This Week in Startups - How to deal with failing startups + Team Wildfire CEO Steve Wolf on "Hurricane-as-a-Service" | E1563

Episode Date: September 18, 2022

Welcome to Sunday! First up, J+M cover different methods and classifications for dealing with failing startups. (2:01) Then, Molly interviews Team Wildfire CEO Steve Wolf about his "Hurricane-as-a-Service" business! (31:56) (0:00) J+M tee up today's segments! (2:01) VC Sunday School: J+M discuss hospice care for startups  (10:50) Embroker - Use code TWIST to get an extra 10% off insurance at https://Embroker.com/twist  (11:58) VC fund dynamics with Zombie startups, Jason explains "pay to play" (25:32) Spokn - Get 3 months free at https://getspokn.com/twist  (27:03) J+M tee up this week's climate interview! (31:56) Steve Wolf explains his jet engine powered fire-fighting device (37:21) OpenPhone - Get an extra 20% off any plan for your first 6 months at https://openphone.com/twist (38:55) Steve breaks down the business side of Team Wildfire, "Hurricanes-as-a-Service", and more! (55:32) Molly gets a virtual tour of the "Hurricane on wheels" Check out Team Wildfire: https://www.teamwildfire.com FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

All right, everybody, it's Sunday, so it's time to learn. Molly has a great question for me for VC Sunday. So what happens when a startup fails? It's the end of life. How do they get shut down? How do they get bought or sold? Or what else can happen to a startup in the final days in the last ditch efforts to save it? It's fascinating.

Yep. But it's a bit of a downer than upper show. I've got a real fun interview today on this week in climate startups with a CEO of a company called Team Wildfire, former Hollywood stuntman Steve Wolf is building tech to solve wildfire issues, and it is not the tech you're thinking of. Think jet engine on wheels. I love it. I also love a person going mid-career and going from, you know, one career to another. We're going to need more tools to deal with these fires, sadly. They're not going anywhere, and they're only getting worse. So I'm really fascinated to hear this interview. It's going to be a great show. Stick with us. This weekend start

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Second half of your first year, triumphant first year as a venture, capitalist, a free market monster, you are quickly becoming turning to the dark side. I feel like Count Duku over here. This is fantastic. All the way. All the way. Let's go. Let's invest.

Let's make some money. What question do you have for me this week? Well, so I know I'm still in the honeymoon period of being an investor, according to all the books I read before starting this job, which is like the first couple of years are great. It's all about hatching new babies and sending the baby turtles to the ocean and nobody started to pick them off yet. However, as we are entering a downturn, and I'm preparing for the time when things are not quite as fun and companies run into some headwinds.

What happens? This is sort of a BC Sunday school about sort of end of life care for startups. Yes. and how they handle it, including what happens when a company wants to like buy out as investors. Sure. Okay. So as investors, we expect, I don't know, 50, 60, 70, 80 percent of companies to not work out. And if we're doing our job correctly, we're backing audacious ideas that will have audacious, crazy outlier outcome.

So what that means is you're going to burn the candle twice as bright. It might burn half as long. It's going to be intense. and the chances of failure are high by design. If you're opening up the millionth pizzeria or the millionth dry cleaner, vCs are not backing you. We want something that's never existed before. That's high risk, high reward.

Okay, so that's the backdrop. So what happens when things die? Typically, if you have venture capitalists on your board and you have a board, you've gotten beyond the seed stage. We'll talk about that first, because there's like seed dying companies and then there's proper governance companies with a board of directors, and there are two different scenarios.

So let's go with, you have VCs on your board. The company, it's up to the founder to be able to find new investors to price the company and keep cash in the bank. It is not up to the VCs to do that. It's up to the founder to run the company. What is the VC's job? The VC's job is there to advise you to make sure you have proper governance, you know, that you're dotting some eyes, crossing some T's and be counseled to you and to make that bet.

They're not obligated to fund the company forever. It's your job as the founder to find new funding sources for each round to price them. And if things are going well, you might be able to get your existing investors to take pro rata. You might get them to give you a preemptive funding offer. These things can happen. So in the good scenarios, your company's tripling revenue. You know this because we look at our portfolio. We say, hey, who's having breakout growth?

Let's talk about those companies. And, hey, should we put more money in? Okay, so we own 5% of this company. They quadrupled revenue. They were worth 10 million when we invest. now we think they're worth $25 million. Should we offer them $2.5 million and try to go from 5 to 15% ownership? Let's give

a shot. Let's offer that. That's called a preemptive term sheet. So that's when you know you're doing really well as a founder. It's when your existing VCs are getting greedy and they want to own more. That means you're in that top 20%, not the 80% that die or have like a modest outcome. Right. Now, if you're in the other 80%

Mali, VCs are going to sit there and watch to see what you want to do. If you're running out of capital, if you go to market, you meet with 50 VCs, you get second meetings with 10 and nobody gives a term sheet, we're going to give advice, we'll tell you to cut the burn, extend the runway, all the stuff you heard in the last year when things were hard, right? Yeah, yeah. But we can't put more money in. The reserves, we've talked about this before, go to the winners. If you're not in the top

20% of the portfolio, then you're in the bottom 80. So you have to accept that. If you can't raise money from the venture community writ large, you have to accept that. So now you've proven to the venture community, your existing investors, and your potential investors, that you're not fundable. So now, what do you do as a founder? At some point, the founder says, I'm going to sell this company or shut it down.

Or I'm going to go into zombie mode. I'm going to go into cockroach mode. And so those are the three potential outcomes. M&A shut down cockroach mode. Let's break those down a little bit. What, M&A seems obvious. you try to get sold. Shut down, pretty straightforward.

Everybody takes a loss. Everybody takes a loss. You get to tell all your LPs. Hey, listen, you put a million dollars into this fund. This was 50,000 of it. You now have 50,000 in losses to, you know, take out against your wins. Just like if you had a stock that went down

or a house that went down in value, you could take a loss, right? So it's nice. Right. Rich people don't mind taking a loss because then they pay their taxes and they get some of it back. It's a nice thing.

Okay. And then and then there's, the third option, zombie or cockroach. Everything else. Cuccaracha, everything else. Everything else. What does that look like?

And are there scenarios when companies try to say to investors like, hey, maybe we can give you a little money back? Okay. So sometimes an investor will say, listen, this has been going on for 10 years. The fund you're in is over. We'd like you to buy back our shares. We put $100,000. We put a million dollars in.

You can buy our shares back for a dollar. We then take the loss of $999, $999, $999, right? we take that loss. You own all the shares in your company. We're not coming to board meetings. We allocate our time because that's really what VCs are worried about is their time. Now, I can allocate my time to something else. We've proven that this experiment didn't work out. Now, if you want to keep going in the experiment, that's fine, but we're selling you our shares back. Now, what happens if that company then turns out to be a winner and they pull a rabbit out of a hat? That could be tragic for the investor. And in fact, there's a modern day example of this. There was a company called Audio. And, And over 15 years ago, a friend of mine, Evan, or as he's known, Ev Williams, who created a blogger. He was like, I'm doing blogging. Hey, J-Cal and Dave Weiner and Adam Curry are doing this podcasting thing. It's tangentially related to blogging, right? It's acoustic direct-to-consumer with through an RSS feed, but just with an attachment.

I'll create a platform for that. So we literally created a blogging platform before blogging was even built into iTunes, before there was Spotify player, any of that. And it didn't work because he was too early. And then he offered to give everybody their money back. And everybody took their money back except for like three people. And then he's like, you know what? In this little obvious corporation, we're going to do a couple of skunk work projects before I close it down.

And that company wound up being Twitter. Those, let's say, I think maybe, let's just say seven out of ten people. There's a core thread on this with some anonymous information. So I don't, we can pull it up if we want. I don't know how accurate it is. But let's just say seven out of ten people gave the money back. those seven out of ten lost out on a thousand X return or more, maybe five thousand X return. Wow.

The three who kept their money in it and said, yeah, you know, keep going. Because Ev had to send an email to everybody and say, hey, listen, I'm shutting audio down. It was a failure. We have a little bit of your money left. We're going to try a couple of things, but my expectation is low. He was completely honest with people. Some people said, okay, great, I'll take my money back. other people said, I'll let it ride.

So that's the issue is if you get into the situation, you've got to be very, very, very careful. Because what I like to do in a situation like that is, I'm like, okay, you're going to give me back $100,000 and then I have no shares. I'll tell you what, I'll take back $50,000. I'll take back half of money. I'll have half an idiot insurance.

Some founders who are savvy will only say, A or B, no, A&B. And then I'll say, no, A&B, I'm J-Cal. I support you early. Do you want to screw me? I want both. And I will hold the line with founders. I'll say, listen, I supported you early.

We both know that this could work or not work. I don't want to be the guy who has to go to his LPs and they say, hey, we were investors in Evan Williams's company. What happened? Can you imagine having to explain to LPs? Yeah. You're Uber, you know, your Airbnb, you let it go. And you were, you had shares in it.

And you gave them back. You idiot. Now, there's also like, yeah. And so, and then something. Sometimes, you know, people just let these things go on. And they're just too proud. Founders are too proud to shut it down. I was too proud to shut down Mahalo, so I kept doing inside and it worked out.

So all my shareholders are inside are like, oh my God, this thing's dead. And I was like, not dead yet. Now it's actually working. So people are like, ooh, Jacob pulled a rabbit at that. I'm hoping I can return their money. Maybe I eventually return their money times a multiple. I never give up. So I'm like one of those crazy founders.

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all you need to know. A good question from the notice actually from Francis. Like how does that work with the fund life situation? You know, if they let it ride or like audio turns into Twitter but it's like 11 years later. The funds theoretically are 10 year

life funds. Yeah. But you can still hold on to stuff for 20 years. Some people do like to have closure and that's when those funds if they really want the closure will give a dollar we'll say buy my shares for a dollar there's actually holding companies that will buy these worth the shares from you and they'll charge you a fee for doing it so you go to this person and say okay here are the four dead projects that we have or let's call them zombie companies these are four zombie companies we don't know what's happening with them founders aren't communicating that we're tired of calling the founder

the website's not being updated we have four companies these are our shares. We're selling them to you for $100. Plus we'll pay a $10,000 fee. You now own the shares. Here's the contact information of the founder. You talk to them. And so there are these like, I don't know what you would call them, but like they're kind of like the people who would walk down the alleyway and buy dead bodies to go use them for science. Is that too graphic? I'm sorry, that's a thing. There was like a thing where people would buy cadavers to cut them up to train medical students. Okay. Go get cadavers. So then what about this?

It's like a cadaver train. What? No, I've heard, this is how somebody explained it to me. All right. And like maybe one of them is still alive and you, you know, great. And then what about this like pay to play thing where then a company, yeah, is recapping. All right. So this is.

And they want you to pay to keep your shares. Great question. This is a what we call the old Hail Mary. You go, you meet with 50 investors. Nobody wants to invest in your company because your company has no growth. And everybody's left your company. And it's like five years. you were left and you burned through $5 million.

And let's just say everybody's kind of sour to the opportunity. You've been doing it for five years. You proved to everybody that you deployed $3 million. You got to $10,000 a month in revenue. You've got enough money to keep two people on the project. You still have $50K. And it's like, ah, you know, this thing is barely on life support. But these two founders don't want to give up.

So they, but they can't clear market with new investors. They've got $3 million invested in the company. the previous valuation was 20 million, the company's worth 5 million. They should really just be going to an incubator, right? Yeah. Really, like the cap table is screwed. But they have this one angel who still believes in them.

And the angel says, I will give you $500,000 for 20% of the business. I'm looking at this business. I see $10K a month in revenue. I see $120k a year in revenue. I therefore put the business at 20 times top line. $2.5 million is the valuation I'm willing to spend and I'll give you $500,000 or price the round.

I want to own 20% of the business, but all the other shareholders, I want to revert to common. And I want them to get these new shares, and I want the founders of the company to get, I'm going to get 20, I want the founders to get 70, and then I want all the existing shareholders

to be down to 10% ownership and common, so they're at the bottom of the stack. And the existing investors are like, well, that's not fair. And it's like, okay, would you like to put a term sheet up? And they say, no, companies fail. Okay, so you don't care about the company enough to put but $1 in. And then you say, well, we'll let you participate in this round.

So, Molly, you had burned $500,000 this company and buy 5% of it at $10 million valuation. Now the valuation is $2.5. I'm offering to buy 20% for the same amount you put in. You can put $500k in as well in on 20%. And you're like, well, I already put $500 in. And you're like, yeah, but you don't want to put any more in. So that's pay to play. The pay is the money you pay.

The play is the new. shares you get at this lower price. And if you don't, you get penalized. Now, when a founder does this, they better have met with 50 venture firms and exhausted all possibilities. They better have from every single investor, we do not want to participate. Then they come to them and say, you all said you didn't want to participate. 50 VCs, we took meetings with. They all said no. Here is our last ditch effort. At least you get, for the 5% you own, if it went down to 10%, you would have 10% of the 5%, just 50 basis points. And you're like, okay, I got 50. basis points. If this company

become 1% you know, if I put 500K and 1% of 50 million would be 500K. So if this happens to become worth 100 million, maybe I break even. See, you have a little bit of idiot insurance in those common shares. So

that's kind of how you reboot a company. It's called a recapitalization or a recap. And in a recap, you are forced to pay to play. Fascinating. Things get So things can get kind of cutthroat when a company is toward the end, it sounds like. How does the state of the market impact how cutthroat? Like how founders behave during this kind of hospice period, do they get?

Most founders, you know, I look at it as, listen, the founders have, if they've done their best, and they don't want to quit and go work at Google and take a salary or go work at meta and get overpaid to build some nonsense in the Metaverse, like, God love them. They love the project so much they won't give up. I have respect for that. I understand it. You don't want to give up.

You got a lot of pride. You got a lot of passion. And if you exhaust at all possibilities, then it's up to me to make the decision. Now, I don't like when they wipe you out to like 0.1% for everybody. I always like to be a little olive branch. Save 10% for the previous investors, 20%, something in that range. Just so you keep some goodwill alive. Now, if you kept the goodwill alive and you gave this other person 20% who wants to take

all the risk and I have to take none. And then all of a sudden the company starts working again and it gets to 10 million. And then you come back to me and say, hey, JCal, you own 1% of the company in common. We wanted to give you a chance to invest again. I know that this is crazy, but here we are. It's working. So you want to keep, as the founder, you want to keep that relationship alive as the investor. It's a bummer to get in the situation, but you have to be a big, you know, you got to be an adult.

Got to be a big boy or a big girl. Or big they, them. Big kid pants on. You got to put your big girl pants on. big person pants on big non-bonary pants on whatever whatever you are and wears you have to be an adult here

adult was I think the best non-gender non-that's a good one big big they them energy put your adult diapers on what but so it sounds like there is opportunity if it even if it's not coming from the founders for VCs to come in like yes they're signaling I believe in this company but they're also saying this is my chance

to wipe out J-Cal yeah I mean listen If you're one of those bottom feeders or you're a maniac who likes to take high risk bets and get high bet rewards, it's fine. I think what you have to look at is, why didn't the founder get this done with $3 million? Right? And so what I always say to those companies is, if you're going to reboot the whole thing, go to an incubator, clean the cap table up, give your existing, if you're really doing a recap, give your existing investors 20%, tell them the only offer you could get was to go to this accelerator and get $150K to keep the company alive. you're down to two founders. The two founders are taking ramen.

They're taking 3K a month, 4K a month, 5K a month draw, the absolute minimum. Now, if you see the founders are taking 200k a year and they're just running the company into the ground, you're like, okay, well, these guys are gals are not taking it seriously. Yeah. And that does happen. Sometimes you'll have a founder who's like,

okay, I got 800,000 left. I'm going to do this recap with 800K left. I'm not giving anybody a pay cut. I'm going to give myself another 30% of the shares. I'm going to have. have the new investor, you know, annoy me 30 points,

and then say there's no other offers. And I had that happen once or twice. And when it did, I just was like, you know what? If the founder is going to be this sharky, I'm out. I'll just, I'll write it off. You know, they've basically proven to me that I don't need to be in business because they're unethical. So there could be unethical things that happen on both sides.

We talked about this, I think, was it last week the week before, about liquidation multiples. Yeah. When somebody starts getting shark and they're like, I want a 3x and you have nobody else. And I'm going to wait until the last minute and then, say, you know what, you're out of cash, I want 4x. And they, you know, pull last minute changes like that. They know you have no choice. When I see that happen, I'm just, I just write

the person's name down in my little book. People to not do business with in their future. And I literally had one of those who pulled this nonsense. And he was like, oh, I'm a big fan. I'm like, if you are a big fan of mine, then you wouldn't be doing this to me. And he's like, well, they got no other offer. And I was like, okay, but it's disrespectful. This is your first deal as a venture capital. You're a former attorney and you're inviting me to your farm in Napa or whatever. He's like, oh, Jake, I'll come to my farming nap. I'll open this wine view.

Blah, blah, blah. I'm a rich former attorney now. And I was like, I want nothing to do with you. I will never do business with you. Any of my founders mention your name. I'm going to explain to them exactly how you screwed me. It was nice to meet you, and I hung up the phone. But that's me because I'm a hardcore motherfucker.

Oh, sorry. I'm a hardcore melon farmer. If somebody wants to, like, tell me they're my friend and they're a fan. And then while they're giving me this hug, you're awesome. They just slowly slide the knife in between my ribs. So I don't even feel it. And I'm like, um, hey pal, did you notice why you're giving me the hug, you're knifing me in the back? Because I'm a Jedi and I've got a lightsaber.

Like, if you're really a big man, I'm about to chop you in half. You wouldn't try it. Also, Melon Farmer is the best thing I ever heard. It's amazing. There's a whole thing where they replace Sam Jackson with snakes on a plane or whatever. And instead of saying, mofo, he says, melon farmer. What's the show about the ethics? Holy forking shirt.

Holy forking shirt. Anyway, I'm a Jedi. You want to try this stuff with me. Like, I literally have the lightsaber. Any more than time, I just go, B, cut you in half. Like, you wouldn't even know the deal that you didn't get into.

This is where behavior matters and like being a class act matters and being supportive matters. I try to be relentlessly supportive and reasonable. I'm not saying sometimes I don't get tweaked. Sometimes I'm not upset about a situation or how things go down.

But I give people every chance if they're doing this stuff, Molly. I explain to them why I think what they're doing is wrong. I say, here's what I think would be a nice way to do this so we can all feel good about working together. And if they insist on doing it the wrong way, I'm just like, you'll never know that I didn't bring you the next Uber or that I didn't bring you the next com or that when the next great

company said, I'm meeting with five VCs, this one gave me a term sheet, this way of I said, those two are great. This one, I've had terrible experiences with. You have to own your behavior. You have to own your reputation. I just every chance I get to examine my own. own behavior and say, am I acting in the most honorable long-term partnership, long-term reputation game? I'm not saying I'm perfect. There have been times when I'm getting really pissed off at people,

you know, and I've told them. But I've never done anything super cut through up. I have never done anything to screw anybody else. I have said, if you want, you know, I was in a situation where there were 10 angels. This person was like, hey, I believe in the company. I took a pay cut. I was like, I believe in you. And they said, we really want you to put more money in. So, okay, I put more money in. But of the 10 people who did the last round,

how many are putting money in? It's like, two of you. You and Mitch Kapor or whatever. And I was like, okay, where are the other eight? And he's like, yeah, they said, no. I said, okay, I'll tell you what, if all 10 people who put in the million dollars do their prorata, I'll do double my prorata.

So, you know, my pro rata is 50K, I'll do 100, and then everybody else just has to do their pro rata. And they got nine out of ten people. and the one person who didn't was a person who had put a small amount of money in, personal money wasn't from a fund and just didn't have the liquidity to do it.

And he said that to me, I said, great, nine out of ten ain't bad. Yeah. And I said, and if you're not going to get nine out of ten to do it, then we should change the terms. And then it should be, maybe not as hardcore as pay to play,

but there should be some sort of kicker. And I've had to do two X kickers where people got, you know, a warrant for every share they bought to close around. And, you know, when things are, You could see people's true colors like during a bar fight. Yeah.

Like, I've been in a bunch of bar fights and I've seen friends of mine jump under the table and I seen friends of mine jump over my shoulder to protect me, right, when I'm getting jumped. Like, this is a little story from Brooklyn, like bar fight, you know, four on four, five on three,

whatever it is. And one guy literally jumped under the table and the, I don't know, just looking at them like, dude, get up. We're outnumbered. It's five on three. We won.

We won. But it was only because the two of us threw down and the other person who jumped under the table and ran backwards. The two of us were running forward. This one guy's run back. It was two on five. We kind of need that extra pair of hands. If anything, just jump on somebody and just get one person out of the mix and wrestle them to the ground. So, anyway, when a bar fight breaks out, you're going to find out who your friends are.

We're getting into bar fight territory, it seems like. And also, I'm happy to. Sorry. I don't know if this is a. No, I'm happy. happy to have these conversations now. That's how I look at it. When the bar fight breaks out, I'm ready.

I'm not saying you got to jump over my shoulder and, you know, jump the biggest guy. But you can't run. That's me. I'm pretty big. You're big. No doubt in my mind that you're going to get in the mix. I don't not have any exception of you not getting in the mix. All right.

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I have such an action Jackson this weekend climate startup. for us. For our fire. I am interviewing Steve Wolf, the CEO of Team Wildfire, because you know wildfires are a big problem, takes all kinds of solutions, including Steve's solution technology to suppress wildfires in which he, a former Hollywood stuntman who lit and put out a bunch of fires, went to firefighters and said like, hey, what do you need to fight megafires? And they were like a hurricane on wheels that blows mist and suppressant.

And he was like, okay, cool, I'll make that. And so he's making that. And then the video is in his garage with like a hurricane on wheels behind us. And it sounds bananas, but he's going to lease these as a service with trained. Hurricanes as a service. Hurricanes as a service is this guy's startup. I mean, we have to keep iterating on countermeasures. Yes.

I had this crazy idea. Fiders are not what they used to be. And fighting them the way that we've always fought them is not going to work. And he's like, they're more intense, correct? Yeah, they're calling a megafires gig it. Their way, they're so intense that they don't know, they can't predict their behavior. And they create their own weather. And it's like, you can't just keep digging ditches around these fires.

They are way more than that. I noticed in Tahoe the summer, there is a major movement to clear debris and brush. So they are on it. Like, and you, it's amazing to me how much brush those evergreens throw off and, you know, you know, you know all the you know, kind of all this like underbrush and debris and then you can you can use these

it's a jet engine on wheels right like but it blows out mist and there's suppressant included and but like it's to clear that stuff which now they're doing with like shovels and picks. Yes. But literally I hate to blow out of fire.

I hate to like reference Trump but like literally in Tahoe like they have groups of people raking this underbrush and it is like a thing. As they should. Yeah, it's just amazing to me because there's this one area where I went to one of the ski mountains

and I was watching them do it. I kid you not, like every 20 feet, there was a 10 foot high mountain of debris they'd done and the forest floor looked amazing. You could like walk through the forest and not be on, you know, a foot of debris.

Like, I just was wondering like, how much is just costing them? And I was like, a lot less than when these houses burnt down is the answer. like it's a lot less. And when they don't have that debris and they build the fire breaks, the fires can be more contained.

And then that would be, they could actually probably get this hurricane thing in there and have a fire link to actually send the hurricane machine in to put it out. But yeah, fire science. Shout out to those firefighters are brave too, man. I mean, they really are.

They really are. And shout out to anybody who's trying to give them better tools because that's, this is, we're losing more firefighters every year as these megafires just overrun them. It's also just kind of fascinating. I was like, how many fires do you lighten on any given day? He's like, three to five. Wow.

I'm just blowing them out, the giant hurricane on wheels. It's a mental health issue, too, but I need to bring this up. Like, when I was in Tahoe the summer, there was a fire. And I saw the fire, you know, by Truckee. The next day, they picked up a mentally ill person who started the fire. It turns out, and I was like doing a little research, it turns out like half these fires. The fires are like in two buckets. half of them are insane people lighting fires, and the other half are insane people doing

barbecues and then not putting them out fully. Or sometimes, you know, like an electrical cable falling and sparking or lightning, right? So, but I think a full two thirds of these are either people who are mentally ill. 90% of fires are started by humans full stop. And it's not even just mentally ill. Is it really that high? 90%. So either dipshits who are starting fires to do marshmallows and don't know how to put out of fire. Yeah.

Mostly dipshits and then mentally ill and or evil people. Oh, Lord. Yeah. It's so, I'm going to say 90% of 90% is ditch dipshits. Probably, yeah. It's probably, yeah, whatever that is.

Or it's like, it's a car backfiring, you know, I mean, it's sometimes it's like you hit a piece of metal or whatever. But they're doing no barbecues. Like, I have a gas barbecue I can do, but there's a rule now in a lot of Northern California, no more coal, no more wood fires. So if you got the pizza oven or whatever, like, no. good. Yeah. You know, if you have a wood-burning fire, no good. It's coming. Too risky. They're literally have banned it all around Tahoe because they're like, we can't risk it. The whole, we'll lose the whole season if one of these fires hits Tahoe. Yeah. The whole winter season or the whole summer season. It could just ruin the whole thing. It's crazy. All right, listen,

great episode. I'm really interested in hearing this interview. Yeah, it's going to be a lot of fun. You're going to love it. Enjoy. Steve Wolfe is the founder and CEO of Team Wildfire, and I promised everyone, dear listener and dear viewer, not been a this weekend climate startups like this one to date. Steve, welcome to the show. Molly, thanks so much for having me today. So for those who may only be listening, first of all, I encourage you to go to YouTube and watch this one on video.

But can you describe to us where you are and what you're standing by? Yeah, right now I'm in my garage in Boulder, Colorado, overlooking the beautiful mountains here. And I'm standing next to this machine that I invented. which is called a storm cell, which is the smallest of three variants that we've designed to literally blow out wildfires using jet engines. So we have a UTV vehicle here, which is a very capable off-road vehicle that can go places that fire trucks can't go, climb up mountains, and get to that single tree lightning strike,

and then put it out by blowing surfactants and suppressants and retardants through the nozzle of this jet engine here so that we can deliver these suppressants at about 200 miles an hour and literally blow fire out just like you blow out a birthday candle. So, Steve, tell me, before we get more into this technology, how did you come to this from your previous, describe your previous career and how that led to this startup? Sure. I was working as a stunt and special effects coordinator on feature films in Hollywood. I worked for James Cameron and done Tom Cruise movies and, you know, when it did. When a movie director asks for something, they get it, right? If James Cameron is filming next to a mountain and he says, next week, we're going to be filming up that mountain and I need a hurricane there

with 200-mile gale force winds and torrential downpour. He gets it. Well, if you ask firefighters what they need to put out a firefighter, they will tell you, we would need a hurricane to put this thing out. Yet the tools that they have access to look more like shovels and chainsaws. And I wondered, how come when James Cameron asks for a hurricane, he gets it, When the fire department asked for a hurricane, they think they're just joking and they go back to hand tools. And I told firefighters that I knew and it worked with, I said, you know, if you really want a hurricane, we can make you a hurricane.

And they said, how do you do that? And I said, well, you use a jet engine to get, you know, 150 mile plus winds. And then you use a mist injection system to add rain or suppressants or whatever you want to that exhaust flow. So that idea. And you put it on a truck. For about 10 years. Yeah. Yeah.

And then we put it on a mobile truck so that we could get it where we need it. And so fire trucks are pretty much pavement pound. You know, they have limited off-road capability. Some of the brush trucks can, you know, get off-road a little bit. But really nothing can get around quite like a UTP or a logging platform. Any of the logging vehicles are designed to climb a mountain, you know, pick up 40,000 pounds of timber and bring it safely back across an icy river. So those vehicles are much more capable.

So that's the platform that we selected for the larger April, which we're building next. And so you said this is 10 years in development? Yeah. So about two years of full-time development and eight years of simmering before, you know, it was COVID that gave me the time to sit down and write out the three patents that apply to this. I drew out some blueprints. And then I showed those blueprints to Tim Draper. And Tim said, this is a brilliant idea.

We've got to have this. and he put in the first half million dollars. And that got us far enough to put together a team of professional firefighters, engineers, and to purchase all the equipment that we needed to build this working prototype. Tell me a little more about the the we need a hurricane concept because I don't think that most people, I mean, that's nowhere near how we ever see firefighting portrayed at all. So like what, what is it about a hurricane that puts out of fire and why have we been so far away from that solution? Well, for one thing, you know, we don't ask for what we don't think is

possible. So while firefighters may go to work with ordinary hand tools, you know, they're praying for rain, but they don't think that the option to have rain is something that they could have at will. But, you know, in Hollywood it is. We're doing a rain scene. We set up rain towers, or we set up fans, or we set up jets, and we make a rainstorm. Those industries are so far apart from each other that one industry didn't realize they could have the benefits of the other. The fire department didn't realize that they could have a special effects department to create rain and wind and mist when they need it. So they didn't ask for it. But now that that technology is available to them, and we've shown this to numerous departments in the Boulder area,

they all want to know how quickly could we get one of these, or a fleet of them. So it's really been a blessing to them to be able to have rain on demand, where they need it, when they need it, the intensity they want, and to literally blow back fire. So we think that fire responds to, you know, hand tools and stuff like that. It doesn't. If you've seen, you know, any of the footage from fires such as the Marshall Fire or the mosquito fire this week, the wind rules the fire. And so in order to control the fire, you have to own the wind.

And jet engines on a mobile platform allows you to do that. All right, everybody on the phone today is Open Phones founder, Dorena Kuya. Welcome to the program, Doreena. Thanks, Jason. Great to be here. What about the situation where you have, you know, a phone number that's a common number? So customer support number or maybe you wanted people to just be able to call you and generally talk to the sales team, how do you handle that when you have a group number, a shared number? That's actually one of the super unique things about the way we've built open phone is that we allow you to have a shared number for your team. First of all, when you call into that shared number, you can set round Robin if that's applicable or by default, everyone's phone.

would ring, the first person to pick it up will be able to have a call. I like that for customer support. Wow. Exactly. Exactly. And also if I am on a call with a customer, I don't want to be interrupted. There are other people who can pick up new calls coming in. But I also really think what's very cool is that this workflow works as well for text

messages. And not only can you just like share responsibility for responding to text, but you can also use this as a training exercise because the way that it works is that if I am a customer support grab. There is a text message from a customer. I don't know how to answer. I can actually tag my teammates privately on that conversation and get help and say, hey, is this okay to say or how would you respond? Okay, everybody, Twist listeners can get 20% off any plan for their first six months at OpenFone. Just go to openphone.com slash twist. If you got an existing number, they'll put it right over for free. Head to O-P-E-H-O-N-H-O-N-E dot com slash twist today for 20% off. Talk about the, okay, so

there's sort of those four components though, right? There's the wind. There's also the the oxygen, the heat, and the chemical reaction. What's in the mist? You're also making this rain. And the chemicals, it seems like, are a big part of your business plan, not just the firefighting itself. Absolutely. So to have fire. You have to have four components. You have to have fuel, oxygen, heat, and a chemical reaction. And when you take away any of those things, the fire goes away. If you take away all of those things, you have no possibility of fire. one thing you can do with a jet engine is you can point it down at the ground and you can literally blow away all of what the fire department calls fuels which we would call trees limbs debris leaves on

the ground brush like that all these things can be blown away to clear the ground of any flammables so when there's nothing left to burn obviously a fire runs out and right now fire departments work almost exclusively through fuel deprivation they try to cut down trees or bulldoze a path to make the fire burn out because it has nothing left to burn. But you can also control heat when you put surfactants, you can just water through a jet engine and you create mist. Mist has a lot of surface area and therefore a tremendous effect of evaporative cooling. When you shoot this mist out as the mist evaporates, as it turns from a liquid to a gas, you know, gases have much more energy. Where does that energy come from? It comes from absorbing heat from the air.

around it. So when you cool that area, you make it less favorable for fire because fire requires heat. It also makes an environment that's much more palatable for firefighters that are in the area because it's significantly cooled. And then you also can interfere with the chemical reaction, and that is what is done by surfactants and retardants, long-term suppressants. They interfere with the fuel's ability to interact with oxygen. And when the fuel can't interact with oxygen, it can't burn. So we're taking away the fuel, we're taking away the heat. We're also taking away the oxygen because when you have more humidity in area,

you have less oxygen. And the denser, the mist that you drive into a fire, the less oxygen is there. So we're literally removing the fuel, the oxygen, the heat, and stopping the chemical reaction. And that essentially can put fire out deadenets tracks. What, all right, let's talk about the business part of this. How many hurricanes, how many of these jets would it take to build out a wildfire? Like if you were a fire department, how many of these would you want to have? Well, I would want most fire departments to have thousands of them, but that's because I'm leasing them as a service. But how many it takes really depends on how fast you get to a fire and how efficient your suppression is. You know, every fire starts as a single spark. And that's pretty. easy to put out. You can douse it with your hand, right? It's when these fires are allowed to grow or they're not able to stop them from growing, then you end up with this enormous perimeter.

And that perimeter grows tremendously quickly, especially when fueled by wind. So we envision, though, that a typical city would want to have 10 of the large hurricanes and 150 of the small ones so that they can station them around the state. They can take, you know, put them in the area is where they're mostly likely to have fire. And the area actually where they're most likely to have fire is where they're people, because people start 90% of these fires. So if you know that it's Labor Day weekend and people are going to be going to the mountains and the parks, you know, you would pre-position your assets where they're most likely to be

needed. And you want to have them positioned around an area so that you have, you know, very rapid response and you can get to these fires and put them out while this small. So sort of nuts and bolts, how much does. does the hardware cost? How much will it? Right now you're building the small one. It costs about a hundred grand for the small one. It costs about a million dollars for the large one. Your ROI is about a year. It's exactly a year because we would charge a hundred grand or a million dollars for each asset that they have in reserve. When activated, you know, there's a big fire

and they say, hey, we need you guys up here. The contract rate jumps up to where your return on the equipment is 14 days. So the the small machine leases for 14 days for 100 grand and the big machine leases for a million dollars for a two-week period. And that's conventional. But in the industry, that's pretty much how Cal Fireworks and other departments work. They work through in terms of leasing, you mean? Like leasing is the most common form of acquiring equipment? Well, they're not they're not, you know, this is not the type of equipment you'd put in the hands of, you know, firefighters. It's a specialty of equipment. that's run by our engineers.

So it is, Hurricane is a service as the business model. You need a hurricane to blow back a fire. You call us or you've already got a contract with us. And we come and apply winds as a counterforce to the prevailing winds. And that stops the fire where it is. So it's really, so your engineers operate these vehicles. I want to put a fine point on that that this is not something.

Our engineers operate our equipment. Yes. And are they your employees? They are our employees, yes. And they're also, they're duly trained as engineers to operate this equipment. Some of them actually have their degrees, you know, their masters in engineering. And all of them are certified and experienced wildland red card holding firefighters. And so what are they doing?

Like, do they work for the fire department? What are they doing when there's not a fire? How does this service work kind of as a year round? When there's not a fire, they're on standby. waiting for activation. So when we send these machines out, the machines sit there wherever the state wants them, wherever we deem they're most likely to be needed,

and they're staffed by a team that's sitting there, you know, working on their online education or whatever they want to be doing, so long as they're available to that machine if it needs to be deployed. So you're not, you're not paying them in their downtime. They'll be employed by the firefighter, by the fire. services as needed? No, they're full-time employees of ours. And when a city pays a prepositioned asset contract, they're paying to have that piece of equipment sitting there available on the runway and a pilot available to drive it. And that pilot is receiving a standby

rate. And then both the equipment and the person jump up to an activation rate when they're needed. Gotcha. And then do you train them? You pay for all the training up front. Yeah. We provide all of the training and everything that they need. And also, the equipment also goes out with the mechanical engineer that can service the equipment and keep it, you know, at full runtime. How have you found the fundraising process to be? Since this is sort of obviously very necessary, it's also hardware intensive.

It's, you know, it's a business model that VCs aren't always sure how to to deal with. Like, I wonder how you're thinking of this in terms of that hockey stick, you know, 20x return. Yeah. So first of all, right, there's, there's only a small number of VCs that like hardware projects. And nobody gets into the business of starting a business because they enjoy fundraising. So you get those things working against you right away. But, you know, it's challenges that make entrepreneurs come a lot. So I've had to learn. a lot about fundraising and creating a pitch deck, not just an engineering log. And that's been interesting.

But if you look at what's going on worldwide, obviously everyone is very concerned about wildfires and their growth, and their continued growth and their renewed intensity. So climate change has really changed the way fires behave and the technology that existed for putting them out even 10 years ago doesn't work on today's fires. So it's widely recognized that a new hardware is necessary for combating these fires. And that's what we're doing. Most of the people in the startup space that are dealing with wildfire are working in data. They're working in apps.

They're working in satellite acquisition. But one of the false beliefs or not fully baked ideas about wildfire suppression is that more data is going to put the fire out faster. And it's simply not true. There's no firefighter that if you go to ask them, you know, how many gigabits does it take to put out a fire? They would laugh at you because, you know, gigabits don't do anything. They're just, you know, ones and zeros existing in ether. They have no effect on the chemical reaction, on the physics of fire. So if you have a physical problem, you have to have a physical solution.

And the venture capitalists we've spoken with understand that very well. And some of them are actually very attuned to the, it needs a development where there's a physical product involved. Yes, the product has to be data informed. We do need satellite imagery to know where the fire is. We need predictive software to tell us where a fire is likely to erupt. We need fire modeling software to tell us once a fire is started, where it's likely to go so that we can get out ahead of it.

But at some point where the rover meets the road, you've got to do something to actually put the fire out. And until we give firefighters a better tool for that, this data really isn't very helpful to them. And then let's talk about the economics of fire because certainly, you know, every year we hear that a fire cost billions of dollars. Those billions of dollars were spent on planes and helicopters and various retardants that, you know, what you're saying don't work very well. And what we see don't work all due respect to those firefighters. These are not the best tools available. How are you thinking about that? How do you translate that into Tam? for this? So the tam for this is enormous. Eventually, we'd like to see all wildfire suppressed with this technology, not just because

it's our technology, but because it's safer. Because in the iteration of this, there are no people on board. This is a strictly remote control or AI operated device that is able to analyze wildfire movement, figure out where it needs to be, how much suppressant has to be delivered at what force and speed and then apply that solution autonomously. So right now we're seeing, you know, one or two firefighter deaths every week for the last several months. This is unheard of, but this is what's going on, whether it's helicopters crashing and losing their crew, wildfire teams being overrun by fire. This is just not a place where humans should be.

So I would really love to see firefighters not dying anymore and robots sent in to do that job. what stage are you at right now? Let's get the... Yeah, right now we've fairly well used up our seed funds that Tim Draper provided. And we're going into another round now. We're doing a $3 to $5 million round so that we can build the second and third iterations of this. Our variance, I should say. We want to do one vehicle agnostic system that can be dropped into the back of a pickup truck.

So you could load 10 of them into a cargo container. ship them across the country the next day, they could be deployed on, you know, 4F150s or whatever the fire departments readily have. And then we want to build the big one, which is based on the logging forwarder, which would have four jets on board so that you can simultaneously scrape the ground pointing down, do direct suppression pointing at the fire, and then do ember capture by raining down on top of a fire. If you can do all those things at once, we really own the fire.

So it's a huge market. It's internationally a multi-billion dollar market of suppression. Once a fire reaches a certain point, it's no longer the economic responsibility of the agency putting it out, but it falls to the federal government. So when a fire reaches a certain magnitude, the municipality or the state is eligible to get all of the cost of putting out that fire recouped by the federal government. So it's not a very price sensitive thing. And there's not a budget set for putting out a fire. No one says, oh, the mosquito fire started. You know, you got $100 million to work with.

No, they say, you got to put this fired out, whatever it costs. So it's not very price sensitive. And if you have a technology that works better, that's more effective, that puts out fires faster, that stops more smoke from polluting the nation, and keeps firefighters alive, you got a winner, I believe. That's why I've put all my work into this full time. When I say full-time, I mean entrepreneur full-time, which is 80 to 100 hours a week. Yeah, for the last three years to bring this out.

And we've shown this to several agencies in the area, and they're just super excited to get this deployed. So our next step is we have a deployment scheduled with the Boulder County Sheriff's Department that oversees fires in Boulder County. We're going to send this unit out with them at no cost. This is a learning opportunity for them to see what the equipment does, for us to talk. learn about how the equipment interfaces with fire to figure out which features we want to beef up, which ones they end up not using so that we can make better iterations on the technology. Well, and I guess that's my only other question is how hard is it to, you know, even when it's not the most effective and fires are changing, the way we've always done things

is a strong, can be a strong barrier to overcome. And so I wonder, I could imagine any individual firefighter looking at this and being like, hell yeah. Like, please parachute in with a sucker and put this thing out. And, you know, somebody who's got existing contracts and longstanding, you know, budgets and agreements with people saying, yeah, yeah, yeah, but this is how we've always done it? Like, how hard is it to make this sale to fire department? Yeah, Molly, you're absolutely right. The fire department is often characterized as 200 years of tradition unimpeded by progress. And they are hesitant. to change. But you have a content changing of the guard where older people are retiring or,

and some of those people really see that the techniques that they've been using for years don't work and are looking for something. And then you have a lot of new kids coming up in the business that are really eager to apply new technology. But, you know, this takes nothing away from what, the validity of what you're saying of resistance to change in any industry. The downside of that is that it's a longer sales process to get in potentially. However, there's a desperate for a new solution. When you see a fighter running up the hillside in California and you know that it's about to eat that town in front of it, you know, you're willing to try anything. And so I think that we're going to see emergency deployments first.

Like, hey, if you got something you think is going to work, bring it up here because this town's going to burn anyway. So nothing to lose in trying it. And then when it works, then we're going to see, you know, standard contract adoption. Right. The other positive side of that that slow to change thing is that once you're in, you're in, right? Once you get embedded in the system, then that inertia works in your favor because you're going to be in for a long time. Right, totally. And we can't stress this enough.

The fires themselves are changing. Like their megafires are a different beast. Yeah, they're calling them now megafires and gigafires, which, you know, strangely barringes. is from these data terms, which again is part of the implication that data could change a fire. Knowing more about where the fire is is useful, but it doesn't put out the fire. You really do need a new hardware to do that. Steve Wolf is the founder and CEO of Team Wildfire. I know we have a couple minutes left in our meeting booking.

I wonder if you could take that fancy camera and walk around that hurricane on wheels for it. I'd love to show you around. know. Amazing. This tech here. This is a real missed opportunity for a field trip, but once the test start, maybe we can come out. We're staring down the barrel of our game.

Right. We're staring down the barrel of a jet engine. Yep. Yeah. All right. This is the jet engine here. And where do you get a jet engine? Just out of curiosity.

Like, are you building it? You know, yeah. It's an off-the-shelf component. So we're trying to use off-the-shelf components and as much of the construction as we can. Is that like an Amazon thing? Honestly, pretty much everything in here

came from Amazon. Wow. So there's your jet engine. The jet engine is fed internally. All right. So we saw the jet engine in the front and the back is tanks and hoses. So we were going from the jet engine. And then we have a control module

here. Fire suppressant our own fire extinguisher. I mean in the back, There's an onboard tank, and the tank simply feeds into these dosimeters. And these dosimeters then add the correct amount of fire retardant. So there's a bucket of fire retardant concentrate. And then that is mixed by a dosimeter, which then tell me if it gets too bright. So on the back, there you have a gasoline. powered pump and you have

a compressed air foam system. I sent you some B-roll of the foam system which can apply insulated foams to a house. And then here is a system where if you stick that tube

there down into a bucket of diesel, it'll suck that up and then it'll add chemicals to the diesel to turn it into jet fuel. And the jet fuel then goes into the fuel storage tank. And then that fuel storage tank sends the fuel up to the jet engine itself. Awesome. And this, just to be, just to be clear is this is the little guy, right?

What's the little one called compared to the hurricane? And this is the storm cell. The storm cell, right. The storm cell is just based on this UTV platform. Yeah. You know, which is a real go anywhere kind of thing. Awesome. And then one last question.

How many fires would you say you start in a given day? Oh, I probably start three to five fires a day. There you have it. There you have it, founders. You don't all have to learn to code. Some of you just have to learn to start fires and put them out. All right, everybody. Thank you for listening.

What an incredible week we had. So many amazing stories. We had the Crypto Roundtable. If you want to go back into the archive on Wednesday, Lawn on Thursday Just so much incredible news The Big Figma news Breaking on Thursday I believe as well

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