This Week in Startups - VC School: What's a venture scale business + Matt Duesterberg of OhmConnect | E1499

Episode Date: July 3, 2022

For today's VC Sunday School, Molly asks Jason about what makes a venture scale business (2:20). Then, for This Week in Climate Startups, Molly sits down with Matt Duesterberg, co-founder of OhmConnect (19:38). (0:00) Jason and Molly tee up today’s show (2:20) VCSS: What is a “venture scale business”? (12:15) OpenPhone - Get an extra 20% off any plan for your first 6 months at https://openphone.com/twist (13:31) More on being venture scale (17:35) Molly tees up This Week in Climate Startups (19:38) TWiCS Molly speaks with Matt Duesterberg, co-founder of OhmConnect (26:14) Odoo - Get your first app free and a $1000 credit at https://odoo.com/twist (27:25) How is OhmConnect paid? (32:10) Microacquire - Sell your business with no fees at https://try.microacquire.com/twist (33:27) OhmConnect energy savings, Gigawatt v. terawatt, $55M Series D (46:02) Thanks for tuning in, and have a happy 4th!

Hey, everybody, hey everybody. Happy Sunday. And I'm hoping you're having a great holiday weekend. But if you need to get away with your family, we have a show for you. Yes. Or are you going on a bike ride? You might want to listen. There you go.

Exactly. On this weekend climate startups, I talked with Matt Dusterberg of Om Connect, which is a super interesting startup letting consumers save energy, but then also become almost a decentralized energy provider themselves. Fascinating, kind of complicated energy markets business, but comes down to at the end of the day, you get a $50 gift card from OMConnect for like turning off your air conditioning

for an hour during peak usage. But first, we're going to do VC Sunday school. We're going to break down how to identify and answer the question, is this startup venture scale. This is an important topic for people investing in companies, but it's also happens to be a very important topic for founders to understand if their business is venture scale

and maybe that's why they're not clearing market with investors. It's going to be a great show. enjoy your barbecues and stick with us. This week in startups is brought to you by OpenFone. As a startup founder, a lot of mistakes are easy to roll back, but using your personal cell phone number as your company number isn't one of them. OpenFone makes it easy to get business phone numbers for you and your team right on top of your existing devices.

Visit openphone.com slash twist to get 20% off your first six months. Odoo. Odo is a fully customizable and fully integrated suite of business apps that lets you build and scale your stack as you build and scale your business. Your first app is free forever, and right now, Odu is offering $1,000 off your first implementation pack at Odu.com slash twist. That's O-D-O-O-O-com slash twist. And micro-acquire. The startup acquisition marketplace. Start the right acquisition conversations at your own pace.

Get free and instant access to over 100,000 trusted buyers with total anonymity. Say goodbye to brokers and meet your ideal buyer today. Go to try.com. Okay. Fisi Sunday school time, Molly, what's your question this week? What are you thinking about? What are you learning? So a thing that has come up a lot is this question.

of, you know, as we talk about multiples and revenue potential, this question fundamentally of like, what is or isn't a venture scale business? And our president, Mike Zavino had said this kind of great thing, I think, what you said is like the most painful decision for a VC is the strong $40 million business. That's like, you know, hey kid, you got a great business here, but it's not venture scale. And doing that math. Like, you know, the, math that you do to figure out if a company is better off, I don't know, just getting like a bank loan. Yeah. So, in many cases, people think that venture capital is the funding source for their business.

Venture capital is the funding source for a very small number of businesses in the world. This should be obvious to everybody, but it's not because they don't understand how venture capitalists get paid. And they don't understand why they exist in the world and why LPs give them money. So you will have somebody who's making a movie or starting a hotel or a pizzeria or a chain of, you know, drive in, say, I want to raise venture capital. And now venture capitalists are charged with getting returns that are, you know, two, three, four times the public markets. In other words, instead of making 7% on average a year, they're expected

to make 15, 20, 25% every year in returns for their investors. And their investors are looking at this category of investing as a way to go after very high growth, some might argue, violently high growing companies. It's very hard to have a company triple, triple, triple, double, double, double, double, their revenue, a million dollars to $3 million to $9 million to $18 million to $36 million to $72 million. Like, this is hard work. It doesn't happen for most businesses, certainly not for a chain of drive-in movie theaters

that you want to build, or your album or your pizzeria, or your consumer package good companies. So that's the first group of people, and it's pretty easy to explain this to them. We only invest in high growth software companies. This is not a software company, or this is a low margin company. So we can kind of take that first swath out of this. Small mom and pop businesses, non-scalable real-world businesses, that's 50% of the people who have this, you know, mistaken idea that venture capital is. for them. They should build their businesses off of sweat equity, bootstrapping, saving money for five years and then opening their restaurant, like a lot of restaurant tours will save money

for a decade, then raise some money from folks, and then they'll open their restaurant. Well, they'll open a version of their restaurant, like a food truck. Or instead of making their three or four movie series, they'll make a short film at Sundance and then use a short film to make a bigger film. In other words, they do their own little incremental thing. Let's take all of those out of here. Pretty easy to explain to them why they're not venture scale. Now, there's a different group of people who are making software businesses, right? Yeah.

And they're making marketplaces, but maybe even those are too niche. And that group of people, it's, you know, you kind of have to hand, you know, you, you kind of have to do the back of the envelope math yourself, do a bottom up tam, total addressable market size, and really start to look at, okay, maybe this business does have. good margins. It can make $10 million in revenue with $5 million in profits, but it can't get past 10 million or it's not going to get past 10 million. It's got a natural ceiling. So if you're making the proverbial software for dentists and you know how many dentists there are in the country, you can actually do what's called the bottom up town. And so sometimes it's very easy to figure out

what the market is for a piece of software. There are only so many dental offices in the United States or the English-speaking world, and they can only afford to pay a certain amount for their software, and you know that business can't get to a billion dollars in revenue where Salesforce could, or Twilio could, or AWS could, or other SaaS software could. And so that's the harder discussion. And then that's just a function of where you invest. If you're investing as an accelerator at two or three million dollar implied valuation or a seed investor at five million, okay, yeah, maybe you'd be happy with a $100 million exit. But if you're investing at $50 million as a venture capitalists or $25 million,

you're not happy with a ceiling of a 2x. That's an interesting point because you're saying there's different scales of venture scale depending on your check size. Right. Maybe. Like, is there? I mean, I guess if you're saying, okay, I'm going to put it on a $100,000. If you're a late stage investor or you do Series B,

or even if you do Series A, you might look at a business very differently than Y Combinator, Techstar, launch accelerator, or a seed investor or an angel investor or friends and family. And because you might say, you know what, if the upper bounds of this investment is 20x, I can make that work in my portfolio. Whereas if the upper bound is 2x, same company. I got onto the company when they had two customers paying $1,000 a month each, $24,000 a year in revenue, and I invested at it $3 million valuation. If the company got sold for $100 million, I'd be 30x.

I feel pretty good, right? Whereas if I invested at $30 million and I bought 10% of the company or 20% of company, I could triple my money maybe if the upper bound is $100 million exit. So you have to look at what the potential exit is. And the potential exit will be based on the potential revenue and potential earnings. So you can actually just do math here. And sometimes you'll break it down for a founder and you'll say, how many customers are there for this business?

What's the most you could charge them? And then once you know that, you can say, okay, well, here's what the evaluation would look like 10 times the top line revenue, 15 times the earnings, the profits, 20 times the profits. Okay, you think you can build a $10 million dollar business? 10 times that is $100 million. Okay. You think you can have $5 million in profits? Three million in profits is what you think?

30% margin, great margin. $3 million times 20 is a $60 million valuation. So this business is worth somewhere between $60 and $100 million, depending on who wants to buy it. Not a great business. And that's the venture scale issue. can you get to a billion in revenue? Right. What's the minimum X that's acceptable when you start to do that?

You know, the minimum multiple that's acceptable to be a venture-scale business. I think it would be enough to return two times your fund. So. Your whole fund. Your whole fund. Not your investment. Not just that. You need to have investments that can, you know, if you're going to take the time to invest in them,

they got to return double the fund. So let's say your fund was a $100 million fund. and you planned on having 30 names in it, 30 companies in there, and you were on average going to invest 2 million in each of those companies, that's 60 million. You have some management fees coming out off the top. Maybe that's 10 million.

And so then there's 30 million left to invest in the big winners. So the top five get another 6 million, something like that. Anyway, you put all that together, Molly. And each of those 30 companies has to have a chance. And let's say your average ownership was 10% each company. Those 30 companies, those 30 names, Uber, Instacard, DoorDash, whatever you invested in, Airbnb, each one of those has to become worth, your position has to become worth $200 million. Your position is 10%.

200 million times 10 is $2 billion. So in other words, you've got to hit a $2 billion outcome in order to double your fund with each of those investments. So you can start to think of the multiple. If you invest it at 50, you would need to have a 40x. So I would say for a seed venture fund, they're looking for typically like that 50x, 20 to 50x would be good. 40, 50, 60 X is where you're doubling your fund and you're returning two times your money with one of the investments, which is what you need to do at some point.

You've got to hit a winner, a big winner. And so that's why this business is hard. And if you double the size of your fund, okay, now you need to hit either 100x, or you have to put more money into each company. It just becomes harder and harder. You have to be able to find companies that are willing to put that money to work, which is also kind of why the billion dollar funds or $2 billion funds become really unwieldy. And they have smaller returns than the bigger funds because you need to hit gigantic outcomes,

like $10 billion unicorns are. So how many $10 billion unicorns are there? So this is what the major LPs are looking at when they examine our funds or other people's funds. What are the chances of you hitting another Uber? What are the chances of you hitting Dropbox or Airbnb? Okay, well, we know because we know the funds that did hit them because we have all the data because we're all being those funds too. So if it can't hit venture scale, I think you need to take a deep pause and say, why are we wasting a bullet on this? We got a certain number of bullets in this gun.

You know, we're going to try to hit sniper shots here. We don't want to just shoot randomly in the air. We got to make everyone count. That's why venture capital can seem very cutthroat, at least the most disciplined. people. They don't want to make willy-nilly investments to feel good about themselves, etc. And when you do see them do that, that's why it stands out so much. When somebody does make like an emotional investment in something weird, you're like, why would you waste a bullet on that? Like, what are you doing? Are you not disciplined? And, you know, this is where this whole debate comes from venture scale.

Is it venture scale? Can it return 40 times my money? 20 times my money, 100 times my money. Yeah. It's a whole, it's a mindset. Listen, lots of founders, a Lucy Goose. juicy with all these personal phone numbers flying around. They put them in company documents. They'll use them for sales calls and more. And this makes things really messy. Okay, you don't know who's calling. Is it a sales prospect? Is it somebody from your kid's school? Should you pick up? Should you not pick up? You don't want to get random calls at the summer barbecue, right? I'm doing multiple barbecues a week. I don't want to start getting the wrong calls and the wrong number. I want to be able to filter them. And if you're the

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Head over to O-P-E-H-O-N-E dot com slash twist today to get 20% off and to make your life easy. It's a lens. And that lens has to be over one eye all the time. Well, and I think a lot, like a monocle, yeah. And I think a lot of, you have a lot of founders who don't understand this math. I think this lesson in VC Sunday school is, I think you kind of understood this already. We're trying to get outlier returns. Yeah.

But I think that's the issue. I think a lot of people are, yeah, having here is the founders don't understand this. So you're having this conversation with founders, like, you're not venture scale. And they're like, what do you mean? We're going to change the world. And it's like, you're going to change the world for dentists. You know, like, there's 20 different ways for a dentist to manage their practice. you are about one of these 20.

It's a race to the bottom. It's not a big enough market. We can't waste. Frankly, VCs don't say this. They don't want to waste their time because that person building that dentist, CRM system management software, they're like, I don't want to waste my time on this. I want to do something big and expansive that could be $10 billion. Not everybody's got that vision.

Well, okay, then that leads to one quick follow on, which is a lot of companies at our stage will come and say, I have this business now and it makes this much money. And then I want the next part of my business to make the venture scale money. And so. Why are we not going after that business now is what the VC would say. Why are we not just doing this midstep here? We have venture capital.

We want to give it to you the second idea. They're like, I need your money to build the second idea. Right. And so if you need the money to build the second idea, you should go to an accelerator, pursue that idea, get an MVP, then get some seed. investors, then get two customers, and then go there. Why are we wasting our time on this intermediary step to build it for dentists if you really want to build it for all doctors and you want to do an open doctor platform?

Now, if you presented it as, this is our beachhead, is dentists. The same software just needs to have this customization pack written for orthodontists, and then we're going to go over to chiropractors, and then we're going to go over to, you know, whatever, you know, group of people. and we're going to just go right down the line to, you know, diabetes doctors and nutritionists, and it's going to be a CRM for any medical practice. And so this is just our beachhead. And so, you know, a lot of times founders will be scared and they don't want to explain

the big vision. They just want to explain the small one that they think they can accomplish. Or maybe they're just not that ambitious. And so a lot of times that's what founders do. They come with a small idea. They don't get funded. Then this person comes in with a bigger idea and they do get funded. And then there's all this hand-wringing, like,

wait, you gave this money to Theranos? Why did you do that? She had the bigger idea. If you wanted to do every blood test, not just one blood test. Now, in that case, it was BS, but some, I mean, this is the truth. Like, I think a lot of people would rather go for the long, crazy idea because it has the outsized impact than for the more modest idea. If she had come and said this, I'm going to just make something to test your, you know,

glucose level or whatever, one singular test. people would be like it seems like a small business she presented a really grand vision and she got a lot of money so venture scale venture scale is the goal that can also be a trap

yeah some people can be BS artists but you know when Travis was talking about Uber he was talking about it as a logistics company hey we're going to do trucks eventually we're going to do food we're going to do delivery you know we're going to do everything convenience stores whatever needs to move

from point A to point B we're going to do it once we have this logistics network up what else can people move from point native point B is going to be the question. You know, we could do cannabis, we could do food, we could do food and cannabis, we could, you know, send you like, you know, from a 7-11. It could be closed from the gap, you know, it could be anything. And now they have started to do that, right? And so you start to see that vision in the second decade of Uber. It takes a long time. But that was the original pitch. We'll start with Lincoln Town cars and, you know,

getting people who are affluent from the airport to their homes for business trips, and then we'll go from there. Nice. Yeah. Well, actually, that's a nice place to segue, a nice way to segue into this week in climate startups because I interviewed a company that's like, let's replace energy. Yeah, there you go. Excellent. Or at least the way it is sold. Today on this week in climate startups, I have Matt Dusterberg president and co-founder of a company called OM Connect. It's an energy startup that plugs into smart devices and people's, you know, utility meters, informs and enables consumers to make better energy choices.

basically it pays them to save energy. And the way OMConnect makes money is that it says, okay, we've got this base of consumers. They saved five megawatt hours of energy because we either remotely turned off their thermostats, which they let us do, or did some other energy savings. Now we can sell that five megawatt hours of energy on the open market and utilities will buy it. Yeah. So they enable these energy savings and then they turn around and make money on the savings, which is fascinating. In 2020, there was that big. August heatwave, which was the first time we had blackouts in California since, like, 2001. And OMConnect users reduced one gigawatt hour of electricity demand in California,

which is enough to power the city of San Francisco for an hour. Super interesting. They just closed a $55 million series D and then have raised about $100 million. I didn't invest in this company. They launched at, they did a company demo with us in 2014. I think Mike Savino, our president, did personally invest in the company. and this was in 2014. So eight years ago,

they were one of the companies that presented at launch festival, which I started after I had a partnership with my guaranteeing for TechCrunch 50, and we split up, UN just did disrupt and I went and do a launch festival. And yeah, there you have it, 2014. Amazing.

Super interesting. Congratulations to them. And yeah, great company. And congratulations on the money raised and I'm an idiot for not investing, apparently. I can't hit them all.

All right, great job. We'll see. we'll see. Enjoy the interview. Enjoy the interview. I can't wait. Matt Dusterberg is president and co-founder of OmeConnect. Welcome to the show. Thanks for coming on.

Thanks for having me, Molly. So I've been wanting to talk to you guys for a while because I'm just so interested in this model. Tell people who aren't familiar what you guys do. Yeah. OmeConnect pays people to reduce their electricity one or two times a week. It's a very simple model. We ask people to turn down for an hour or two, you know, once a week. And then we'll pay you for it.

how, first of all, how do you know? And then second, how did you get any investors to go for that? Just kidding. I know how. That's a great question. Actually, we did secure one of our first investors at a launch conference. So, you know, it all ties back to Jason. So a big shout out to him.

All things do, yep. Yeah, so the model is a little bit interesting. But to get into your question, which is how do we actually measure it, We're actually tapping into smart meters, which has been installed into about 90% of the nation, really through the American Reinvestment and Recovery Act back in the days of Obama. And then how do you tie into that? Like with an API. Tell me a little bit more about how you get installed. Yeah.

So one of the big requirements, as soon as a user signs up with us, we ask them to basically validate that we can get access to their utility meter data. and then that's through utilities or third parties, and we're then able to look at historical data, look at what you usually use, and then compare that to what during a single event, what a person is using. So if a user usually uses one or two kilowatts, and they reduce to half a kilowatt,

we can calculate precisely how much they're reducing. And then how do they realize those, when you say you pay them, what does that look like to the consumer? Yeah, we have a virtual. currency called watts. And each one of those watts can be cashed out through PayPal or Venmo. And then we can also give gift cards through Amazon or Target. But we love to kind of really try and get more devices into users' homes so we can automatically save for them as well as encourages them to get prizes,

such as a trip to Disneyland. And does this work? Are you seeing a meaningful reduction in power research as a result? Yeah, absolutely. We are seeing 20 to 30 percent reductions on our users on an everyday basis, which is pretty meaningful. If you look at other folks in our space like O-power, they generally use about, or reduce about 1% at all times. So what kind of devices would I have to have in my house in order to do this? Like in a start talking like a Ness thermometer? Are you talking about a smart meter from my utility, both all? Thermostat. The thermostat. Sorry, Thank you. My kids.

Yeah, so you don't actually have to have any devices to start. You can just do behavioral changes, which is, hey, turn off your AC for an hour, don't run the laundry or don't want the dishwasher. And that will actually usually net a couple dollars. The more advanced users do have devices, we do encourage that. Smart plugs are on the order $5 to $7. We're often able to give you the first one for free. a lot of our users are low to modern income. So this is their first smart device in their home,

which is really cool. We're introducing them the whole new world of Internet of things. But then the ideal kind of the best device we like to have access to is thermostats. And that's really controlling about 50% of your energy usage at any given time. The really cool thing is people don't even notice. So we'll turn off your thermostat or change the temperature, set point by a few degrees. And they won't really notice and we'll be able to save a lot of energy during some really

critical times for the grid. Tell me, give me some stats. It looks like my notes say that in 2020, OEM Connect users reduced one gigawatt, gigawatt hours of electricity demand in California during an August tea wave. Yeah, that was specifically during, if you may recall, there were some blackouts in California. This was the first time we had blackout since 2001. It was a pretty big deal. Oh, I remember.

Certainly. Both of those, actually. The 2001 and then these ones, yeah. Yeah, it created some political shockwaves, which we're still kind of dealing with today. But, yeah, so we were called to dispatch our users. We dispatched about a million user events, which means like, you know, a million user hours. And we saved about a gigawatt hour of reductions during that time. It was pretty fascinating to see kind of the level of reductions.

that people were doing and had the consistency. People were writing in saying, hey, look, you know, this is hard. I'm, you know, turning off my AC for three hours. But, you know, I've got my fan and, you know, I'm watching the Dodgers game on the iPad. And it's all good because I'm making $5, $10, $15 for just doing that. Yeah. So they saw the tangible rewards directly and they were rewarded for doing so. I want to ask you more about incentivizing behavior change because that is such a, you know, philosophical and fundamental part of tackling the climate crisis.

But before I ask you that, I want to ask how you make money. That's a great question. And that's something that's a little bit more nuance. And, you know, I've been my whole career in the energy sector. So it's quite complicated. But just at a simple view of it is we act as a generation unit. So instead of turning on a natural gas. power plant when the sun's not shining or the wind's not blowing, we get turned on instead.

And as we, as California and the rest of the world adopts more and more renewables, which is awesome, by the way, we're seeing phenomenal adoption rates of solar and wind. The challenge is that we're using electricity all the time. So when the sun has some clouds over it or, you know, it's not windy, there's volatility in the grid. And usually that's solved by natural gas being turned on and off. and instead of having that turn on, they just ask, hey, can OMCONNECD users reduce a little bit during that time? We do that and we get paid for doing that instead of having to build a new natural gas power plant. And then we pass most of those savings onto our users.

We've paid out over $20 million today. Before we get to the ad, it makes our team so happy to see our partners celebrate big wins, and I'm thrilled to hear about this huge funding round for our amazing partner, Odu. Really great stuff from Julian and the team there, especially in this crazier venture market. So congratulations. And speaking of the market right now, being capital efficient is more important than ever. You know that if you're an entrepreneur. And one easy way for you to cut costs is to run all of your SaaS apps on one platform. So check out Odo's suite of business apps. Using Odu means you don't have to have a bunch of different

SaaS subscriptions. Everything you need is already on Odu right now. All you have to do is turn it on when you're ready. And they only charge you for the apps. You use. Odu has over 40 main apps and over 16,000 apps from their open source community. All of this will streamline your business. No more issues transferring data back and forth. And you'll have one customer support contact across all of your apps, not 20. And here's the best part. Your first app is free forever. And Odo is offering you $1,000 in credit on your first implementation pack. So go to Odo.com slash twist for $1,000 off, that's ODOO.com slash twist. So you are being paid by utilities?

In a roundabout way, yeah. So in the energy sector, you may live in the Bay Area, I don't know, but you probably have PG&E as your utility. PG&E actually buys its power from the California ISO, which is an energy market. It's similar to the NASDAQ, for example. You can buy and sell stocks of Apple on the NASDAQ. you can buy and sell kilowatts of energy on the California ISO. So PG&A is going and buying it.

We're selling it. We don't never really kind of see each other because it's all being kind of transacted through the market. But in a roundabout way, yes, PG&A is basically buying it from us. Right. So what you're essentially saying is we have all of these users. We have a measure and apparently a consistently measurable. amount of energy savings

that we can effectively sell as like excess electrons. That's right, yes. Excess. And it is really driven by a federal law that happened over the past few years. It actually got passed in 2013 and ratified in 2016 that basically said you can sell megawatts of power just like you would sell megawatts of power.

That was N as in Nancy, as opposed to Amazon Mama. That's right. Okay. Like negative a go watts, right? You can see me already going into the energy lingo, you know, megawatts, megawatts. I know,

I'm trying to keep up with the acronym soup. I'm in the radio, you know, universe too, where I'm like, okay, nobody's going to hear the difference between those two words. So let's,

I mean, energy selling and buying is so fascinating and so complicated. And it seems like it would really take somebody who came from that sector to understand that, because what you are described, describing is it and what you've built is effectively a virtual power plant right you've said we have we will be able to generate this much electricity through savings how certain are you of the supply you know like yeah are you having to measure the excess electrons minute by minute the nago watts

yeah you know what if you don't do at that time they're like now i'm i'm good i got a bonus that's a great question and that is something that we're talking to the energy regulators the energy operators all the time about. And we don't always hit it exactly on the head. You know, if you dispatch a natural gas power plant for 50 megawatts, you'll get 50 megawatts. But sometimes you might get zero, you know, it may fail. And there's a, you know, non-zero chance. When we dispatch for 50, you're either going to get between like 40 or 60. You don't really know which one. And so, you know, we're working with the energy operators to account for some of that variability and have them get comfortable with that.

And really figure out a way to create that flexibility in the grid as we bring on more renewables on the grid. I wonder, so like in terms of the reliability, though, if it's 40 to 60, if you say it's going to be 50 and it's between 40 and 60, how does that compare to say Urquot in Texas? Like, it still seems like it might be more reliable than some of the energy supply that we've seen. Yeah, I mean, I think that's one of the. the biggest advantages of us having kind of such a distributed set of resources,

there's very little chance that we'll get zero, whereas there's the non-zero chance that a natural gas plant might fail or a wind turbine might freeze over. And so really what we're doing is we're diversifying our resource fleet to be resilient to extreme weather events, as well as this higher penetration of renewables. and we're seeing kind of this fight happening all the time. The renewables are so cost-effective.

They just want to plow more renewables into the grid. The grid operators are scared because they're like, I can't turn on the sun and I can't turn on wind. So what do I do? And there are batteries, but not quite enough. Yeah, and there's a lot of competing uses. We should definitely get batteries and cars. There's more than enough electric vehicles that we need to get on the roads.

But if we can solve this problem, this flexibility in the grid, we can really start to get to high 100% penetration renewables, which really solves a quarter of the entire carbon footprint. And so there is a pathway that I see in the next 10 to 15 years where we could get 25% of the carbon footprint fully under our control. And so it's a pretty exciting time, but it's also like we need to move fast because, you know, the extreme weather events aren't stopping. Yeah.

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And if you want to list your company, you can do that as well. So let's talk about scale. Let's go back to that gigawatt hour savings in 2020. For people who don't necessarily understand what we're talking about, give us the perspective. I mean, is that a block? Is that a city? Yeah, it's about San Francisco, the city of San Francisco for about an hour. And so, you know, that's what we're trying to get off at scale. The idea is, can we get to terawatt hours?

Now, we only have a couple hundred thousand users in California, New York, and Texas. We want to be millions of users. And we just raised a round of financing to do so. We're also expanding our footprint and bringing on a lot of strategic partners to do so as Yeah, we should note you just closed a $55 million series D fundraising round a few weeks ago. Total investments close to $100 million overall. Yeah, that's right. And most of these are through strategic partnerships.

So sidewalk infrastructure partners, which is an affiliate of Alphabet. So Google's, we have a deep relationship with Google through that. Sun power. And we're delivering solar and storage solutions for our users. through Sunpower. Carrier has been an amazing partner. They're bringing a fleet of kind of contractors that are installing HVAC systems into homes directly. So there's a whole ecosystem around the home and energy use management that we're partnering with the key folks in each of those verticals. And so what could this start to look like? I mean, I imagine, you know,

goal one is on board those millions of users with this behavior change specifically around energy. I have also, though, talked to, you know, providers of mobile charging infrastructure or makers of EVs who are talking about bidirectional charging. Like, it seems like this idea of distributed energy storage and generation is almost limitless. Well, I mean, limitless, but it seems like there's a lot of potential. Like, you could really amp up the watts. Absolutely. Amp up the watts. I love it. I'm a little embarrassed by that pun. But also not at all. Just put it all in there.

Absolutely. I mean, there's a tremendous amount of interest here. I think one of the areas that the energy sector has failed to date is thinking about who's adopting it. They've always had the mindset of we'll build it and they'll come. And they keep building these, you know, field of dreams with no one actually showing up because they're like, oh, the customers don't want, you know, PG need to control my entire home. why wouldn't they? You know, they're scratching their heads. Don't even get me started, man.

Yeah. And, you know, John Oliver. Exactly, exactly. And so, you know, there's a whole spectrum of kind of the end user here. But, you know, really what you need to do is engage them from the beginning. Give them direct access to some of the value. Like, oh, I am going to turn off my AC from 6 to 7 on a hot day because I'm earning $5 from it. Like we have created a very nice cyclical loop where a user can take an action and directly get rewarded from it that we've not seen in the industry to date for some reason.

There's a lot in that for some reason. I mean, what do you think that is? Is it just because certainly utilities are starting to send, they're being a little more proactive. It's protectionist, it seems like in nature that they're being proactive about saying, like, please turn your air conditioning off during these hours because we can't keep the lights on if you don't. But what do you think it is about utilities? Is it just that it's a rate-based system? And so, frankly, the more you use, the more they get paid. Yeah, I mean, I wish I had like the silver bullet to figure that out.

I mean, I think there's been a lot of folks studying why utilities have the inability to engage users that, by the way, they call them rate-based or rate payers. Right-pairs, exactly. Or load. Even worse, I've seen them. Oh, yeah, or load. You mean the, you know, Jane and John Doe? down the street, you're just going to call load.

Yeah, of course, just the load. You know, it's just a different mindset. I'm sorry, I don't want to say it, but like, really, we're all just big poops to you. Thanks a lot. Exactly. Yeah. Wow.

I am a child. I'm sorry. Please, continue. Yeah, no, that's exactly it. And so they are really, really, utilities and the incumbent in the energy sector is really, really good at delivering electricity every day, every hour of the week. they are not good at engaging people.

And in fact, they really want people to just go to sleep on them. They don't want to engage. And they just want you to pay your bill, you know, month in, month out. So I think this has to really change the paradigm of how you think from the energy sector. How do you engage customers? You're asking them to give you access to your home, which is a very personal thing. We're literally in people's homes, turning off and on refrigerators, turning off and on your thermostat. In some cases, we have users with 20 plugs. We're turning off and on

everything in your home for an hour, 15 minutes at a time. That's a personal event. And no offense to PG&E, but like, that's just not something I think of when I think of PGE. Talk to me about that consumer experience. Like, when people sign up for Oak Home Connect are, I know they're not buying these devices from you, but do you have, what? What's the learning experience like and the kind of the onboarding? Like, do you have a kit, order this? Yeah. You know, referral link from Amazon.

I'm learning as fast as I can, and it's still drinking from Firehouse eight years. I'm the energy guy. My two co-founders are really consumer deep. And it was funny, we had a demographic that we originally targeted, which is like, oh, you know, you've got an EV, you've got solar, you're really energy conscious. Of course you'll come on. And there were some of those folks. but actually they were kind of our worst users

because they're already like super efficient. They're already kind of all, you know, fully renewable. We got, I remember back in 2016, we got a post by Mr. Money Mustache. He's a Twitter handle, like Mr. Money Mustash. And we literally, I was in a board meeting and like the numbers were going through the roof and like, what's going on?

I was like, oh, Mr. Money Mustash posted about us. And then we tapped into that, you know, it was Reddit beer money, like earn $5 to buy you beer, just turn off your fridge. And then you really tap into a different demographic. They don't have solar. They don't have EVs. They probably haven't even ever installed a smart device in their home,

but they're really sensitive to $50 to $100 a year in saving. And so we're providing kind of this Uber or Airbnb service where you can actually monetize the latent value of your electricity within your home. So $50 to $100 was really interesting to them, and we started tapping to them. But a lot of that was, you know, that's all my co-founder. So that's not me from the energy sector. And we mainly hire out of the consumer expertise, Google, LinkedIn, Facebook, Zinga.

So, you know, staying away from the energy sector as it comes to consumer engagement. I mean, yes. I'll do respect to you. It's great to be the only guy in the room who can talk about PPAs and BPPAs and virtual power plants and the number of electrons and gigawatt hours. But, yeah. Well, I mean, this is honestly one of the things. I find so compelling about energy efficiency. And when you talk to people in the climate space and like long-time journalists and activists,

I mean, one of the things they'll tell you is the massive return on investment that you get from energy efficiency. And the sort of benefit that if you position it properly, it doesn't even matter if people, you know, I hate to use the word believe, but it doesn't even matter if they believe that the climate crisis is a climate crisis because who doesn't want to save money? That's right. And there's another aspect of that, which is really independence. I think, I don't know who it was, but maybe Volt Solar, but they did a study a few years back and they were trying to figure out what's the biggest driver of solar adoption? And they cut it by, you know, a hundred different variables. And the one thing that was like the most indicative was NRA membership, National Rifle Association membership. Yeah, right. Which seems like crazy. And when you think about it, like this, this kind of juxtaposition. But as you think about it from the lens of independence, I control this. It unlocks this other group.

And it's really powerful because if we're thinking about tapping into millions of users, we need everyone to come on board and help us about the climate challenge we have today. Yeah, 100%. I mean, you can see the crossover with preppers completely because ultimately this is about some version of decentralization, which arguably is, is why utilities might not go for things like this, right?

Because death spiral. I'm not trying to draw you into anything that's going to get you in trouble. But you could imagine that that's part of, well, it could be an opportunity for utilities or it could end up being a threat long term. That's right. And, you know, it certainly disrupts the industry in a lot of different ways. Who is your competition? aside from PG&A maybe.

Yeah, I mean, I think you hit the nail on the head. I think the status quo is really it. And I mean, if you've seen, you know, just today, there's a bill going through the California state legislature about kind of unlocking more funds to build more fossil fuel-based power plants. And that is the status quo. That is, you know, even in California, a very progressive state. But they're so scared of keeping the lights on

when the wind's not blowing and the sun's not shining. that they were resorting to going back to exactly what we say, don't do. Don't build natural gas power plants. And by the way, just so you know, natural gas prices has just skyrocketed over the past couple months. So we're building gas power plants on this fuel that's super volatile that has connections to Russia. Like, there's a lot of negative around all that.

But it's just this status quo and this fear, really, of change. What kind of scale do you think? you have to get to be a really, really significant disruptor? Terra watt hour. So it's about a thousand X where we are today. And we've seen kind of pathways to get there, and it has to be global. But, you know, as I mentioned earlier, like, I'm so excited. Like, we literally have a pathway to control a big portion of the climate crisis on our hands.

And it's like, and that's driving, you know, we have very good team. We have an amazing team. We have very good investors. We have very good partners. Everyone who's all aligned on trying to figure out and tackle, how do we get to 100% decarbonized, decentralized grid? How did you, before, you know, one last question. How did you come to this and decide to get involved in kind of tackling,

you know, it sounds like your old career in this innovative way, no more status quo for you? Yeah, no, I mean, I saw it from a different angle. I was an interdegie trader when I first got out of college and had a couple of $30 million portfolios. It was fun. It was also like kind of icky in a way that I'm making a lot of money out these markets and no one else has access to it. I was only able to get access because I was a trader and like it made no sense. So in a way, this was the idea of democratizing that, the access of us to trade and get $30 million out of

this market, I want to give directly the hands of these low and moderate income users, they are earning, you know, $50 to $100 a year for just turning off their lights or their AC for a couple hours a week. Matt Dusterberg is the president and co-founder of OmConnect. Where can people find you, OmConnect.com? That's right. www. O-H-M-C-O-H-M-C-O-N-A-C-T dot com.

Go check it out. Get that beer money, people. Thanks, Matt. Get that beer money. Get us to Terawat. We got this. Okay, great show, everybody. Tune in on Tuesday.

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