The SAF Podcast
Welcome to The SAF Podcast, the only podcast on the internet that exclusively covers sustainable aviation fuel (SAF). So if you want to find out the real issues and challenges are for commercialising and scaling SAF production, look no further.
Every week we will be hearing from senior industry leaders who are actively shaping the future of SAF and aviation.
Hosted by Oscar Henderson and brought to you by the team at SAF Investor. Connect with us at www.safinvestor.com
The SAF Podcast
The SAF Podcast: Aether Fuels - Pulling SAF out of thin air
Connor Madigan, founder of Aether Fuels, joins Oscar on this week's episode of The SAF Podcast. Madigan shares his journey from founding a successful OLED manufacturing equipment company to pioneering a transformative approach to SAF technology through Aether's Aurora solution.
At the heart of our conversation is Aether Fuels' Aurora technology, developed with GTI Energy, which reimagines the traditional Fischer-Tropsch process for sustainable fuel production. By focusing on the syngas generation and upgrading steps, their system achieves up to 50% capital cost reduction and 20% higher yields than conventional approaches. Conor expertly breaks down how their "tri-conversion" reactor and innovative catalysts simplify production while maximizing carbon utilisation.
We also explore the evolving landscape of SAF offtake agreements, where Conor provides valuable insights into the tension between investors requiring long-term contracts and airlines traditionally accustomed to shorter fuel purchasing timeframes. His perspective on how creative deal structures are emerging to balance risk and opportunity illuminates a critical aspect of scaling sustainable fuels.
Madigan also provides a nuanced perspective on strategic investor selection, highlighting the importance of partners who bring deep market understanding beyond pure capital. We also look at how this is managed against a backdrop of higher policy uncertainty and how to adapt to work with less policy certainty.
If you enjoyed this episode check out our previous discussion with Mukund Karanjikar, CleanJoule: https://www.buzzsprout.com/2202964/episodes/15427620
Hello and welcome to another episode of the SAF podcast. This week I'm delighted to be joined by Connor Madigan from Etherfuels and we are going to be getting into all the stuff about what EtherFuels has got going on and also the importance of partnerships and what makes a good partner to a developing SAF technology production company. But before we get into all of that, Connor, how are you?
Speaker 2:Great yeah, thank you so much for having me on the podcast.
Speaker 1:No absolutely delighted. Thank you so much for having me on the podcast. No, absolutely delighted. Thank you so much for giving us your time. So before we get into Etherfuels, I wanted to take a step back and I like to sort of take a trip down memory lane with all our guests.
Speaker 2:So just give everyone a sense of your background before Etherfuels, because you've done some some quite interesting things before you're in your current position yeah, I actually started my career as a technical person, trained originally as an electrical engineer, kind of slash physicist and after I finished getting my phd at mit, I launched and founded a company based on my graduate research, and so that company it's a very different space.
Speaker 2:We make manufacturing equipment for the OLED display industry. So if you have an iPhone or a Galaxy cell phone that has an OLED screen in it nowadays and my company their equipment helps make a majority of those that are out there today. And that experience of taking a technology from a lab where it was just basically an experiment in a chemistry fume hood and scaling it up to multiple hundreds of millions of dollars a year business and supplying these big precision pieces of machinery into factories at Samsung or LG or Apple, and going through that whole journey really taught me a lot about what it's like to build a business in the sort of deep tech kind of physical hardware space and, uh, that experience got me really excited to want to do it again, which is actually um, how I I I ended up pivoting over and coming to aether fuels it's a bit of a sort of a drug isn, isn't it?
Speaker 1:When you sort of some people, you know serial entrepreneurs, they'll found multiple companies. What's the sort of you know, the reasoning and what, for you, made it sort of right for you to go and found, start and found another company after founding such a successful one.
Speaker 2:So, first of all, I just I really like building things and companies, but also physical stuff, and so I knew that I wanted to keep doing that. And in 2020, I had an opportunity actually to hand off the reins of my previous company to the executive team that I'd recruited in, and it felt like the right time to let them take it on. And I particularly wanted to go do something, though in the climate space. I liked the idea of building companies, but it felt not quite as meaningful to just do it to out-compete the competition. If I could work on something where the problem had real meaning and where our success could benefit society, that just added another layer of excitement and motivation. And you know, building companies is hard, so you want to layer on as much motivation as you can find, and, yeah, and so that's how I kind of made that decision to switch to something new and kind of do this whole journey again.
Speaker 1:So why ether fuels? You said you wanted to go and do something in climate, but there's so many different sort of aspects of climate. What drew you to sort of sustainable fuels, biofuels, saf and founding ether fuels?
Speaker 2:so I um like to pitch this idea that the best startup companies start with a really good problem, then they layer on a really good team and then they get to the technology piece and, truthfully, you can actually start in any order. But I say that just because I think, in the end, a company's success is most driven by whether or not they're working on a great problem and if they have a great team to do it. And so in starting Aether Fuels, what we did was we looked around for really good business problem and we in this case is I set out to find a really good problem and worked with colleagues all across my network, kind of brainstorming different ideas and eventually the one we landed on that led to Aether Fuels. I came out of discussions I had with the chief investment officer at a fund called Zora Innovation, which is part of Tomasic. Tomasic is a big $300 billion asset under management fund based in Singapore, and those discussions started just with an industry research report about the SAF industry back in 2020. And that was really kind of a new idea for me.
Speaker 2:I hadn't really paid any attention to decarbonizing aviation and how to do it, and what was exciting about this problem is that it was very big and, as far as I could tell, really fundamental, that there was no other way that the aviation industry was going to get to net zero except by finding a way to get jet fuel that basically has all the nice properties jet Fuel has of high density and easy transport and works with all the existing fleets, but somehow was going to be net zero and, especially if we wanted to do it in a reasonable timeframe, that we would need something that could work with existing fleets and that really kind of focused me in on oh, this is an excellent problem, that it's really big, that the industry absolutely needs it, and so that's the ingredient to go build an interesting company where you're tackling something really complicated and that is going to require a lot of investment to fully solve, require a lot of investment to fully solve.
Speaker 2:And then from there, once I had that sort of seed and the support of Zora Innovation, we set up the company around first searching for and identifying the right team members and the right technology, which I then did over the sort of subsequent, you know, first year of the company. And the technology actually that we ultimately landed on came from a research institute in the Chicago area, gti Energy, and they had been working on some technology since 2016. That was really exciting. That could really make an impact in the space really exciting, that could really make an impact in the space. And once we reached an agreement with them to license the technology, that was kind of the final piece of the puzzle to really get things going.
Speaker 1:I find it so fascinating that you took it sort of market, find the market that you can go and disrupt, find the team members and then find the technology. Because if you speak to sort of venture capitalists they rightfully pick on those three as being critical when they make their investment decisions. But you wouldn't necessarily look, they wouldn't necessarily view it in that order. So I think it's really interesting that you went sort of in that sort of sequential steps and then landed on the technology you were going to find last.
Speaker 2:Yeah, and I think an important thing to emphasize is that in this process you can fail at any point along the way, and actually I looked at a lot of different ideas where actually I found other good ideas but couldn't convince myself that I could find like a technology that was going to make a difference.
Speaker 2:And so you know, I describe it like this sort of very orderly.
Speaker 2:You know, of course I'll do this step and then the next step, and then the next step, but we had no guarantees at any of these stages that we would find what we wanted.
Speaker 2:But this was the one where we found all the pieces and I think, after having gone through building a company all the way from sort of beginning to end, and in that first company, starting absolutely from the technology and then finding the problem to solve, that I sort of came to believe that if you're doing something really good and complicated but impactful, that it's going to take a long time, you're going to pivot and change so many times that the business problem has to be your North Star and your team is what's going to pivot and change so many times that the business problem has to be your North Star and your team is what's going to enable you to pivot and find the right solution. And I actually do find that a lot of venture capitalists say, oh, this would be the great way to start all of your companies. But actually what mostly happens is we see great technology and then we figure out how to use it so I want to deal with the last aspect, the technology.
Speaker 1:Take us through. You know what the ether aura technology is, how that sort of partnership with gti energy works and sort of what's so different about it compared to sort of the more traditional fischer, trops, ft process? Because you're kind of refining and simplifying and synthesizing that process, aren't you?
Speaker 2:Yes, absolutely so. The perfect way to describe it is as an optimization of the traditional FT process. And in traditional Fischer-Tropsch there's three major steps. One is that you convert your input feed gases into syngas, co and hydrogen. Then in the fischer tropes step, in the middle, you convert the syngas into a raw collection of hydrocarbons. These are some short, some medium, some long in terms of chain length and they're not quite ready to be used as products yet. And then you need to. Then, in that last step, the third step, do upgrading, which is used to basically chop up the long chains, do some further chemical processing and you end up with your finished products, your jet fuels or your diesel or your gasoline, depending on what you're designing the plant for. And we came in with some technology to optimize the first and third steps the first step where you make syngas and the third step where you upgrade the products. And that was partly strategic because we had looked around at the market while we were doing our technology survey and identified that in our view the Fisher-Tropsch step had been improved and optimized over the previous couple of decades by a lot of great companies in the space and that step was now looking pretty good. They had brought down costs, right-sized it to the types of plants that we would want to build for sustainable fuels, it to the types of plants that we would want to build for sustainable fuels. And we looked at the industry and saw that the syngas generation and the upgrading steps had not really changed much from technology that had been around for 20 plus years. And so that's where we focused in and that's where GTI had developed some really interesting technology in their development program, and so we then exclusively licensed that and then have spent the last couple of years transforming it into and adding in more technology pieces and forming our Aether Aurora solution.
Speaker 2:Aether aurora solution the first part of our solution is a step up. We call tri-conversion, which is a single reactor and catalyst that allows us to convert a wide range of inputs co, co2, light hydrocarbons, hydrogen all in one reactor into the syngas we need and traditionally that would take two or three reactors to use all of those different components and get them into the syngas. So that's a nice example of process intensification, where we took something that takes two or three reactors, now do it in one. That reactor is also electrified, so instead of providing the heat of reaction using fuel, we provide electrons in and those provide the heat, and the benefit of that is that instead of burning fuel and producing CO2 waste that is now lost from the system, we make sure that all of the carbon that flows into our system is just in the process feed. None of it's used as fuel and that means that we can maximize the yield of the plant. That's all on that front end side. That makes the syngas, and on the back end side we also innovated in the upgrading section by solving a particular kind of very technical sounding problem, but with a lot of impact.
Speaker 2:So the traditional upgrading catalysts are poisoned by CO and CO is part of the syngas that goes into your FT reactor. Your FT reactor converts a lot of it, but it doesn't convert all of it, and so coming out of the back of that FT reactor is a bunch of CO, and to get rid of it before it goes to the upgrading step you need to do a bunch of separations. You need to lose all of your temperature and pressure and then you've got to separate out just the hydrocarbons, heat it back up, pressurize it again, and all of that extra separation equipment ends up burning a fair amount of cost in your plant capital, but also in energy. And we developed and now have a catalyst that is able to do the upgrading step in the presence of the CO and that allows us to take the stream directly out of the FT reactor and into the upgrader without any intervening separations. Sometimes that's referred to in the industry as a tail reactor configuration, and that simplicity again translates into process intensification.
Speaker 2:We plant a smaller, there's fewer pieces of equipment and that leads to lower capex.
Speaker 2:When we kind of put all this together, we get capex savings of as much as 50% compared to a state-of-the-art plant and increases in yield from electrification of as much as 20%.
Speaker 2:And we do all of that while still having a tremendous amount of flexibility in the kinds of feeds that we can use, kind of to go back to what that means chemically. So we can take in CO, co2, light hydrocarbons and hydrogen and if you walk that backward to ask what kinds of feedstocks coming in with sort of conventional pre-processing technology can produce those feeds, you find that you can use this solution to do, say, co2 and hydrogen conversion. Say you want to build an e-fuel plant, you can also use it to do biogas conversion, where you have methane and CO2 coming from biogenic sources. You can do gasified waste, so you could take waste streams like agricultural waste, wood waste, gasify them and turn them into a stream that can feed right into our plant. Or you could even take industrial off gases, so off gases from steel mill, chemical plants, refineries, and all of those become feedstocks that we could use.
Speaker 1:So Aether Aurora gives this sort of really beautiful solution where we have a lower capex, higher yield solution where we have a lower capex, higher yield and all of this flexibility in how we can deploy it. I still find it amazing that Fisher-Tropsch this technology that's been around for what seems like decades or is decades, has still got this much scope for refinement and development over this time. You said you're focusing on the first step and the third step because you were happy with what the second step looks like in terms of technological refinement, but the scope to develop this technology just seems endless.
Speaker 2:Yeah, and I think that it's really important to highlight what's different about the sustainable fuels use case compared to the traditional one. So traditional ft was designed for fossil fuels to convert coal or natural gas into things like gasoline and diesel. And because it's a fossil fuel process, traditionally it's operated at very large scale because it's pretty easy to aggregate a lot of coal or a lot of natural gas into one place and to get a sense of what that scale is, it's like hundreds of thousands of barrels per day. But for sustainable fuels to make the economics work, you typically need to avoid trying to move around the feedstocks big distances because they're kind of expensive and hard to transport. That could mean like hydrogen if that's one of your inputs could mean CO2, which really is hard to move around unless you just happen to have a pipeline there.
Speaker 2:And agricultural waste is the same way Industrial waste. You really just have the waste stream that's at the one plant that you might sit yourself next to and that limits you to plant scales that are typically like maybe 1,000 to 5,000 barrels per day. So it's that 100x change in scale that has driven all of this new wave of innovation, because it's just you need to rethink how you design a plant if it's that much smaller, because you need to focus on simplification. Get rid of CapEx, because CapEx at small scale is really high relative to your product productivity and that's really been a great spur for new innovation.
Speaker 1:And where are you currently in sort of your development in terms of your technology and your movement towards, you know, FID and commercial production? What stage are you at now?
Speaker 2:Yeah, so we're super excited to be building a demonstration plant this year. That'll be kind of one to two barrels per day, um the. We launched the company with a pilot plant that was making a one to two gallon per day scale, uh, and fully integrated. And the demo plant is on track and we installed the front half of that plant, uh earlier this year and we'll be having some announcements about that shortly. And on the back of the demo plant we'll be going into a first small commercial facility That'll be around 50 barrels per day and the target is to have that operating as early as 2028. That would be still a stepping stone and the goal would be to go to a large commercial production facility of a thousand barrels per day or more operating as early as 2030. At that last increment that then becomes a building block that we could really replicate all over the world things I find interesting about you guys is that you're a lot of people developing technology.
Speaker 1:They've got a hub. They're very small, very focused, but you guys have got, you know you're working in Illinois and then you've also, because of your relationship with Zora from founding, you've got a presence in Southeast Asia as well. So why do you, why are you sort of balancing those two instead of sort of focusing on just the one and you know why Southeast Asia as well?
Speaker 2:Yeah. So let me step back by saying that we spend a lot of time thinking about feedstocks and inputs to plants, because that's been a real challenge for a number of different SAF projects. I mean just to use as an example like the existing kind of mature SAF technology takes waste fats and lipids like use cooking oil, converts them into fuel, and one of the big motivations for having a new wave of technology like ours is that those feedstocks are just very scarce, like even if we got all of them used, we would still be only to serve a small portion of the industry's demand, and so we need to figure out how to use abundant feedstocks. And it's nice to say on paper things like oh well, there's, like this huge amount of biomass in the world that's just wasted, let's just use it. Or there's theoretically, a huge amount of CO2 in the world to use, but I got to get a lot of hydrogen to go use it in one place, and so that need to match your feedstocks to the scale of the plant really drives you to think creatively about where should you put your projects and to make them make sense, about where should you put your projects and to make them make sense. And so we spent some time looking all over the world on for the next, say, five to 10 years what places would be really interesting to build plants in, and we decided to focus first on North America and Southeast Asia. To a certain extent that's bandwidth.
Speaker 2:We believe our solution is suitable for deployment pretty much anywhere in the world, but we do have good reasons for focusing in those regions. First, on Southeast Asia, we believe that project costs can be really quite affordable there, so building a plant there is quite a bit cheaper than most other places we could build plants. We also have these strong regional relationships through Tomasek, the parent of Zora, and we have more insight into the region because of that relationship than a lot of Western companies. So it's not as scary for us to look at this region and see the opportunities. In particular, there is a lot of waste biomass generated there, and there are a number of regions where it's generated in a fairly concentrated way, so we're able to aggregate quite a bit of feedstock in regions where we can build plants at relatively large scale. And so we see SAF production as both uniquely economic in that region but also as a way to help that region tackle a problem which is the generation of a lot of waste from various agricultural and timber industries.
Speaker 2:At the same time, north America remains attractive for a number of routes because it has a lot of different resources and it still has a lot of policies to encourage local production of sustainable fuels. So, even though it may be sort of intrinsically a more expensive place to build a facility and run it, the net after considering policy is that it becomes quite competitive. Now, of course, the policy environment is always dynamic in the US, but ultimately, so long as we're focused on projects that are going to be driving job creation, that the policies will tend to continue to be supportive, and so that's kind of how we ended up looking at these two regions. Illinois, specifically, is where we have our R&D center, and that's really based on the relationship we have with GTI Energy, since we've set up our R&D center where they are located.
Speaker 1:And the offtake agreements that you've sort of negotiated and arranged. The MOUs you have with JetBlue and Singapore Airlines mirrors what you're saying about where the feedstock is, where it's cost competitive to make a plant. You've got those demand signals and those offtake agreements to go along with that. So it fits that nice narrative, doesn't it?
Speaker 2:kind of sort of fits, that sort of nice narrative, doesn't it? Yeah, I mean, I think that we've really tried to form partnerships as early as we could with folks that can teach us about the market and also help us scale into the market, and so we were super excited to have JetBlue join our cap table as an investor and then subsequently to work with them to get an MAU in place, and also thrilled to get an MAU in place with Singapore Airlines. These are just a first step in the engagement, but they are great to establish the mutual sort of needs and constraints of each side and to get that conversation started on. What does an offtake agreement need to look like to successfully get projects built?
Speaker 1:You've just expertly preempted my next question because I was going to ask you about what MOUs currently look like and sort of taking a step back from your agreements, whether you think the structure and the whole sort of theory of signing an MOU to show demand and that's a good enough demand signal for an offtake to get investment into a facility whether it's early stage or looking at later project development FID Do you think they're fulfilling the current needs or do you think there needs to be refinements, more details put within the MOUs that people can read into to create stronger demand signals rather than just having a memorandum of understanding?
Speaker 2:Yeah, I think the sustainable fuels industry broadly has already kind of arced through at least one hype cycle where there was a lot of enthusiasm that potentially encouraged people to not be necessarily as disciplined as they needed to be. And we're sort of coming in after that first hype cycle and so we're coming into a universe that I think has learned lessons from that first wave and is operating with a little bit more discipline. And one of the aspects of that greater discipline is that now for projects to move forward they need firm offtake contracts with price floors that are take or pay and have a tenor, a term of offtake that typically is going to line up with the term of any debt they're getting, and so that might be five years, it might be 10 years. And you know that learning on what's needed to kind of move the industry sort of through FID with third-party financing is great. I mean we need to have those lessons learned.
Speaker 2:But it does also create a tension, because the airlines are absolutely not used to doing long-term off-take agreements. They typically would do agreements measured in months, not years, and so that is during this incubation phase of the industry say the next five to 10 years those types of longer term contracts are needed and financing folks are increasingly requiring firm contracts and on the fewer producer side. So we need to recognize that off-takers need to get upside to help balance out a deal where they're making long-term commitments. So how can they make that make economic sense for them and the good news is that people are out there being very creative. There are now a few contracts that have been inked with the right terms take or pay, long-term price floors and they've figured out ways to share upside. And there's, of course, more work for us to do to get that into something that's more standardized across the industry. That'll work well for everybody. But we are seeing very good progress.
Speaker 1:I do feel slightly sorry for airlines in the sense that they could get caught out massively with signing a long-term offtake agreement with a certain price. If they get that wrong, considering fuel is such a large percentage of their costs and it's going over such a longer term than they're normally used to sort of arranging these agreements there is there is a lot of risk for an airline in signing these offtake agreements, as beneficial as they are, you know, for them and for producer it's not. It's not a risk-free endeavor. So it's very, it's delicately finding the balance between what a producer needs but also limiting the exposure that an airline has in the long term.
Speaker 2:Yeah, I think it's important to frame it exactly that way as risk management. And so the airlines are looking at a future where there are certain mandates for fuel that they need to comply with and they're trying to figure out, like, how much sustainable fuel will we need to have? What could be the penalties for noncompliance, what do we think the spot market might look like? So they're doing their own modeling to try to make sense of all that.
Speaker 2:I think the key thing to kind of keep the sort of incubation phase that I'm describing in perspective is that this is a phase where we're talking about, you know, a few percent, maybe up to 10% of the fuel, uh being uh sap fuel, and it's really as we get kind of beyond that five to ten year horizon where we start to look at, you know, bigger numbers.
Speaker 2:And I do think that there will be an evolution of uh these offtake agreements away from requiring, you know, this kind of level of lock-in once the industry is larger and more established, because then financing parties will be able to see oh, there's an established market with many, many years of market data. I don't need a firm, long-term offtake agreement, but it's during this initial phase that we need that, and so I say all that to highlight that, yes, the offtaker is taking on some risk, but it is still going to be a quite small fraction of their total fuel budget, and so it should be possible for them to manage that risk as part of their strategy to ensure compliance with forthcoming mandates, without it becoming sort of like an existential risk for them to their sort of financials.
Speaker 1:I want to sort of flip to your financials, because earlier this year you raised, you did your series a funding. You got 34 million dollars, I believe. Is that correct? Yes, that's right. Um, so, with your background sort of founding growing companies do you, you know, enjoy the, you know the requirements that go into raising money, raising investment rounds, talking to vcs, communicating your sort of market, the idea, the technology? You know the investor, the best ability of your company as well? Is that an element that you, you really enjoy? Because I know some people, you know found companies and it's something that they don't enjoy so much.
Speaker 2:Yeah, I, so I like building the business and building teams and the technology the most, so that's definitely where I, where I I have the most passion about spending my time. But you know, fundraising is absolutely part of the deal and it is when done the right way, it can be a very focusing exercise for a company to make sure that you are building a really good business plan that is really explainable and defendable to parties that aren't already bought in, and so the positive piece I like to take away from funding efforts is that it gets us, it makes us a better company. That said, it is a ton of work, and so it was a lot of work putting that round together. I'm glad we got a great result, but yeah, it's sort of a necessary task. We get some good things out of it, but I do confess I prefer the company building part itself more.
Speaker 1:How easy or difficult is it communicating? You know your new technology, what you're trying to do to bring new investors in up. Presumably some are sort of a lot more abreast of this than others. I know JetBlue, who you mentioned earlier, have got other investments in the space, so presumably they see the value proposition quite easily, but there must be others where it's a bit more challenging to try and convince them. Is that the case, or is everyone lots of people you're talking to fairly well abreast?
Speaker 2:We found when we were doing our series A, that we got the most traction when we were talking to investors that were most familiar with the sustainable fuels space, and I mean that in the sense of the most traction relative to kind of competitors in the space.
Speaker 2:So we generally talked to investors who were looking at sustainable fuels and had talked to many of our peers, but the ones that knew the most about the industry seemed to really like our technology and our solution the most, and I think that, as a result of that, we ended up really focusing in on funds that were already quite expert, doing kind of the basic briefing and rationale of why invest in the SAF market with many, many funds.
Speaker 2:I think more and more this industry is becoming more mainstream among investors, but certainly still in 2023, when we were doing a lot of the initial work for the Series A, when we were doing a lot of the initial work for the Series A, it was a pretty sort of niche space, and I think, though, with the folks that we did ultimately take on as investors, they really grasped the innovation. I mean, we were typically working with investors who had already invested in other companies in the space or were themselves operating in the space, and the emphasis on stock flexibility and the focus on bringing down CapEx were going right to the heart of what they saw as kind of key challenges in the space lot of your investors when you sort of go through.
Speaker 1:It was sort of involved in your series, a series a. A lot of them are, you know, strategic investors, corporate venture capitalists, as opposed to you know the more pure vc side of things, and that sort of is sort of exemplified by what you just mentioned about having you know successful conversations with people that already invest, invested or it's sort of exposure to the space, sort of operationally beforehand. What benefit do you see in having you know strategic investors, sort of venture investors, on board beyond sort of just the capital going in, because presumably they bring so much more than just money to the equation?
Speaker 2:Yeah, I mean it's a really interesting question and there isn't a standard answer for every industry. I, my first company we did our first couple of rounds with purely financial investors and then started to bring in strategic investors after that. And I think the key question for a company to ask is how much do they need help in understanding the market and in getting in front of the right customers and partners and getting to scale? In front of the right customers and partners and getting to scale and sort of when do they need that help? And that kind of funnels back to a strategy on when to bring in strategic investors. And in our case, since we were starting with a technology that had already gotten a number of years of development and we felt that we could move fairly quickly into a mode of uh, refinement and scaling as opposed to sort of the basic pathfinding, so that made it a little bit more interesting and timely for us to bring in strategics early, and so we did set out from the beginning to bring in a number of folks from the oil and gas industry. We feel strongly that they have to be a big part of the SAF transition and we also felt that they would have tremendous knowledge and understanding of what it was going to take to build the types of projects we want to build, and that they would have the infrastructure and resources to help us do demonstrations and tests.
Speaker 2:Of course, it made perfect sense for us to look for an airline to help us really understand the market. And in our whole portfolio we also have, as an example, a renewable energy developer. Doral Energy is one of our investors. Another company from the petrochemical industry, xeon, that helps us understand another slice of the opportunity. So our main product is SAF, but we also make some naphtha and we wanted to understand what that market opportunity could look like. And we wanted to understand what that market opportunity could look like. And in general, we've really focused on how to bring in companies that can help us with understanding the market, getting the right relationships with our potential partners or customers and helping us now in the next phase of the company, with scaling into sort of demonstration and small commercial facilities.
Speaker 1:When you were sort of doing your funding round, did you have the luxury of considering? You know, we want, you know, some pure VC and some strategics. You just went through sort of a very strategic list of what the benefits of each investor brings to the table. But was it a case of you know, we could pick this investor, pick that investor? Was it a case of you know, these are the guys that actually want to come on board and build around? Were you so? Were you turning people away? Or is it just sort of a happy coincidence that you've got this great group of investors that fulfill all your needs within the sort of series, a funding round?
Speaker 2:we were fortunate to have an oversubscribed um series a, so so we did have, uh, to certain extent, some some luxury in picking and choosing. I would also say that we had already established a sort of boundary, that we wanted a financial lead for the A, and so we ultimately got that with AP Ventures, a UK-based fund that is one of the most sophisticated and expert in hydrogen and sustainable fuels, and having them as a lead where they're doing really good independent diligence and coming up with really good market financial terms, adds a ton of credibility to the round, and so that was definitely strategic and we sort of focused our efforts there in terms of getting a financial lead, and we, as I said, were fortunate to be able to do some picking and choosing. But it was also sort of a natural filtering process that we talked with lots of funds and the ones that really got the story and understood the market were naturally the ones we ended up spending the most time with.
Speaker 1:Another sort of avenue of finance you guys have received is sort of government grant funding from the US government. So so how easy, or is that easier to get? Harder to get? Because it's sort of government money Is that sort of challenging in a way to sort of get access to. And why did you sort of, you know, choose to sort of try and get government grants as well as sort of VC funding?
Speaker 2:Yeah, so with the government grant funding that's gone into the sort of technology development that was all done by GTI Energy and those grants went into their sort of initial development work. That then led to the technology that we licensed and we have joined together with GTI one of their existing projects. We're now also a cost share partner and working with them on that project. We have subsequent to that, also after setting up our own team internally for grants submitted a few applications for funding, and you know we think it's really important to kind of keep all of those avenues available.
Speaker 2:The critical thing we always keep in mind internally on government grants is just to make sure that we're not chasing money just to bring in some more money, that it's always very focused and aligned with the work that we need to go do and the timing for when we want to go do it, the work that we need to go do and the timing for when we want to go do it, and when we see that like sort of alignment happen, we do go after grants, but they are uncertain. You really don't know if you're going to get one until it just comes through, and so from a startup standpoint, we often need to plan to not get the grant but be in a position to take advantage of it if it comes in. And that sort of kind of natural stance means that we are generally basing our plan on not having grant funding and then just looking at ways to kind of accelerate when we do get it Interesting you talk about planning not to receive grant funding.
Speaker 1:What's your take on the new administration coming in pausing a lot of this? You know grant infrastructure, the, the IRA and all the tax incentives, but specifically on grants they've sort of they've paused all that for now. Do you think that's going to have a big effect, or are most people in a similar boat planning not to receive grants and therefore, with it being paused and them not necessarily being available, it doesn't make tangibly that much difference in the short term?
Speaker 2:It definitely not a good thing in our view for the industry.
Speaker 2:We think that the government grants that are kind of outstanding, uh, right now for the SAF industry are helping to drive the development of the technology in the US so that the US can have a leading position, and any sort of reduction in resource into the space helping drive development, you know, has the potential to erode the sort of US leadership position, and so we think all of that is sort of not great.
Speaker 2:We would like to have a robust and strong technology base here so that we can build a really big business with, you know, a lot of job creation producing staff here. That said, where we are because of the stage we're at, where we're able to fund most of our work purely through our equity fundraising and we don't really have to rely on government grant programs, it's not having a ton of effect on us, but you know, we definitely, you know, come down on the view that we really would like the DOE and other similar agencies to sort of resume their programs because we think they're really powerful for building a strong SAF industry in the US in the future.
Speaker 1:Do you think it's harder, no different sort of operating in this sort of more uncertain policy landscape in the US and does that sort of make you think more inwardly about your own processes, your own sort of technology development, rather than looking sort of outwardly about the overall sort of SAF market structure? Does it sort of change your outlook with all this sort of pausing about the overall sort of SAF market structure? Does it sort of change your outlook with all this sort of pausing of grants and all this policy and uncertainty coming?
Speaker 2:from government.
Speaker 2:I would say that we region to maintain a particularly favorable position that we're relying on forever, be planning for a policy to go away in one particular place or a sort of general market trend to move in the other direction in any one area, and we sort of have tried to make sure we're always thinking about the business globally and from the macro perspective of SAF generally, rather than, say, focusing in on any one specific type of SAF or any one specific technology pathway that the market might be favoring, like whether it's biofuels or e-fuels or biogas.
Speaker 2:And so all along that has been informing our strategy to first always have global plans, so multiple countries covered where we can deploy our technology next, and to be able to use lots of different feedstock feedstocks so that if policy moves, say, away from e-fuels, we're prepared to pivot and make sure we are really strong on biofuels and vice versa. And that has been our sort of main philosophy around how to manage the regulatory uncertainty is that this sort of flexibility and global view is really the only good way to do it, and so far that has been an effective way for us to kind of manage that sort of dynamism in the policy space in the renewable fuel space versus you know your experience in the OLED sort of phone screen manufacturing space, or you know the other startups you've worked with.
Speaker 1:What's the sort of one or two big challenges in the renewable space that you potentially haven't seen elsewhere?
Speaker 2:that you potentially haven't seen elsewhere. You know, I actually find that my previous company has so many way more similarities than differences that you know it's a lot of capital investment to go build the first product. It's a long cycle to go prove that it really works and that the business model will be successful. So, to be honest, it's overwhelmingly more similarities than differences. I would say.
Speaker 2:Probably, though, the biggest challenge in this space is the one we just talked about, that there's more dependence on policy in this industry than there was in my last, and that the dynamic aspect of that has not just an effect on, like, the actual economics of a particular project we might want to build, but also has more ability to kind of get into the zeitgeist and affect overall investor sentiment, sort of in an outsized way. So there's sort of more swings in enthusiasm and fear in this industry than in my previous company, but what I do like is that this is also, though, a space where people are just tremendously passionate about what they're doing, and it's just really energizing to be in a space where people are out there trying to make successful companies that give great returns to their investors, but are also just really enthusiastic about doing good.
Speaker 1:Connor, thank you so much. It's been fascinating to hear about your technology, how you're working with all your investors and your partners in growing the business, and the challenges you've found along the way and how you're overcoming them. Thanks so much for giving us some time.
Speaker 2:Thank you for the opportunity.