then you go and find a technology that's there. Can you talk more about that? How did you source that? What's that process like for other people who may have similar types of backgrounds, looking to solve solutions in the climate space. Solve problems in the climate space Sure.

Luke Shors: 12:51

So something that was said to me a long time ago that I found kind of helpful was you know, you can think of climate change as a, you know, a temperature problem, but you can also think of it as an acid base problem, and carbon dioxide is an acid and we have too much acid in the atmosphere and we have too much acid in the oceans and we need to transform some of that acid into, you know, terrestrial geologic storage. So the base that you know we use is called sodium hydroxide, and you know this is also known as LI, and this is a very common chemical. It's produced all over the world. You know it's used in soaps and lots of other things, and so it's been known for 100 plus years that sodium hydroxide has the ability to bond to CO2 and create sodium carbonate. So the idea of using sodium hydroxide to create, to capture CO2 was not novel. That's that is known. The question is, how do you do that at scale very, very cheaply in a way that can be deployed? And so that is.

Luke Shors: 14:13

you know that's an engineering problem, but it's also just a it's also just a, you know, business problem, and so that's where we were able to kind of utilize our strengths of thinking through how do you structure these projects?

Luke Shors: 14:28

What do the you know economics of these projects look like Now, in using kind of off the shelf equipment to accomplish this goal. Of course, over time we can try and optimize some of this equipment for this you know particular goal. So, to give an example, the you know cooling towers that we will use that will expose the sodium hydroxide to the air are not actually optimized for this task. They're optimized for, you know, heat transfer, and what we need is to optimize something for mass transfer. So we have engineers that are, you know, taking this equipment and thinking about what is, what is the next version of this look like? And right now we've got 22 staff, and so, you know, we've got eight engineers and scientists, and so, you know, on the technical side it's grown, you know, significantly beyond our original conceptualization of the technology. But you know, that's kind of how our thought process led us to this point.

Silas Mahner: 15:46

So was there a specific? You know, it sounds like you had some level of technical understanding of how this works. Was this just a base kind of well-known method of capturing carbon? That's? You know, it's not proprietary and you just said, hey, we can take this and go run with it and make it more, make it more refined. Hey, there are you building a climate tech business and looking for very specialized talent? Consider reaching out to our sponsors, next Wave Partners. Next Wave are experts in talent acquisition, recruitment and retention across the climate tech, renewables and ESG spaces globally. So if your team is growing or you're looking to make a career change yourself, feel free to reach out to Next Wave at next-wavepartnerscom or reach out to one of their consultants directly via their LinkedIn page.

Luke Shors: 16:28

Well, our process for producing sodium hydroxide is unique and so. But it does utilize kind of unit technologies that others have developed at, you know, large scale with high technology readiness levels. So the basic approach of our process is to take a salt water input and we strip out the salt, the NACL, and then we have H2O. We separate the hydrogen from the hydroxide through electrochemical processes which are well known and well understood. At that point we combine back the sodium with the hydroxide to create sodium hydroxide and that is our solvent.

Luke Shors: 17:30

So we're somewhat unique among direct air carbon capture groups in that we do not recycle our solvent. So we're not. You know, in many groups processes. What they do is they use a solvent or a sorbant, they absorb CO2, they heat that back up, it re-releases the CO2 and then they store that in something a geological formation which is called like a class 6-well typically. But we and there's the problem with that approach is over time there's degradation of that sorbant or solvent so it becomes less effective in that, in capturing CO2. We have basically a linear process where we're constantly generating the solvent and so we're constantly mineralizing the CO2.

Luke Shors: 18:32

And that has some advantages because we don't have to be close to a you know particular geologic formation, because you can store this mineral anywhere. So there's lots of articles in the media now about different places that are considering building CO2 pipelines. So in California there's a discussion of whether they should build a CO2 pipeline. You know, in Iowa there's discussion about a CO2 pipeline and this is you know this is presented as this is a. You know it's a very tough decision. We need a CO2 pipeline to store, you know, co2. And the other hand, you know, communities don't necessarily want a pipeline running through their backyard. We sort of bypass this discussion because we create a mineral from the CO2. So we're not ultimately dependent upon Class 6 wells for storing the CO2.

Somil Aggarwal: 19:31

So just to double tap on that to make sure I understand it sounds like there's a, I think, three key differentiators within the process. So it's the ability to use that water consumption or a different form of water consumption to create this recurring solvent, which is essentially what you're used to store throughout this intermediary process, and then that also helps you in terms of, like, how you need to store. So, essentially, the real innovation here is almost the portability of the entire process. Is that accurate?

Luke Shors: 20:01

That's accurate, and I would add to that that you know how do you? How do you? What are the economics of these projects? And so one answer is the economics of these projects is exclusively based upon carbon removal credits, and indeed you can build such projects purely based upon the purchase of carbon dioxide removal. In the United States, it's even easier to do that because you have the inflation reduction act now that provides $180 tax credit per ton of CO2 removed. However, you can't. You can't build projects in many places in the world purely based upon carbon removal credits, and even in the US it's hard.

Luke Shors: 20:54

So the economics of our projects are not just based upon carbon removal. We also, because we basically squeeze out water from this salty brine. That fresh water has economic value and, in addition, the brine management is something that has costs in many places. So in our first project, which will break ground in the first quarter of 2024 in LA County, in a place called Palmdale, they were looking at leasing many acres of land for salt evaporation ponds, and so that was their discharge from their water treatment facility, and those brine evaporation ponds have no economic value, it's purely cost. So that's their effectively was going to be their garbage. So in our process we transform that to sodium carbonate, which is much more easy to store it doesn't have the same environmental damages of storing salt and so these become basically economic benefits of our process that are totally independent of carbon removal. Hey there.

Silas Mahner: 22:18

Thanks for listening to this episode. If you made it this far, it's likely that you're enjoying the show, so wanted to ask your help. If you're enjoying it, please give us a review on Apple Podcasts and share with somebody in the same industry who might find this interesting. And if you're interested in getting summaries of these episodes, go subscribe to our newsletter that comes out on LinkedIn and Substack Links can be found in the description. Thanks for your help in growing through each of this show. This is pretty fascinating. I've never heard of a carbon capture company that found the other the economic incentive to save somebody money. So this is quite fascinating. So, just that, I want to try to conceptualize this. I'm a very visual person. So the projects, essentially, what do they look like? Is this a kind of a small pond where you can take this stuff? Can you just like if you're explaining to our grandmas, right, how does it look, this project in kind of concept, when you see these things all around the world someday?

Luke Shors: 23:09

Okay, so people don't generally like to drink salt water, right, so I'll start there. And so there's a variety of water sources. Low salinity water is also known as brackish water when you have true desalinization which is taking ocean water. In any event, you have a salt problem, right? So in any water treatment facility that is dealing with salt, they are removing that salt. But you can remove that salt up to a point and then at some point the salt becomes concentrated enough in the water that it ceases to be economically viable to treat it further and so that becomes kind of the waste stream. So essentially, if you have an input salty water stream, the water treatment facility emerges with two streams. It emerges with the freshwater stream, which is what people want, and the concentrated brine stream, which is the garbage essentially from that facility.

Luke Shors: 24:21

If it's located on the coast, in many cases these plants are permitted to just discharge that brine back into the ocean. But that's not something that generally communities are thrilled about, right, and you have activism among surfers and scuba divers and other community groups because it's known that this brine discharge hurts marine life, and for new projects that aren't already permitted, this is the source of substantial scrutiny, particularly in shallow bodies of water. So for instance in the Middle East you have shallow bodies of water where you have massive desalination operations and over time all that brine discharge just increases the salinity of that whole body of water. Inland that brine is typically dealt with in the salt evaporation ponds.

Somil Aggarwal: 25:29

So in any event.

Luke Shors: 25:31

you have this brine problem, and what we do, in a way, is we make it economical to treat that brine and to transform it.

Ana Konstantinova : 25:42

So it's not so much that we manage it.

Luke Shors: 25:45

it's that we use up those salts, and so we can generate fresh water from a source of water that was no longer economical to deal with in a traditional way.

Silas Mahner: 26:02

Okay, so this would be almost like. Your objective is to make essentially a bolt-on plant to these desalination plants that can further take out the salt, produce more fresh water, so they're able to have more economic benefit as a commercial operation, but also save the money from having to rent land to dry out the salt flats. Right, is that correct?

Luke Shors: 26:25

That's all correct and there's other things you can do. So in some ways that's phase one. What are some of the other things you can do? The?

Ana Konstantinova : 26:36

outputs of our process.

Luke Shors: 26:39

by a happy coincidence, some of them are actually used in water treatment. So water treatment uses sodium hydroxide, it uses sodium carbonate. We produce some dilute acid that is used by water treatment to clean membranes. So you can create some nice circular economy synergies and in doing so you can also reduce the emissions of the water treatment facility by providing them effectively low carbon chemicals on site.

Silas Mahner: 27:14

This is pretty cool. This is pretty fascinating. So now I want to talk about. You mentioned earlier that you built this not just on the idea of selling carbon credits, right? So can we talk about? Are these projects even if you completely take away people buying carbon, buying carbon credits Will these projects be viable for those decalination plants? Will they want this that much that it's going to be that valuable for them to invest in it?

Luke Shors: 27:41

Well, I should be careful about how I answer this one, because it's kind of a funny thing right now in carbon markets. So traditionally in nature-based solutions, there's this concept of additionality, and so the idea is that buyers of credits want credits that are additional. This makes tons of sense in the case of, say, reforestation, because trees grow, whether we plant them or not. Seeds fall and acorns grow into oak trees, and that oak tree wasn't dependent upon a carbon credit for its growth. So it makes sense to ask the question would that tree or would that forest have existed in the absence of this carbon credit? But that concept is being applied to direct air capture as well, and I think it's more questionable in that context because these facilities are not going to just build themselves.

Luke Shors: 28:50

So there's no counterfactual where you say would this facility have existed in the absence of any action? No, it wouldn't, because facilities don't build themselves. But if you truly got to the point where there was no cost of doing carbon removal, that these facilities were purely financeable just on water and dealing with brine waste, then would companies buy the carbon removal credits? Now I think the answer is yes. If all it takes is $1 per ton of CO2 removed. That's great. That means that we've effectively massively lowered the price of carbon removal. But at the moment there is this criterion and grants and applications Is this investment in carbon removal financially additional?

Silas Mahner: 29:54

In other words.

Somil Aggarwal: 29:55

Would this facility exist?

Luke Shors: 29:58

without the carbon removal purchase. Now we can honestly answer that no, the facility would not exist without the carbon removal purchase. But if I presented as being too good of a thing, strangely enough it scares away some of the carbon removal purchasers.

Silas Mahner: 30:21

Yeah, I think this is kind of interesting. You have a little bit of a misalignment of incentives, because you're trying to make sure you do the right thing and have good compliance with the carbon markets which is notorious for having a couple issues in it but at the same time you're able to do something and hypothetically fund things that probably would not get funded because if there was less incentive to do it, they might say, well, we're not going to try something new, we're just going to do things the way we've done them. So I do want to get through the rest of the technology here. So I want to get down to the point of what. On your website it mentions that this is a model for commercial success. So at what carbon price are these projects viable and what is the price of carbon per tonne removed that you guys can get to, based on your current calculations? Because I know you said you're building a pilot project, so it's probably just bench ideas right now.

Luke Shors: 31:15

Yeah. So I mean there is no one cost of carbon removal for our projects, because any project has. It's a question what is the value of the brine management? What is the value of the fresh water? If the value of those is high, then the cost of the carbon removal becomes much lower. If the value of those is not as great, then the cost of carbon removal is higher.

Luke Shors: 31:45

So to give you an example, in the case of a desalinization plant it may already be permitted to discharge brine in the ocean. So that's not a good thing. But from their perspective there's no cost to it because they've already got a permit, and so there's no value in us dealing with the brine. But in other cases the group's ability to produce fresh water may be limited by their existing permit for brine discharge. So maybe the market demand for water is X, but they can only produce 75% of X because they can't discharge more brine. So if we can eliminate some of that brine, then they can actually produce more water. So the economics of our projects are contingent on a lot of things, which makes it hard to say precisely what is the price of carbon removal. I know that's a bit of an evasive answer and I apologize for that, but our goal is to get to under $100 per ton of carbon removal.

Silas Mahner: 33:09

Got it Okay, yeah, I just want to make sure, because I know that some of these technologies and the way they sell them, they're selling them at crazy numbers and it's like, okay, well, we need to make it more economical, we need to bring this cost down. And that's what I wanted to push into, because the website says that it's commercially viable and it's available today. And to move through these things a little bit quicker, just to touch on the point of when you say it's available today, you're meaning that it's using existing technologies, not some future moonshot thing that we may or may not figure out, right? That's the reason behind that.

Luke Shors: 33:44

Sure, Sure and over time. Of course, as membranes get more advanced, we can incorporate those technologies into our processes. But having viable projects is not reliant on a membrane advancement.

Silas Mahner: 34:02

Yeah, understood. That's great. That's very helpful to clarify, so thanks for that.

Luke Shors: 34:06

I mean, one of our moonshots is that we're working on now is, you know we've been the carbonates themselves are a cost store, and so that increases our costs. But what if the carbonates themselves were a source of revenue? Well, how do you do that? You know, our moonshot is you use that as a vehicle for ocean alkalinity enhancement. So you know, the oceans have absorbed more than 50% of all CO2 since the Industrial Revolution. They're becoming acidic If you put an alkaline substance in them, that buffers that acidity, and so we've been working with a number of research institutes to basically model what would happen if you add our carbonates to the ocean.

Luke Shors: 34:57

That's, you know. That, of course, is going to require a lot of research, a lot of, you know, permitting and consents, but I think we can get to the point based on you know what we're learning already, that you know we will one day be able to sell those credits as well, and then we will transform what is a significant cost for us, which is the storage of the carbonates, into a further revenue stream, and then, you know, we can further reduce the cost per ton.

Somil Aggarwal: 35:29

I think this the way that you laid out you know, I think, at least three different sources of revenue, three different options of what this product can be attractive is usually, I think, akin to a lot of what we hear in venture capital, with, you know, taking bets for shots on goal in terms of you know what is the go to market that can get you to scale and what is the go to market that can get you to that hundred million dollar revenue business Right. So it's really great to see, with deep tech and a climate tech focus, that there is that same optionality with the kind of technology that you're innovating on. I want to get your perspective on that go to market. You know, when you're looking at these different bets and possibilities of making revenue, are you seeing traction for some above others?

Luke Shors: 36:10

Yeah, I mean, I think a problem that a lot of DAT groups face fundamentally is people want these projects in the abstract, but it doesn't mean they want them in their community. Right, so I can be in support of direct air capture Doesn't mean I want it in my neighborhood, right? So you know, a lot of DAT groups say, well, it's going to create jobs and it's going to create these. You know local economic benefits. That's true, but our approach is that, you know, we supply water and communities want water, particularly in many, you know, water stressed parts of the world. Because we integrate with an existing water facility, we have a much smaller footprint that a standalone DAT facility.

Luke Shors: 37:03

Not only that, but we're interfacing with a group that has a mandate to deliver water to its constituencies, and so I think you know that's not an economic advantage but it is a go to market advantage Because, if you think about it, there's no local constituencies that are tasked with providing carbon removal for their communities. You know your typical small town does not have a carbon removal. You know board or you know municipality, right. And so if we can meet a customer problem, which is water and brine management, this gives us a means of deploying direct air capture that a group that just has direct air capture does not have.

Somil Aggarwal: 37:59

Definitely, and I think you know, focusing and indexing on not only the big picture problem but your edge within it. That provides real, tangible benefits, like the focus on water that makes a lot of sense. I think there's a lot of, you know, heads in the clouds, approaches to deep tech that don't really focus on that.

Silas Mahner: 38:15

One thing. I just want to make a comment to bring this back. I think it's really important to highlight this, and then you can continue. Somehow is that what you're saying, luke, is that you found a way to have an alignment with a group that already has a job to do, right, and you're helping them to do their job, so you have champions of your product, not people fighting against it, which is what typically happens in local communities with a lot of these things. They're afraid of change, et cetera. So I just want to like highlight that to anybody listening, because I think that that is extremely important and I want to make sure we don't gloss it over. So continue, yeah, yeah.

Luke Shors: 38:47

And you know it's typical that startups that have at some point have a pivot right. That's kind of the common story and I don't think we had a pivot so much. But you know we saw ourselves first and foremost as a DAC group that had a water co-benefit and a brine management co benefit. But what we have learned with our initial customers is, from their perspective, we are a water group that deals with brine that has a nice carbon capture co-benefit. So you know, from their perspective the carbon capture is a nice ancillary benefit but it's not really the core value proposition that we provide.

Somil Aggarwal: 39:31

Yeah, I think that's a really cool example of how, when you put something out there, people will have their own reasons for loving you know the technology and the product as a whole. So, through the cool to hear all that feedback you know from your experience. One thing I want to do is also take that success that you've had an understanding of what is valuable for the customer. How did you navigate bringing that into your conversations for raising you know from what I can see you've raised, you know convertible debt as well as received a grant. So this you know. There's a budget of different ways in which you articulate your message right. So when you're interacting with these different you know capital deploying groups, how are you navigating the fact that you can call yourself, you know, a main beneficiary of water providing versus? You know direct to air carbon capture? How are you navigating that messaging?

Luke Shors: 40:22

Yeah, I mean there was, you know, as you may know, on the heels of the Department of Energy's announcement on the DAC hubs, carbon engineering, which was, you know, one of the big recipients of that, was acquired by Occidental Petroleum and you know that was purchased for more than a billion dollars and a lot. You know I saw several comments on that by kind of you know, big shot investors that they obviously did very well, their investors did very well, and the group that that can do this and not have a water problem because you know, many, many leading DAC groups are actually massive freshwater consumers. So a group that can accomplish carbon capture and not have a water problem, you know, really has even even better possibilities. I think you know we have we've discussed these kind of two addressable markets carbon capture and water and we have another addressable market as well, which is critical mineral recovery. And so a lot of these brines actually have, you know, critical minerals in them, whether that's lithium or manganese or any, any number of things.

Luke Shors: 41:55

And again this gets to basically an economic synergy, which is to get at these minerals you first have to get rid of the salts and so it comes back to the salts issue. So you know I don't want to, I don't want to portray that we're kind of, you know, boiling the ocean and going after everything. But you know that is. We have some things that are being basically propelled by grants that we can continue to study, to kind of work on, and that you know that is one of them. Whether or not we can, if we deploy this, say, you know, new York is sitting on a big aquifer that has a lot of salts in it, has a lot of lithium in it, and it's hard to get to that because if you're just doing lithium recovery it's not viable. But if you could stack the benefits of freshwater production, lithium recovery, direct air capture, then suddenly what was a non viable project becomes potentially quite profitable.

Silas Mahner: 43:00

So was this then the point you had reached when you mentioned at the beginning that you went out and raised $3 million within a couple months? Did you already have this conceptualizing you understood? Hey, we know that we're going to provide more than just direct air capture Because, if I'm not mistaken, if I'm guessing correctly, you raised at a time when it was a little bit easier to raise, so I don't know if that had to do with it. I'm curious to understand that more, as well as the grants how you obtain the grants and any advice on other companies how they obtain, like the advice around getting grants.

Luke Shors: 43:33

Yeah, we raised the $3 million prior to fully understanding some of these economic synergies. We've since raised another $5 million and we're targeting a pretty significant series A in the next six months. So we raised the $3 million in many ways on the backs of the April 2022 announcement by the IPCC that we would need to get to gigaton scale of carbon dioxide removal in order to stay within the 1.5 Celsius warming targets of the Paris agreement. So we started out first and foremost as a DAC company, but as we've progressed and as these various circular economy strategies have become more and more apparent to us, we've become more of a decarbonization company.

Silas Mahner: 44:39

Got it. So then, on the topic of you mentioned, you're going to be raising soon. So there's somebody. Matt McGraw has come on the show recently and talked about the difference. Everybody says hardware is too hard to fund, it takes a lot extra money. But I saw a chart he actually shared on LinkedIn I think it was today that kind of showed the funding for software. It's usually just like this kind of gradual line of goes up until they get to big, big rounds, but with hardware it's kind of like nothing, nothing, nothing. And it spikes right Because they get to a point where the technology works and it's just simply okay. Now we know how to do it, I'm going to deploy it. Are you like? I don't know how much you can speak to it or how much you haven't? You know, haven't raised around yet, but can you speak to that process of? Okay, once we got to this point, then investors are suddenly okay, perfect, it works, like we make sense, and then it becomes a little bit easier. Is that? Can you speak to that at all?

Luke Shors: 45:31

Sure, sure, I mean this. These sort of first of a kind facilities are really challenging, and this is something that climate tech companies generally face. You know, in our case, one of our big, one of our big breakthroughs was being a recipient from the California Energy Commission for our Palmdale project. So we received $8.1 million for that project and you know that's that's really critical in building that project. As you said, you know, software is cheap and hardware is not, and so fundamentally, it requires a lot of capital to get these things started. Now, over time, as you have proved out your technology, you know, as I said, the unit operations are well proven, but the some of the integrations are unique, and so we do have to prove those out. After proving this out, then suddenly this becomes something that you know subsequent facilities can be financed. And so, you know, in California we were the first I believe we were the first clean tech company that was approved by the iBank for their loan guarantee program.

Luke Shors: 46:51

So you know, this is another government program that is pretty essential for us to build a facility, because if you just go to a bank and say, you know I want to build this unique facility, right, it's, it's too complex of a story.

Luke Shors: 47:07

It's, you know, particularly for a pre revenue company, and there's just not, there's just not really the environment for this. You know, the Department of Energy has a loan guarantee program, but it's, I think it's a minimum of $100 million. So it's just, and this is a, you know, this is a gap that the groups are identifying and, and you know, not just for our sake, but like for the planet's sake, you know, if there are, if there are groups with, you know, great ideas that need, you know, $5 million to prove them out like this, this shouldn't be an insurmountable obstacle, right? And it's very hard to raise venture funds to build a facility, because that's not the sort of returns that you know, venture capitalists are looking for. So it's, this is kind of the, you know, the valley of death in this space, and I think we're going to cross it through to, you know, because of some of these programs. But it's, it's a real challenge.

Silas Mahner: 48:13

Yeah, I just want one comment.

Silas Mahner: 48:14

I think and we can move on to the next section is that you mentioned a point which is very obvious from coming off of climate week. This will be posted a couple like two weeks after climate week, but we're recording right one week after. There was a lot of discussion around bridging that gap and using a different type of set of tools for the capital stack to build hardware right, because, again, it's not necessarily that much more money, especially if you have some grant money in there and you know how to obtain the grants, you can actually, you know, get to the point where it's proven and then it's just an infrastructure play right. Then you can get really, really cheap, cheap capital to go build these things. And I'm very excited talking to you because this reminds me, you know, of some of the other founders we've had on, where it seems like you're getting really close to that inflection point in a much shorter time than some of these people did, and you know you're getting really close to it. And then these are big info. Funds can come in.

Luke Shors: 49:05

Yeah, and it doesn't hurt that my partner is, you know, was a finance professor and a federal reserve, you know, regulator, and so he knows these systems intimately. But it, you know, I would think, if you have two co co founders that are coming off, you know, phds in material science, I mean they may be brilliant individuals, but whether or not they're going to be able to navigate these systems, I mean it's been very hard for us and we have people that are, you know, pretty, pretty savvy in these areas.

Silas Mahner: 49:39

Yeah, note to self, make sure to find a co founder that regulated the Fed prior. All right, we can go to the next section now.

Somil Aggarwal: 49:49

Yeah, no, I was going to say it sounds like you really got a good team behind you and, you know, hopefully everyone can find sort of a way to navigate the systems that easily, because it's yeah, it's not easy and even having the technical expertise we've seen at times isn't enough, and I think that's actually you're making my job easy. For me that's a pretty good segue. You know, looking at this space, we're coming up on the last segment of the show really, and we always love to give, you know, advice to founders who sound, who listen to this episode and get inspired and are currently either working in the space or want to get interested in it. So, across the areas of fundraising, you know, go to market, how you found your product market fit, how you got talent. You know managing the team generally speaking, like, what are your top three pieces of advice for founders?

Luke Shors: 50:41

I mean, obviously there's a lot of non-dilutive funding in this space and you know teams should think through how to access that, because that's important. You know, in the case of some of our grants we found, you know national labs as partners. You know when you're a startup, you obviously don't have that kind of you know name, brand recognition, credibility with grant-making organizations. So you know who are your partners on those grants and can those partners add, you know, credibility to your initial efforts. I think is an important strategic consideration. As far as talent goes, I think that's been something that's been either we've gotten lucky or what I actually suspect is there's just a lot of really bright, talented people that want to make a difference in the climate space and so it's been pretty easy to recruit. You know very smart, competent, hardworking people. You know it's, I think, a lot of people when I hear discussions on these topics, they think about this almost purely from an economic perspective, and we do as well.

Luke Shors: 52:06

But I think it's also you are deploying, you know physical projects in places. So how do you actually get community buy-in? That's not something that's just purely based upon the economics of projects. So there is some you know some discovery there that you know you can't shortchange that any more than you can shortchange you know customer discovery, right, that's a process of trying to figure out you know what it is that you know communities want, how to make these projects palatable. We are in the one of the DOE DAC hubs, the Cal DAC hub, and a lot of that is trying to figure out how to deploy these projects in a way that is responsible and you know is wanted by communities. So I don't know if those were three things.

Silas Mahner: 53:14

No, I think it's good. I'll just reiterate the point you made earlier. I think that founders really should take away, if you ask me, which is making sure that you have those alignments correct right. If you are trying to do something where you have to convince the community that it's a good thing, it might be a little bit tougher than if you have some really key stakeholders who already know the community to help you with that. With that said, then let's our favorite, probably my favorite part of the show always, and part of the reason I started the show, is to just ask you kind of, what are your ideas for? If you were to go, like you, suddenly carbon sorry, suddenly capture six evaporated and you had to go, and no pun intended, then you had to go start a new company. What would you? What would you do it in? What kind of technology would you work on?

Luke Shors: 54:00

Can I take a vacation first?

Silas Mahner: 54:03

Yes, you get a two month vacation.

Luke Shors: 54:09

Let's see if I'm staying in the climate space, maybe something else in kind of geoengineering, you know, broadly speaking you know it's certainly it's been very, it's been very apparent this the last few years.

Luke Shors: 54:34

You know how vulnerable forests are to forest fires. I don't really have a forestry background, but I'm kind of curious what sort of innovations come out to you know, make make forests more resilient. To you know, intervene quicker. To you know it's like you're you're in New York, right, I mean, new York a few months ago was this guy was red, it was apocalypse. So you know, that's that's interesting. I mean, I find I really find these kind of circular economy projects really interesting. Just, maybe it just aesthetically appeals to me. But just thinking about kind of the system synergies and you know, even though it's a bit simple, this kind of mantra of how one company's trash becomes another's treasure and vice versa, I think that's, you know, that's a really appealing thing to kind of to progress.

Luke Shors: 55:48

I was in some conversations yesterday where I was talking to some people about Africa, where I used to work a fair amount, and on the education space. I think, like how, you know, how can maybe low and middle income countries participate in these sorts of clean tech projects? You know they can't offer the same tax credits that you know Europe or US can. But how does. How do you you know you build capability there. I do have an education background so I'm sort of interested in that, that kind of you know, workforce perspective and capacity building. So I might be interested in something like that.

Somil Aggarwal: 56:43

Super cool and you mentioned one thing I wanted to follow up as you talked about. Like, how you know, one day New York woke up and the sky was red. Our most recent interview that's out right now with tea from OpenESG similar situation where I think there was just so much not paid attention to and all of a sudden the problem was so real. Everyone started to, I think, embodied the same thing you said, which is you know, one person's trash is another person's treasure, you know, looking at every part of the problem and saying, okay, where can you make value out of this? So I definitely think that had a really big impact on where we are.

Luke Shors: 57:16

Yeah, I was in. I was in Cureboss a few months ago and we're trying to do a project in Cureboss, and Cureboss is consistently ranked, as you know, one of the most five vulnerable countries to climate change, because you know it's only a few feet above the ocean and so one one good tide and you know the whole country is submerged. But I think, while indeed, you know, places like Cureboss are very vulnerable and require support, I think that narrative of vulnerability, while it's true to some extent, it's also created the sense in many of us that, well, we don't live in a vulnerable place, right? And I think the last couple of years, there's been this dawning recognition that, no, in fact, there's a lot of similarities everywhere, and that is the nature of climate change. And so, you know, I'm hoping that that continues, this kind of groundswell of momentum for climate change response, is this, this shared recognition that you know we're in this together. There's, you know this is not just Bangladesh's problem or low-lying. You know parts of, you know Cureboss, but this is really all of our problem.

Silas Mahner: 58:36

Yeah, I think that's a really good place to throw up things up. I think it is important. People have realized that there is no, there's no more haven cities. I think I just saw a post last week about this that this idea of like a haven oh, you know, climate change doesn't really affect this place. Those are going away very quickly, right, everybody's going to deal with it, even the people I'm familiar with from Wisconsin where everybody's like, oh, it's not climate change, it's just the weather, just how it is in Wisconsin. Right, it's getting to a point where it's pretty bad.

Silas Mahner: 59:05

But one thing I did want to just put a dot on is that when last week at the Climate Capital Summit, chris Saka spoke and he mentioned something about geoengineering which apparently some people are very, very like, cautious of right, so people are really cautious to do anything these things. But he pointed out that there are some times where we do things that actually are net negative for what we're trying to do. One of them he mentioned was the smoke from I think it was diesel ships that crossed the ocean, had created a layer of clouds that was actually cooling the ocean, so once they cleaned up those fuels it actually had a net negative or net net warming impact on the ocean. So I think it's important for people to remember that if you think that these things are really bad, just remember we've already been geoengineering the earth, just unintentionally. So maybe as long as we're doing it, you know with intention, we should be okay.

Luke Shors: 59:57

But any any last points you want to make and where people can reach you, Sure, and it's always important to remember when we, when we talk about something like geoengineering or ocean alkalinity enhancement, we can pursue this in a responsible way, right, us? Doing ocean alkalinity enhancement doesn't mean we dump 100,000 tons of our carbonates in the ocean tomorrow and say, oh, what's going to happen? Right you? You know you start out with a gram and you measure it, and you know you do modeling, and so there's ways to to pursue these responsibly and to your point. We already are engineering the planet. So being afraid of you know further, of intentionally engineering the planet, seems more silly to me than you know, unintentionally engineering the planet, right, yeah? So yeah, this, this was great. Thank you so much for your time. I'm I'm, you know, on LinkedIn and that's probably my, my social media platform, that I am most active in, but I really appreciated this, this dialogue and the work you're doing.

Silas Mahner: 1:01:08

Yeah, absolutely. Thanks so much for coming out. I think it's a great. I think it was a great discussion and we got through a lot that we could have talked about more, but we're out of time. We'll maybe see how you guys go and we'll have you on again in a year or so, but thanks so much for for coming on.

Luke Shors: 1:01:21

Thank you Bye.