Walk me through the origin story for Casper.

What gap did you see in the market, and how did you go about attacking that gap?

So I'm one of five cofounders with Casper, and we started working on the idea in 02/2013.

And back in 2013, direct to consumer as a business model was really starting to emerge.

And we started to see what was happening in some other industries like eyeglasses and what Warby Parker was doing, clothing and what Bonobos was doing, Harry's and razors.

And we thought to ourselves that the mattress industry was one that was ripe for this type of innovation.

And we started to go deep around what a direct to consumer business model would look like for the mattress space.

And we became convinced that it was a good idea and something we wanted to work on.

So Five O's got together, we started working on the idea mid twenty thirteen.

And we launched the idea 04/22/2014.

And we're off to the races from that day going forward.

Explain on a first principles basis the direct to consumer model.

Is it just circumventing the the middleman or is there something more powerful about the model?

No, I think much more powerful.

I think at its core, it's really about creating a brand that connects directly with consumers.

So you develop a voice that connects with consumers, you have a relationship with consumers, so you're getting direct feedback from your customers.

And knowing what your customers want and how they want to shop and what they want within their products is a very valuable input.

So from us, we were saying that you could circumvent traditional retail in the mattress industry, which we felt was very broken, antiquated and frankly, something that didn't provide a good customer experience at all.

And we were able to circumvent that traditional retail experience with a digital first experience, where they could connect directly with us who were making products that we were selling, making the brand, and really having that direct one to one relationship with consumers at scale, I think is the core of a DTC business model and something that can be very valuable if done correctly and harnessed at scale.

You guys grew to a $100,000,000 in revenue in year one, one of the fastest growing startups of all time.

How did that come about?

We got lucky that we hit product market fit right out of the gate.

We were surprised.

We we did not expect demand would be as strong as it was out of the box for us or out of the gate, I should say.

And we were lucky, people love the product and people love posting about unboxing the product and people love talking about it.

And if you would have asked us or our investors pre launch, would anyone go to social media to brag about their mattress purchase?

People thought we were crazy to think that.

And yet that's exactly what happened.

People were proud to talk about their mattress experience.

They were proud to post it.

They were proud to show the unboxing experience where the mattress explodes out of the box.

All of that led to us growing very virally, very organically, us having really strong referrals from our customer and all of that led to sales.

And so we were very lucky that we had to sprint to keep up with the business from day one.

We were able to follow-up with additional product launches and expand into different ways to connect with consumers.

And all of that allowed us to grow our business very quickly.

I think one of the biggest constraints to hyper growth is not necessarily sales, it's not necessarily supply, it's actually the team.

How did you scale your team so quickly in such a short period of time?

It was about the culture and about building a team that was really focused on the mission.

People really understand that sleep is a critical part of health and and that the sleep industry wanted and needed to be reinvented.

And that attracted some great talent early on.

It attracted talent throughout my tenure of running the company and scaling the business.

And, you know, it all has to do with team that drives execution so that you can manage demand and supply and everything else that goes to delivering physical products at the end of the day.

You mentioned mission, which is not something you would associate with a mattress company.

How did you get people aligned with the mission of building a mattress company?

The founders, you know, myself included, we talked very early days about just the importance of sleep, of of the importance of creating a brand that really leveled up what people were doing.

You know, buying a mattress can be very transactional, and yet you spend a third of your life with this product, and it makes a difference to the other two thirds of your life in in a super meaningful way.

And so we always wanted to create a brand and develop products that connected with consumers in a deeper way than just a transactional way.

And that has to do with talking about sleep at the core of what we wanted to build.

And that's why we ultimately talked about creating the the first brand around sleep, the Nike of sleep.

How how do we level up everything we're doing to a deeper kind of emotional personal connection?

Because I think that's what great brands are able to do.

Great brands are able to let you know that we care about you, your experience, and and ultimately the benefits that you get from our product.

And so we we thought very deeply about how to build those connections with our consumers and tried to bring that through with how we marketed to them, how we built the brand, how we built connectivity beyond just the transaction itself.

How are you able to go beyond just the brand and just the transactional nature of the relationship with the client?

It comes down to being thoughtful about every potential touch point that you have with a consumer.

You know, a mattress purchase is certainly an infrequent purchase, but it is a very considered purchase.

And so it's one that you are thinking deeply about.

You are shopping for over usually a longer period of time than some less, expensive purchases.

And so that meant that we wanted to be thoughtful and and have that creativity show up with every single touch point.

That could be seeing our ad when you're riding to work on a subway station, hearing our ad when you're listening to a great podcast like this one, unboxing the experience and and really understanding that the instructions were designed with thoughtfulness and that the unboxing experience was done with thoughtfulness and taking people through.

How did we design the mattress?

Why did we design it this way?

What are the features and benefits of every layer that we put into the mattress?

And just that really thoughtful curation of every touch point we had with our customer led to consumers having a deeper relationship with Casper than any mattress brand that came before us.

And you guys went public, I believe it was a couple months before COVID-nineteen.

Tell me about that process.

What was it like going from a private to public company?

Yeah, unfortunately, a couple of weeks before COVID-nineteen.

So we completed our IPO at the end of Q1 of twenty twenty.

It was a very tough period for us as a company.

For me personally, I had never run a public company.

We had just completed a long roadshow of telling investors about our offline expansion.

We had a great partnership with Target.

We had stores that we were opening up that were performing super well.

And a big part of our growth story was around that offline expansion.

And that's what we educated the street around.

And shortly after completing the IPO process ahead of our first earnings call, COVID hit and we all had to work from home, work remotely, had to do my first earnings call locked in my office at home by myself.

It was all very scary and a first time for me dealing with any of that kind of public company management side of things.

But the team did great that the team helped support me.

We got the company through a really rocky period.

A lot of COVID, there was really strong demand for anyone selling digitally.

And we saw that with our business.

But it was just like everyone, a very scary time for running a business, for being a leader, for being something, doing something for the first time.

And of course you went public and then a couple of weeks later COVID hit and it was a very difficult market.

Was that what ultimately led to the sale of Casper or was there something fundamentally wrong with the business?

Nothing fundamentally wrong with the business.

We were bought because of the fundamental upside that our buyers saw with us.

So we ran the business for about eighteen months as a public company.

We ended up getting taken private and bought by a private equity firm in November of 'twenty one.

So it was a tough run-in the public markets during COVID ups and downs.

Certainly made some mistakes while running the business and didn't appreciate how strong demand would be for our products and our category during parts of that.

And I think our buyers saw that there was real upside in the business and the category and the mattress category continues to be a big one that's had some challenges lately in the in the macro environment, but overall can be a great category, is very profitable, is a a very established legacy, kinda industry, and and one that I still think has tons of room for disruption and innovation.

You grew to a 100,000,000 revenue year one.

You went public.

You certainly had a lot of success.

You also had some difficult times.

What are the main lessons that you learned from that experience?

For me, that that was the first time that I ever saw hyper growth that I ever dealt with the challenges.

Like you asked about scaling the team, hiring quickly, growing fast.

Growth has its own set of challenges and and opportunities, of course.

So for me, it was personally, you know, the first time I ever managed a team so large and dealt with the challenges of the business.

We had our issues with supply chain, with products.

There are just a million things that go wrong every day in a business that's dealing with scaling both a digital product and a physical product.

And it was just really making sure that we were taking things one day at a time and trying to stay focused on execution, but continuing to push ourselves in a way to move quickly and and execute as fast as we can so that we can move on to the next opportunity or or solve the next problem that we're dealing with.

So give me some how tos on how to build a hyperscale organization.

There's no shortcut to it.

I was lucky that I had four other cofounders, and so all of us could spend meaningful time in the early days around hiring.

We all met every hire for as long as we could and really wanted to make sure that we were instilling a sense of culture that we had defined with each of the hires and then making sure they were set up for success after they joined us.

And it it was that time commitment of no matter what's going on in the business, no matter what other things we wanna do, we know we need to build this team quickly.

And so we need to spend a real amount of time, a third, a half of our time just on interviewing, just on making sure that we're out there meeting and getting the best and brightest.

And we were lucky that good talent attracts good talent, and a players wanna play with other a players.

And we had a great team from the beginning.

And I think that continued to attract great talent.

We were a well known brand in business within New York City.

And we were able to use that as a real catalyst to getting great talent to join us.

And we were just lucky to continue to have business success, which meant that other people wanted to continue to support the culture of winning and culture of productivity and speed.

You were one of the first D2C brands that really took off you and Warby Parker.

And presumably you had to create entire new positions or ways to look at growing a business.

How did you figure out who to hire for previously unknown types of skills and functions?

I was lucky to work with a great executive coach who helped me learn a lot of the traditional ways of of building teams and building collaboration and building good communication systems.

Communication is is core to building and scaling a business and making sure that you're communicating everything throughout the organization as frequently as possible is is really critical.

And it was just understanding those lessons as we were going.

We had great investors.

Tony Florence at NEA is exceptional.

He was always a great coach and mentor.

Ben Lear at Lear Hippo Ventures, exceptional, always a great coach and mentor.

And so we we were lucky that I was surrounded by great partners.

My cofounders all cared deeply about scaling the business, hiring great people, training great people, making sure that they were set up for success.

And so it was a concerted effort at every level of the organization.

Brian Chesky, founder and CEO of Airbnb, popularized this entire concept of before you interview somebody, talk to 10 world class people or maybe twenty, thirty in that category in order to understand what greatness looks like.

How much of that was part of your hiring process and how much did your hiring process evolve as you started interviewing?

We always talked about understanding what does great look like.

I always encourage the leaders of the company to constantly be meeting with their peers at other companies.

The nice thing about the direct to consumer industry is that we don't directly compete with the Warby Parkers or Harry's of the world.

So I wanted my head of marketing to meet with their heads of marketing, and I wanted our head of people to meet with their head of people.

That way, you had a understanding of what other companies were dealing with, how they were thinking about talent and scaling and growth and acquisition and everything else running their companies.

And so understanding what great looks like is certainly a, I think, a a critical table stakes input to a process.

And then just getting out there and being in the mix and knowing that you're building a good brand for your employees and how your employees talk about their experience is gonna matter a lot, especially within an ecosystem like New York City Tech and other ecosystems that folks are active members of communities.

And so we just always wanted to be meticulous with making sure we were optimizing everyone's experience and we were building a good brand and good reputation both with our consumers and with employees or potential employees.

And then going into those conversations with a prepared mind around what great looks like, what we needed with the org and being very transparent.

Here's what we know we need today.

Here's what we might need in the future.

Is this a fit for where you've spent your career, where you want to spend your time and not being overly prescriptive with we need this exact person to go do it.

And knowing that oftentimes a good, smart, talented person can go take on a bunch of new challenges that maybe they haven't done in their career, but that they would be excited to do.

And so build a team that has that flexibility and and that diversity of talent.

Couple things to unpack there is obviously all ABB, always be branding.

So you're always branding, always building community.

The other thing is you weren't insecure.

You weren't trying to hide your weaknesses or your challenges.

You were out there, you weaponized those challenges into the market and had all these conversations that help you evolve the solution to your own problem.

So by not being insecure, you allowed other people to help in the market to help solve your problem.

I would maybe frame it as we were maybe like deeply insecure, but we didn't have an ego about it.

Meaning we didn't feel like we had to pretend that we knew the answers to things that we didn't know.

And a lot of what we were doing, we were doing for the first time as a company or as an industry.

And so let's not have an ego about it.

Let's have humility around what we're doing.

And it's okay to ask people for help or how are you thinking about things or let's try this knowing that there might be failure here and making sure there wasn't a fear of failure culture was definitely something that we had to focus on because we had a lot of early success and we wanted people to still be taking risks and trying new things.

And the only way that you could kind of encourage that is making sure there wasn't that fear of failure and that you were insecure enough where you always were pushing to get more inputs, to get smarter on something, to try to understand something better.

But you didn't have the ego where if it didn't work, you couldn't represent that, you know, that one didn't work, but let's go try something else.

And I think creating that right balance and mix across those kind of different personalities is important.

You weren't looking for people that wanted to join an organization that was already had no issues and they just wanted to be on the boat.

You were solving for people that wanted to have agency around what they're doing and around building their own kind of competency within the organization.

That's very well said.

I would say that that can lead to problems where we, if anything suffered from always chasing a new shiny object and going after new opportunities in new areas.

So I think there is a balance to all of this and lessons learned around that.

But you're exactly right.

Like high agency was very much something we optimized for folks that wanted to take responsibility for things, pick up challenges, not just be told, here's what you need to go work on, and embrace that across the org at every level, was something that we talked a lot about in kind of defining the culture that we wanted.

You mentioned organizational design.

I know this is a term that MBAs and business school professors love to talk about, but unpack a little bit what you mean by organizational design and how should startups be organized for lack of a better term?

It's a great question.

And it's a great question because there is no single answer for it.

There's no single way to think about design.

And I would more encourage founders to think about what it is that their strengths and weaknesses are as a team, what they need to accomplish as a company, and what stage they are in and and solving for when it comes to speed and outputs and things like that.

And all of that drives then what the right organizational design is.

From my experience with Casper, we had a very unique structure because we had five cofounders.

And sometimes co founders can be great for certain aspects of running a business and not great at other aspects.

We all have our own individual strengths and weaknesses.

And designing a management team around that and around a co founder dynamic and around a scaling dynamic is all things that we thought a lot about and that would change over time as teams grew, as the business grew, as the complexity grew.

These were all things that drove different ways that we thought about design.

And so, again, I don't think there's a single right or wrong way, but it's understanding what is the CEO's strengths and weaknesses?

How do you balance that?

How do you make sure that, especially in the early days of company building, the CEO is is optimizing their time around what are the highest priorities and then has a great team that they can rely on and surround themselves with that can take on other things that are necessary for you to continue to achieve great milestones and outcomes.

Is organizational design something that you really shouldn't think about until you're at 25 employees, you just need to execute, and then it'll kind of emerge based on where you are a couple of years in?

Or are there some kind of non revolving door decisions that you have to make from day one to make sure that you don't have the wrong organizational design?

A 100% the latter and not the former, meaning you need to be thinking about organizational design day one.

And organizational design, you know, maybe it's it's a fancy word for just how do we work together.

And even if it's just you and a cofounder talking about how we wanna work together, who's responsible for what, where are the lines of accountability, and just constantly over communicating.

Again, whether you're a team of two or 20 or 2,000, communication is so critical.

Avoiding confusion is so critical.

And it's all about constantly defining the way that we work together, where are their roles and responsibilities, who has accountability for this, and how do we show up day in and day out in a way that makes us as productive as possible.

And I I think you can't visit that topic often enough, and you can't think about it early enough.

Sort of like this this very fancy term for you have people and you have tasks.

And how do you structure those people into doing those tasks at scale?

I I think that's part of it.

I as I mentioned, I worked with a great executive coach, a guy named Jeff Hunter, and Jeff runs a program called Talentism.

As I work closely with Jeff, he emphasized how it's all about avoidance of confusion.

And confusion is what erodes productivity.

Confusion is what erodes happiness with your job.

Confusion is kind of the root of everything that slows down companies and slows down you achieving what your outcomes are.

And one of the core ways to avoid confusion is communication.

And so that's communication to your point around what are the tasks that we need to do, but also how do we do that?

Who is going to do the things that we need to do to accomplish those tasks?

And back to what we were talking about earlier, what does great look like?

Do I need to be accomplishing these things in a week, a month, a quarter?

How are we going to talk about it?

How are we going to track it?

And just making sure that this operating system of how we're going to go build this company is as well defined and as thoughtful as possible, I think is really critical ingredient to overall success with a company.

One thing that's tricky for me as a leader and just seeing startup CEOs is when you have a new category, you're one of the first big players in the DTC brand and you're hyperscaling, you must be changing your mind on core things, including strategies quite often.

How do you change your mind on these things and still maintain the credibility organizationally and with your employees?

That's a great question observation.

And I think it is very important for you to maintain the flexibility to change your mind when you have new inputs or reach a new conclusion.

But at the same time, you don't wanna whipsaw the organization.

And And so so you you you don't don't wanna wanna be in a constant state of chaos and where people don't understand what the north star is.

And I I think it comes back to communication.

If you can explain the why behind things, then I think you get a lot more permission from the organization to change your mind and for them to accept new direction, for you to cancel something that was a priority or whatever the the resulting decision is.

If if people really understand the why and how you got to that decision and what the inputs were for you personally to reach that conclusion, then I think you get a ton more permission from the organization to buy into those changes on a more frequent basis.

And ideally, wanna have some data or have run small tests around this new thesis before kind of making the organizational pivot?

Potentially.

We were a data driven organization, but we also talked about how we wanted to avoid analysis paralysis and how sometimes you just have to go with your gut, especially when you're in a business that you were building from day one, you know your customers well, you know your supply chain well.

Sometimes you could ask for all the data in the world, but there's going to be no data that really articulates the picture of why you formed a decision in your gut.

And I think the best leaders and the best organizations embrace a combination of very data driven insights, but also going with where you think the right answer is for the org, even if it's impossible to validate that through data.

If you were to go back to 2014 when you founded the company, what skills do you wish you had in 2014 that would have helped you get an even bigger outcome with Casper, from going public to the acquisition?

Well, certainly all of the management skills that we've been talking about, you know, communication, organizational design, etcetera, I learned on the job.

Had I had that knowledge earlier, we always talked about how we were building the plane while flying it.

You know, that's scary and has its challenges.

And that was all input I wish I had.

You know, the other thing I wish I had was just the perspective that comes with experience.

And perspective is something that to me is invaluable and that you often can't make up, you know, just time of being in a job and doing a job for a certain amount of duration.

But perspective around how investor sentiment can change, capital markets can change, that, you know, the sentiment around what the right way to build a company can change.

We were certainly playing a a venture backed game and what that means.

And, just the the maturity and perspective that comes with experience is something that would have been valuable for us to have earlier in my career.

Do you think that's kind of the key having one foot in first principles thinking and one foot in basically venture orthodoxy or market orthodoxy, understanding exactly what the financial markets needs while also balancing that with what is fundamentally a good business?

I I don't think that venture backed business building is at odds with good company building.

I think you have to have the perspective of what is the game that we're playing and know that the game can change over time.

Meaning, you can be in hyper growth mode where you are allocating capital to drive growth even though you don't have perhaps the unit economics that come for more of a scaling mode or more of a profitability mode.

And just thinking about all of the different inputs to business building and what you're solving for and knowing that what you're solving for can change over time, I think is critically important today.

And again, when we were running Casper and when we started Casper, I never talked or thought about things like capital allocation and the philosophy behind how we were doing company building.

For us, it was just about building a great product, building a great brand and getting it out there as widely as we could.

And I think that's kind of the core maybe to your point around like first principles thinking of company building.

But then there's the nuance of what is the right level of speed?

What is the right level of kind of investment into the business?

Where are you investing that's sustainable versus not?

And again, just coming back to, you know, our parlance was like, what is the game that we're playing today?

And knowing like public investors want you to play a different game than venture investors and private equity investors want you to play a different game and credit investors think about things differently than equity investors.

A company oftentimes needs to think about all of these different constituents and balance all of those inputs with a plan that, allows you to continue to attract capital, continue to gain value and deliver on the ultimate value creating side of things, which is a great customer experience.

Tell me about the difference between venture investors and public investors.

Venture investors are long term oriented to begin with.

They are thinking about things in five, ten plus year kind of time increments.

Public investors most often are very short term and thinking quarter to quarter with company building.

Sentiment within public investing changes, I think more frequently than venture investing, meaning sometimes public investors will be very oriented on growth and other times they will be very oriented around profitability and cash flow.

You also deal with a huge dispersion of public investors.

You can be dealing with value people, growth people, hedge funds that are very short term nature, long only funds that are much longer in kind of their thought process.

So you just have a lot of different constituents within the public equity investing universe.

Venture, I think, is generally oriented to growth.

They're generally oriented to long term value creation.

And they're oriented towards investing in a business to build sustainable first principles, business value creation.

So building moats, building technology, building great teams, and and knowing that that's not done in a linear fashion and and being more attuned to kind of the sausage making than perhaps public investors who are more geared towards being analysts and living in spreadsheets.

A lot of private companies.

You have SpaceX out of $300,000,000,000 valuation and these kind of crazy private valuations, obviously, OpenAI.

Is it then rational for them to stay private for as long as possible?

And what's the takeaway from the CEO seat of a private company?

To me, they're a very small handful of companies and you mentioned them.

There are others like Ramp or Stripe, etcetera.

But you're talking maybe a couple dozen companies that can get all of the benefits of being a public company while staying private and avoid all of the downfalls of being a public company.

And for those companies, I think it makes total sense why a CEO would wanna stay as private for as long as they can.

And that's because they can tap the capital markets whenever they want.

They can give their employees and their shareholders liquidity whenever they want.

They don't have to deal with public reporting, they can invest longer term with the business.

And so again, they get the best of both worlds, the best of being private and the best of being public.

But you were talking about a very small handful number of companies that have that kind of privileged position.

For the vast majority of venture backed companies that are even able to potentially tap the public markets, the public markets have a lot of benefit.

They bring liquidity to your shareholders, they bring liquidity to your employees, They elevate the level of discipline that you'll operate the business around.

And so I think there's a lot of reasons to like going public.

And I think the venture industry as a whole has a big problem around liquidity and returning capital to shareholders.

And I think that's gonna require a retraining of how both founders and venture investors think about and coach their companies around going public and returning capital to shareholders.

And so I think you have to kind of bifurcate what type of private companies you're talking about relative to the world of of how and when they should go public.

Outside of just access to capital and liquidity, I've been in these meetings with New York Stock Exchange, Nasdaq, you know, always tout the value of going public, the branding, all these kind of tertiary benefits.

Are any of those meaningful and tangible benefits to a company that went public, or is it really about, you know, having liquidity and, you know, satisfying your private investors?

You know, for certain companies, they they certainly can have those benefits.

You know, with Casper, we were very lucky that we were a very well known brand.

We were a very well known business.

We had spent a lot of time with the investment community, we've spent a lot of time just building a well known brand.

And so for us, it was less about the branding opportunity.

And it was more around operating the business at a level of sophistication, at a level of maturity that we wanted to hold ourselves accountable for.

And that combined with access to capital and the other things that we've talked about made the public markets make sense for us.

But the public markets can be fickle, they can be very brutal.

We certainly had a tough go in them.

And so you just have to go in eyes wide open.

And there's a lot of convexity in the public markets, meaning that when things work, they can work out really well, really quickly and market caps can grow really quickly.

But the same is true on the downside too, you could erode value very quickly.

So I think it's really just a question of where the business is.

Is it at a level of scale and maturity that should support kind of that level of scrutiny and that type of reporting?

And if it can be, then it can be the right answer for a lot of companies for sure.

So after selling Casper, you went on to become investor through Montauk Climate.

Tell me about Montauk Climate.

While I was running Casper, was lucky that I started my investing side of life as well.

So for over a decade now, I've been investing in private companies.

I really like that side of life too.

I like partnering with founders early in their existence to help them think about their business they're building and share the lessons that I've learned in building companies in the past.

So I've always loved both the operating side of life and the investing side of life.

And I think it was thinking about how to combine those two things that led us to start Montauk Climate.

So immediately selling Casper, I wanted to get back into company building.

I wanted to get back into that kind of ero to one phase of life.

And that led me to personally incubate some companies.

I didn't want to go run a single company.

I was lucky that I felt like I checked every box as a CEO that I had personally.

But I love trying to figure out the right strategy, the right team, the right opportunity out there and being part of that early phases of really figuring out product market fit and that ero to one sprint.

So that led me to incubate some ideas.

One of the companies I helped incubate is a company called Haven Energy.

Haven is doing super well today.

They are a business designed to help homeowners and increasingly business owners add battery storage to their properties.

And it was really that business that took me down the energy rabbit hole of learning about the energy transition, learning about how technology was starting to come into the energy space and trying to figure out the right pieces for Haven Energy that led me to wanna start Montauk Climate with Evan Karin, my co founder.

Double click on Montauk Climate.

So you have incubation, you have investing.

Tell me about the overall strategy for the firm.

So part of our business is a venture studio.

The venture studio is where we are standing up new ideas that we come up with.

We're constantly talking about and doing deep research around what's going on with the convergence of energy and technology and where we don't see people actively building companies.

And when we see that white space, we then decide if we think there's a good business opportunity to go put together a business plan, a business model, we go really deep on that research, we talk to customers, we talk to operators, etcetera, and ultimately come up with a business that we're excited about.

With that business, we'll then go out and start to build a founding team and we'll partner with that founding team as co founders to go launch and hopefully scale a business.

So that's our venture studio business.

We've been lucky that we've launched seven businesses out of that.

Five of those businesses have already raised outside capital.

Several are growing very quickly and are live now.

And we want to continue to build and launch companies within what we now call the electron economy to scale.

So that's one part.

The other part is our investing business.

So funds to invest into the electron economy where these are non incubated companies, but where we get involved with the series A or B round, where a company is post product market fit, but has not yet achieved the level of growth and scale that we believe is possible.

So in those instances, we want to invest, we want to join the board, we want to roll up our sleeves and really help those founders scale their business.

And then the third pillar to Montauk Climate is really an incubated effort, but also investing is around credit and creating credit investment opportunities for our investors to invest into companies focused on the electron economy and the energy transition.

And so that business is called Turtle Hill Capital that we help stand up as well.

Is there some special subsidy in the market for investing into credit?

Or is it just kind of synergistic with the rest of the business?

It really started with what are the needs of these companies and what are the needs of companies that aren't at massive scale when it comes to solving the energy opportunity at hand.

And so we talk a lot about the need for energy addition.

There's just not enough energy on the grids today to power our AI ambitions even to deal with the heat that's happening today.

I mean, we're sitting here indoors, but it's gonna be 95, 98 degrees in New York City.

And there's a real chance that the utilities in this area are gonna run out of power today.

And so how do we get more power on the grid?

How do we get more out of the power that we have?

How does the electron economy that's that's reshaping AI and intelligence and electrifying every part of our economy going to look in the future?

And how do we bring technology to bear there?

And a lot of companies that are focused on these problem areas need to grow quickly.

And that's where venture capital and equity is great.

And they also need to deploy hardware.

And that's where credit is often needed.

So that could be EV chargers, it could be batteries, it could be geothermal heat pumps, All of these types of businesses, they reach certain levels of scale and growth, need to think about what is the right capital stack for their business.

And it's very difficult to finance some of these businesses entirely with equity.

But when we went to look for credit, even for Haven Energy, we saw that the credit guys that had the expertise around these energy assets were really only interested in cutting very large 9 figure checks.

Like, they just don't get out of bed for less than a $150,000,000 investment.

And when you were sub a $100,000,000, there were very few firms that had the knowledge and expertise to underwrite energy assets or energy businesses with the ability to then deploy 25 or $50,000,000 worth of credit.

And so all three of these pillars exist within Montau Climate because we saw a real need in the market.

We saw a real need to create new companies that were going after these energy opportunities because there's just not enough founders going after these problems.

And so we think there's a great opportunity to start companies that scale quickly and create a lot of value.

We think there needs to be more hands on operators focused on how to take these companies from product market fit to scale.

And that's where we have a lot of expertise and that's our equity platform.

And then credit is needed to optimize these capital stacks so that companies can deploy hardware and do so, while they're growing quickly with the right type of capital support.

Almost vertically integrating a solution to the market's needs because one of these solutions one of these solutions is not enough.

You need the other parts to actually help grow these companies as well.

That's right.

At the end of the day, company building is not rocket science.

You know, you you generally need a great team, you need a great product, and you need capital.

And when you can bring those three things together, you generally have a recipe for big success and big success for investors and big success for the operators.

And so we're focused on holistic solutions.

And we think that the climate space and the energy space has been too myopic for too long.

And and we are able to bring a diversified set of experiences across our team to bear to help these companies think about how to scale, how to bring in capital at the right phase of time for these businesses, and how to drive big outcomes.

How do you define the electron economy?

And tell me about these seven companies that you've incubated.

What areas are you going after?

So the electron economy, we define as the parts of our world that are being redefined due to the electron and that the electron is becoming the basis for how we reshape huge areas of our lives.

And we talk about the AIification of everything, right?

AI is becoming embedded with everything.

And AI is essentially a function of accessing electricity and using that electricity to generate intelligence.

We all know about the theme of electrifying everything.

Our cars are being electrified, our homes are being electrified, the buildings we work in are being electrified.

All of that means that how those electrons are being used, how we get more out of those electrons, how the electrons flow are critical for how our physical economy operates.

And the digitization of everything is a theme that we talk a lot about.

We are generating more and more data than we've ever generated by orders of magnitude.

And we are actually able to harness the power of that data because we have AI that is able to crunch that data and generate useful output from it.

And so all of this means that we need to rethink how we're approaching the electricity system and grid within our country, how we're changing the way we use software and hardware to get more out of electrons and how we're harnessing the AI and the digitalization and the electrification of our economy.

And so for us, that means we're thinking about starting companies where AI helps you manage your utility bills and your electricity footprint.

We're thinking about digital infrastructure deeply.

Data centers are a huge area of focus and how they operate, how they're built, how they're scaled, how the GPUs are provisioned.

That's that's been a big area that that we've gone deep on.

How do we generate data?

So how do we create earth observation platforms that can help companies scale and manage the infrastructure that they have?

And so we kind of dissect those themes and are looking deeply into each of those verticals understand where we wanna both build companies and invest in companies.

Yeah, a very interesting vantage point in that you've focused yourself on this electron economy, which is essentially energy and new forms of energy.

Handicap for me in the next ten, twenty years, what's gonna solve our energy needs over the next ten to twenty years?

Ten to twenty years is a long enough time horizon where I think you will see new forms of energy really scale up, forms of energy that I shouldn't say new forms, but nuclear as an example is something that does take a long time, but has the ability to scale up and newer technologies like SMRs, etcetera.

So I certainly think you'll see nuclear as a bigger part of the mix over that timeframe.

I think our concern around nuclear is when you're thinking about a sub five year time horizon and just building nuclear technology is going to take time to scale.

You're already seeing solar be a massive input to the grid and a massive input to our electricity footprint.

I think you're going to continue to see solar and battery costs decline dramatically.

And that's going to mean that we're going to continue to proliferate solar and battery storage on our grid, even if we see tax credit treatment at the federal level decline with some of the changes that are coming out of Congress.

So I think you still want to see renewables come on the grid.

I think you want to see battery storage as part of the renewable mix come on the grid in a bigger way.

And so utility scale batteries are very interesting.

And then I think you're gonna see newer areas of energy generation like nuclear come online over a ten or twenty year period to really scale up the amount of electricity that the this this country has.

You mentioned nuclear, and one of the, I guess, things that people repeat is that we're it would take ten years even if we started today.

And the first question on that is, well, why does that matter?

Why shouldn't we start today?

Are we not gonna have a world in ten years?

Two is part of that ten years, ironically, is three to five years of regulatory and red tape.

So if we have the right regulatory framework, you could actually accelerate that to, let's say, five to ten years, maybe five at the most optimistic and, you know, within ten years almost for sure, if you had some of that regulatory tape.

But So, it depends what hat you're wearing when you think about kind of the first part of your question around the duration, which, you know, for ten years, the government should absolutely be thinking about how do we encourage nuclear development?

How do we encourage nuclear power generation and create a investable backdrop where nuclear makes sense?

If you're an early stage venture investor, then ten plus years as a duration and projects that are gonna require hundreds of millions, billions of dollars of capital can be a very tough place to invest.

So it really just depends what hat you're wearing when you think about these.

But from a American dynamism standpoint, from a, you know, USA being successful, from a world being successful, we absolutely need more energy.

We need it at scale, and we need to be doing everything we can to bring energy online as fast as we possibly can.

The question is just how to do it, how to create a backdrop that's going to incentivize capital to allow more generation to happen.

And right now, it's a very difficult environment for increasing energy generation because you have the price of oil and natural gas too low and the cost of turbines and power generation too high to make sense to build more thermal generation.

And you're having an administration that's going to be discouraging solar with some of the tax credit changes that they're making on the near term.

And you have nuclear, which yes, regulatory is a part of the duration, but you also do need to be very careful with nuclear power generation and you need some level of regulation, you need some level of making sure that we are doing that in a smart way.

And part of the problem is just talent.

We don't have enough nuclear engineers.

We don't have enough electrical engineers in this country to deal with the areas of development and to deal with the bringing online these new sources of power generation at scale.

And so part of the opportunity is how do we get more people to focus on these areas?

How do we get more people trained to be smart around this?

Nuclear generation is not an area where people have been thought to go to school and to build careers in the last thirty years around.

And so how do we encourage all of that to happen at more scale?

And a lot of that has to do with the cost of power, the cost of generation, the cost of putting power back to the grid.

And so there's a big economic backdrop that's gonna drive a lot of this as well.

We'll get right back to interview.

But first, we're looking for the next great guest.

If you or someone you know is a capital allocator and would make for a great guest, please reach out to me directly at david@whitespreadcapital.com.

Let's take to the side the lack of nuclear scientists and some of these other constraints.

From a pure political will, talk to me about the different political factions that are pro and anti nuclear because it never was quite clear to me why it's a political issue.

It is a political issue mainly because of NIMBYism.

And so it's less about left versus right, republican versus democrat, and it's more that no one wants a nuclear power generation site in their backyard.

And so politicians get involved when there's a proposed nuclear site because their constituents don't want a nuclear site in their backyards.

And so that's why it's very hard to get approvals done.

It's why a lot of the administration's current focus is around what type of federal sites and and already existing nuclear sites can we convert to drive new nuclear technologies and new testing facilities.

And the NIMBY issue is not gonna go away, around this.

And and that's why it's a political lightning rod no matter what side of the aisle you sit on.

Tell me about the breakdown of where you've invested into the last couple of years via Montauk Climate.

Sure.

So, you know, I think probably the the most obvious area of excitement that we share is around AI.

And we all know the massive amounts of dollars going into digital infrastructure to allow for AI to continue to scale.

But you're seeing new applications of that AI every single day that have the potential to transform the way we work, the way we live.

And I think that is the most exciting area.

I think it is the most investable area.

And I think we're still in the early, early days of seeing how that AI transforms every aspect of our economy.

And as Sam Altman has talked about in front of Congress, as Jensen Huang has talked about, AI at its core is all around electricity.

It's around accessing electricity and converting electrons into intelligence through the GPU chips.

And so for us, we spend a lot of time in this kind of digital infrastructure AI theme.

That's how to build AI solutions and apply them to areas that have to do with energy.

That's how you build digital infrastructure faster.

It's how you operate digital infrastructure more efficiently and sustainably.

And so that's informed several companies that we've started with.

So just to highlight a few, we launched a company called GridFree AI.

GridFree AI announced a $5,000,000 seed round recently.

And GridFree AI is all around how do you access energy at scale to build data centers without burning the grid?

So how do you develop a power and cooling system that you can generate gigawatts of power without tapping into the grid?

Because accessing the grid is the biggest bottleneck for building data centers.

The interconnection queues are three to five years and in some parts of our country, even longer to build a new data center.

And so we came up with a technology that combines cooling and power production in one unit that creates a much more sustainable, efficient data center footprint and allows you to build data centers much more quickly than you could otherwise build them today.

And that was really combining a founding team from oil and gas with Ralph Alexander, our CEO, who ran big parts of British Petroleum, was CEO and Chairman of Talend Energy, through and through great operator with Patrick Ants, who had a fifteen plus year at Microsoft and has spent his career in data centers and really understanding what are the operational needs and requirements of a data center and how do you plug the power and cooling systems into that in a way that is scalable and modular, which the oil and gas industry has done for years?

Think that's going to be a really big company that transformed the way digital infrastructure is built and operated in our country.

Another company that we started that flows from that is how GPUs are provisioned within the data center environment.

And so today, a lot of GPUs are run very inefficiently.

And even though they're spun up, they are sitting idle.

And that's because there are not intelligent ways to drive the orchestration of workloads within the data center environment.

And so one of our companies is focused around intelligent orchestration of AI workloads and how to optimize those across cost of energy, latency, and other factors that might inform a smarter way to break up workloads that have to do with large language models and training models and inference, etcetera.

Another example of a company is a company called ClearCurrent AI, which is using AI solutions to help large energy load customers better audit, understand, analyze, and eventually procure their power.

And so that's a company where we announced over $4,000,000 seed round recently, and they are building AI tools for data centers to better manage their energy footprint and their utility bills and how they procure and use energy across their entire ecosystem.

And as you can imagine, these guys are dealing with bigger and bigger power bills every month.

Power density is becoming a real problem that they have to deal with.

And yet they're dealing with utilities that constantly have rate changes and tariff changes, etcetera.

And the best way to ingest these large amounts of data that's around your energy footprint is by a custom built AI solution.

So that's another example of applying AI to the energy landscape within digital infrastructure.

How would a private allocator, let's say CIO of a pension fund or the CIO of Endowment Foundation, if they were bullish on the electronic economy, how would they invest in the space?

What are some ways that they could go long this trade?

Yeah, it's a great question.

Of course, they could partner with us if they are interested in the software side of the digital infrastructure landscape.

Or let me rephrase this.

If they were an LP in Montauk Climate and you are now advising them how to expand their trade, what would you advise them at that point?

Great question.

So of course it depends on what their risk tolerance is, what their duration is, but the conversations that we have with a lot of CIOs is around how do we think about digital infrastructure investing.

So infrastructure has been a huge theme for a lot of the large allocators for many years, and a lot of the infrastructure allocations have gone into digital infrastructure.

So you see folks like KKR and GIP BlackRock that own CyrusOne and all of the large private equity infrastructure players own very large data center platforms.

I think QTS will be Blackstone's most successful investment.

And so I think if they are allocating a private equity and infrastructure, that would be an area that they could continue to lean into and really make big capital commitments that will generate really substantial yields.

I think credit is another huge area of focus within digital infrastructure and credit continues to be a very active part of the ecosystem and folks like BlueOwl and partnering with Crusoe is a very exciting kind of partnership that you could play in as a CIO.

And then I think there are more of the derivative trades that come beyond just the core digital infrastructure, which are what are the companies that are going to be successful because these data centers are scaling up.

And a lot of that is software related and more traditional kind of venture related opportunities.

And I think that's a very exciting, successful part of the ecosystem that, still has a lot of, of time to play out.

You have the power grid, you have the electron, the hardware that's connecting to the power grid.

And then you have the software layer on top of that, that has to now manage basically the inputs and outputs of whatever capacity you're building.

We published a report that kind of makes that breakdown clear within the electron economy.

And we liken it back to other transitions.

And what we talk about is how you need the infrastructure layer to exist for the other sides of the equation to start to come online, which above the infrastructure layer, have the orchestration layer and above the orchestration layer, you have the application layer.

And for us, we spend a lot of time thinking about the application layer because that's where a lot of venture outcomes can happen.

And so to draw the parallels to other transitions that have happened, you needed the mobile phones to exist and the physical iPhones and infrastructure to have the mobile wave happen.

You then had the orchestration happen across how mobile phones worked at scale and how they integrated with five gs towers and etcetera.

And then you had the applications that came on, folks like Uber and Meta and others that were able to build on the mobile transition with applications that then scaled to be enormous successful businesses.

And that's where venture investing in particular did very well.

And so we thought a lot about within the electron economy, what are the infrastructure layers that exist that could be digital infrastructure, it could be batteries, it could be solar, etcetera.

And then how do you build software solutions to drive orchestration or applications on top of that?

And that in particular, the orchestration application layers are where Montauk Climat's focused.

So you've been also as an angel investor, extremely successful.

As investor, you were in ramp, relativity space, masterclass at the early stages.

What are your takeaways and what it takes to be a great early stage investor?

Yes.

Great question.

I think at the end of the day, this is I'm sure cliche, but it's about underwriting the founders and are you backing a founder that is gonna have the qualities to build a big successful business?

And it's certainly not obvious.

And we know that early stage investing is a low hit rate game where you're hoping for very big outcomes and you have to have enough shots on goal because it's impossible to predict these with a very high percentage rate.

But the core to all of the companies that ended up being very successful within the companies that I was fortunate enough to work with all had to do with founders that had the grit, had the intelligence, had the determination, had the vision to really drive execution, knowing that every one of these businesses had their ups and downs and every one of these businesses had their challenges, but the best founders power through.

They're smart.

They know how to tap their community, their network, and they have a vision for building something really big and exciting, and they're not gonna let anything stop them.

And if you have that quality as a founder and and as a founding team, then odds are that someone you should bet on.

I've been reflecting on this last couple weeks.

So I invested in Circle about eight years ago, and I've been thinking about Congratulations.

Thank you.

Not yet liquid, so congratulate me upon lockup, but upon unlock.

But I've been thinking about this concept, can you even know who's gonna be super successful?

And my sense is that you can't really know who's gonna hit, you know the traits that are necessary, but not sufficient.

Sometimes you look in a couple years into investment, you're like, man, I shouldn't have made that.

And and most of the time, if you made a good decision, you don't yet know.

But there's so many other factors, there's regular like with circles, there's regulatory, there's legislative, there's elections, and all these things are not only unknowable, but they're not even based on the founder and the business themselves.

I think that's one of the reasons why some of the greatest investors, they don't necessarily know which one of them are hits and and which ones will break out.

It's not because they don't know all the factors that takes to be a great founder that leads to a deca billion dollar outcome.

I think it's just that there's far more factors at play than just the founder in the business in year one.

Sometimes it's not even known until a decade out.

That's for sure all correct.

And there is it is impossible to have a very high hit rate with predicting how successfully company will be in its earliest days.

And you know that because the most successful investors in our ecosystem still have a low hit rate when it comes to early stage investing.

And it's because there are so many variables, some within founders controls, many without many not within founder control that drive these outcomes.

And Circle's a great example just in talking to other investors who invested with that company early where they marked that investment down to ero several times because the company was facing existential crises.

Again, some internally caused, some externally caused and had no idea whether that business was going to be a ero or a $50,000,000,000 outcome as it is today.

And I think that that's just because there are exogenous factors that impact so much of this.

There are internal factors that that impact so much of these outcomes.

And it's impossible to predict a company when it's a very young baby of a company, what's gonna end up happening to that.

But you do know there are very many factors that are required inputs like determination and grit and resiliency and intelligence and vision.

And when you see all of that in a founder combined with an area that you think is interesting and can lead to a good big business outcome, then that's when you hopefully take a risk adjusted bet that you want you know, take a ride with someone and see how it goes over a long duration.

The Uber finance nerds, me included, will be thrilled to hear that the takeaway is basically portfolio construction.

So because it is unknowable and because there's so many variables, but yet the returns could be a thousand x to 10,000 x, the number one thing you could focus on as an early stage venture investor, at least, is portfolio construction, making sure that you have enough, bats at the plate, making sure that you early enough, that you're diversified enough across different verticals, across different geographies.

So it is kind of a it's relearning the power of portfolio construction in venture that everybody talks about, but it's very hard to know before you kind of see it in your own portfolio.

That's right.

I think it's it's portfolio construction, and portfolio construction has to do with the vintage that you're investing in, the sectors that you're investing in.

And like you said, having a diversified enough set of bets where you have the chance for a big, big outcome, knowing that it's impossible to predict on any one company if you're investing early enough.

And so I I do think that portfolio construction is the right way to encapsulate kind of the risk of early stage investing.

And, hopefully, if if you pick the right sectors and you pick the right years to go deploy in, you can have good taste in picking founders to back, and that's where this can be a great business to be in.

It's this the portfolio construction and the value of being persistent investor in venture, it's this meme that has been essentially accepted by top LPs.

You will be rewarded by staying in the asset class.

There's been enough market fluctuations now that the top investors understand you have to play the long game.

There's no way to time venture, and people that have time tried to time it over the last fifty, sixty years have consistently failed to do so.

So it's it's one of these things that the market slow slower than the public market learning that venture is something that you really need to steady hands.

You you see that time and time again that depending on the the crazy thing about venture is just how long the duration is.

So if most of your bets are gonna take, call it ten years to play out, you're betting that the areas that you're investing in today are going to be exciting and interesting and drive good multiples ten years from now.

And a lot of that has to do with the price you're paying going in.

So what's going on within the economy and markets today?

And a lot of it has to do with the price and multiples you're gonna get on the way out.

And so that's having to do with where the world is ten years from now.

And that that's just very hard to predict, and that's why you just need to be in the game year in and year out and and hopefully pick areas that are going to experience, secular growth for decades.

Philip, this has been MasterClass.

What would you like our audience to know about you, about Montauk Climate, about anything else you'd like to share?

For us, I think we are really trying to get the word out around the electron economy.

And to me, the reason why I went from being a generalist investor and and having focused in working with founders across every sector of venture to being all in and fully focusing my time around the electron economy is because I believe it is the greatest opportunity in front of us over the next ten and twenty years.

And we love to go deep around why technology is going to transform the energy landscape and why the electron economy is the smartest place to allocate capital and the most interesting area to be playing in.

And so we would love folks to wanna go deeper into that area and explore with us why we see such a compelling, tapestry behind the electron economy.

I I think this is a very interesting space and I appreciate you jumping on the podcast.

Thank you very much for having me, David.

It was a great conversation.

Thank you for listening.

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