Startup Founding 101 – Part II

Fred Davis: The Power Connect podcast is brought to you by Innowatts. Discover the Innowatts difference today at innowatts.com.

Neal Dikeman: Coffee’s cheap. My job is to have those 30 minute conversations and then to see patterns. And then after that, the job is connecting people to make us all money somehow to progressive technology.

Get employees to join, get new investors in. These are interesting, these are actually Silicon Valley problems that Silicon Valley has solved. Silicon Valley understands how to scale businesses in really interesting ways because they understand how to build and utilize networks and connections to create products and drive businesses and scale and form capital and customer relationships and that sort of thing.

The rest of the world that knows energy, like Texas, has gotta figure out how to do some of that to scale this stuff in the energy transition. Cause it can’t be done the way it was done before.

Fred Davis: Welcome into The Power Connect podcast. I’m your host, Fred Davis, episode 51 of the program rolling along on a Thursday. I’m glad to have you guys on board as we are each and every episode, part two of our Neal Dikeman conversation going down today. Look, it’s been a busy last couple of weeks. And so I do apologize for not getting some episodes out to you.

We’ve got a slate of episodes coming up here in the next couple of weeks. And then of course, we’ve got a tremendous month of December on tap as well content wise. So look, I know we’ve been backed up a little bit. We had a tremendous webinar that went down last week with the folks over at Innowatts.

So a shout out to a Krishan Kasiviswanathan, Chief Innovation Officer over at Innowatts. So I’m not going to even try to pronounce his last name. He told me how to pronounce it and I don’t want to insult the man. And then Mr. Roozbeh Amirazodi from over at Rhythm Energy. If you haven’t seen the webinar, go to innowatts.com, click on the pop up, and go to the go to the landing page that we created for it. All things forecasting, all things as far as what Rhythm’s been able to do in the short amount of time that it’s been around, and is now one of the top ten retail energy providers in the space, and so just an absolute fun time, very insightful.

Very informative. And again, it’s not your typical type webinar. We kept that thing moving. And of course if you’ve known me for any amount of time, if I’m moderating something, we’re going to make sure it is popping off. And we certainly did that. So again, shout out to a Rhythm Energy, Roozbeh, Krishnan, Innowatts. We did a tremendous job. Go check it out. Finding a rhythm, forecasting and innovating in a renewable age. We had a good time. Check it out. We think you’ll enjoy it. Speaking of Innowatts, look, let me tell you about Innowatts podcast partner. Look, the winter temps are here and market volatility is the norm.

Oil and gas prices are still high. And the question for retail energy providers is how can I get my load forecast even tighter for the days and weeks ahead. While utilities are thinking, how can we improve our demand forecasting and glean insights into how our customers are consuming energy? There is a way and it’s Innowatts’ energy data platform that is recognized as one of the most accurate demand forecasting tools in energy, thanks to its proprietary AI and machine learning powered processes and capabilities that are also providing profitability, risk management and carbon insights that allow its customers to make faster and smarter decisions that are leading to higher revenue outcomes. Go to innowatts.com today to learn more about the Innowatts difference and how it can work for you or follow Innowatts on their LinkedIn page. All right, let’s get right down to today’s episode. Episode number 51, Neal Dikeman, Energy Transition Ventures, part two of our conversation. Again, if you listen to part one, if you haven’t yet, go check it out.

Great insight from a veteran of the cleantech space. And when I do talk about cleantech space, being a veteran of it Neal Dikeman is certainly that guy. What do we get into in today’s episode? Cause look, we don’t do a lot of part twos with folks, but with Neal Dikeman, we had no choice. Why?

Because he’s just that kind of guy. We get into the evolution of cleantech. He talks a little about his former blog, and he’s still running it, but how it started out as a marketing tool and what it’s developed into, that being cleantech.org, we get into it, how it was going to be the Craigslist for cleantech.

So we talked a little bit about that. How Silicon Valley, which obviously he’s got a lot of experience in and how Texas needs to come together. There needs to be better communication and how they can work together for a better cleantech environment. Why networking and utilizing your network is vital in today’s day and age.

He gives more startup tips and he’s got a very interesting answer on the IRA, AKA the Inflation Reduction Act. And any kind of future political ambitions. Again, it’s Neal Dikeman. Need I say more, one of my favorite conversations and just one of my favorite people in the space. And I certainly think you will agree.

So without further ado, one of the founding partners of Energy Transition Ventures, Mr. Neal Dikeman.

Neal Dikeman: I wrote the, ‘what is cleantech?’, the first history of the term cleantech in about 2007 or so. And there were a couple of media firms that helped create it. The Cleantech Group and Clean Edge, which would do media, put on conferences, and in discussion with some of the founders over there and a few other people that were around at the time. Nobody can quite pinpoint who coined it. There was an April of 2001 Clean Edge report that the guys had put out that used the term, not really as a term of art, but pretty close. And so that’s the first really written piece. The Cleantech Group was set up around that time. And so , between the two of them and there was a handful of venture capitalists Nancy Floyd, who was over at Nth Power.

There’s a few others that were someone in that group got the coinage and then it emerged and it got popularized by those groups and a few others. The Cleantech Group was a powerhouse for a long time. Keith Raab, Nick Parker, you had set up, they were the, their conference was the place to go if you were a startup or more importantly, if you were a venture capitalist doing cleantech and they probably get more credit than anyone for having popularized the term and creating it as essentially an umbrella asset class for, I used to call it the imperial term.

It sucks in all sectors around it. So there was IT, biotech, and venture capitalists were looking for something new because software was, IT was dead. We were in the tech rack, post dot-com. Yeah, so I think everybody was looking for kind of the next big thing, and these guys had helped manage to popularize a term around stuff that people wanted to do.

Before that wave one was, you can use the term Energy Tech, there’s Energy Venture Fair, NREL Energy Growth Forum. There’s a bunch of stuff going on, but much smaller. It was utility driven, it was actually all copying Enron. All the first wave money pre 2001, the late 90s money in energy tech was deregulation and distributed generation and gas as a convergence fuel driven. 2001, 2005, and even that 2001 time frame. Things like solar were barely a thing. The solar companies that existed then were smaller than an R&D project at a solar company today. The trade show marketing budget of today’s companies was bigger than those companies. There’s some really cool — Astropower, Evergreen Solar, Ovonix, ECD, some really cool companies.

But it was young. And so even that sector didn’t really explode until the 03 to 05, 06, 07 time frame. And then the sector got its legs under it, essentially in the green wave. Yeah, CalPERS and CalSTRS put up 500 million dollars to go into funds that would invest in cleantech. And this was the first real institutional money that was going to back funds.

CalPERS. So it exploded. Before that had been some high net worth money, corporate money, smaller fun stuff. And so all the mainstream VCs started, okay, maybe this stuff isn’t bad. Kleiner Perkins and a couple others didn’t like the term cleantech because they wanted their own brand. So they started to popularize the term greentech, which got nowhere and died after a few years.

What did? There were some media companies. It was a, there was a nomenclature war. Now we have climate tech. Because cleantech is old. Those were the people who didn’t make money. Not true. Not true. The cool kids didn’t make money. Other people did. But now climate tech, all the cool kids call it climate tech.

I, I’m not one of the cool kids in case you haven’t figured that out. We call it energy transition, which is more of the corporate boardroom strategic term that has become the large term of the art. That didn’t pass cleantech as a search term for stuff until middle of the pandemic.

Fred Davis: Okay.

Neal Dikeman: Yeah. Climate tech of course, wasn’t really a thing up until the last year or so. And now the cool kids have got it. Yeah. So nobody uses cleantech anymore except it just gets slipped into conversation because well, it is the, umbrella term of art that describes everything.

Fred Davis: It really is, isn’t it?

Neal Dikeman: Isn’t it?

That was the beauty of what Nick and Keith had. It’s just brilliant, right? They had literally created the imperial umbrella term. And I at one point had written all these, this list of the definition of cleantech. So I wrote the first seminal definition thing. And there were a whole bunch of warring definitions, which basically consisted of lists of stuff— sectors that comprise it.

Ag Tech is cleantech by the way. Water tech is cleantech. Sure. Energy is cleantech. Climate Tech is, it’s all cleantech. There’s only three sectors. IT, biotech and cleantech and venture. All the rest of ’em fit into one of those.

Fred Davis: Okay. And so you go over to Jane Capital. What was

Neal Dikeman: Jane and I started it.

Jane, sorry. There is a Jane of Jane Capital. My partner for a dozen years named Jane Linder. She was one of the first female VCs in the Valley, really. Was at a firm called W. I. Harper. She’d hired me at GlobalGate, which was the fund behind yellowpages.com and a few others. And then she and I partnered to found Jane Capital.

So, number one, she was older and more experienced than me. I won’t tell you how much older. She’d get very mad. Yeah. But I had no brand, right? It was her relationship. She, I told her when we started this, Hey, I, in order to launch this thing, we need a big brother. We need somebody to work for, and we need an advisor or somebody kind of some gray hair to help us.

So she’s like, all right, makes a couple of phone calls. And we closed Macquarie Bank as our anchor customer. We were the advisor to their tech fund. They’re who trained, they were investor in one of the guys was on the board of Globalgate. They were, yeah, big IT investor in Australia, the team there, we basically were running the Macquarie venture model at Jane Capital for years.

Very successful. And then she called her friend Adlai Stevenson, who’d been on the board of Globalgate for us, and said, I’d like you to be our main advisor. We had a few others, but those were the first two phone calls. I’m like, alright, this is gonna work.

Fred Davis: You said it’s like the godfather of fintech.

Neal Dikeman: I think he is. He invented the CRADA, which all these people are working under. He invented the TLO, ‘ invented’ if government people invent stuff. He literally wrote the bills and wrote the law, right? But, yeah he wasn’t a known name as a cleantech name at the time, because,

Fred Davis: nobody was then, right?

Neal Dikeman: Just Keith and Nick. And I’ll send this podcast and they will get a kick out of it. Yeah, they’re great. They’re still in the business at various spots and doing things. But they, it’s like, where did all this stuff came from? A company said, we’re going to found one.

And they set up the conference for cleantech and they were genius because they go get all the investors at the table. They were geniuses at getting the money to come to the table. And so it was the place you would go kept to keep the riffraff out. Yeah, only the investor types and they let us in cuz like I guess they liked us.

We were entertaining or some such, but yeah, they managed to keep that brand driven a decade, but it created the term. It created a place to go. So we launched cleantech.org as essentially a marketing project for Jane Capital, and we started with the idea that it’s the Craigslist for cleantech. Where do you, there’s no center of gravity in our sector. It’s everywhere. The startups are all over the world. The investors are all over the world. The team, the customers are, it’s not like the valley. So we create one on the web. So we hired a guy, we registered domain and started to build out a portal using the NREL investor database and yeah, a library of 600 research notes, it’s still on there, called the UFTO Notes. That was a decade of Basically, every technology startup and everything that came out of the national labs and energy that one of our research scientists was writing up as a multi-client study. Every utility and every CVC in the business was his customer. This was what they saw. He was probably the top networker in the sector for a long time.

So that was the anchor of the portal. And then our cleantech blog was set up to launch the content. It’s content is king. You need content. So this was gonna be our content engine. And I got a couple of really rock star bloggers to come help. And we started, we started writing.

That’s what kind of got that pulled together.

Fred Davis: And so when you say you want it, and you’ve got the NREL, you’ve got this, CBC, you got this huge collection of folks or database that you brought to it. And so when you say you wanted to be the Craigslist again, you wanted to be the hub of all things cleantech.

If you need anything, research…

Neal Dikeman: that was the original concept, right? And the portal world, of course, has moved on. Now we don’t consume content in portals anymore. We consume it in social. So the LinkedIn’s, Facebook’s. So right now, the Cleantech Group we run a 40 something thousand member group for Cleantech on LinkedIn have run another 11,000 member group for just for carbon markets people on LinkedIn. And so you start just to consume content differently.

Fred Davis: Yeah.

Neal Dikeman: The, yeah, so it’s just, it was, but the concept’s still alive. We did a prize competition, a year and about 18 months ago with one of my largest LPs at Energy Transition Ventures, a company called the GS Group, which is number seven on the Korean conglomerate list.

They had an innovation program. They wanted to kick it out and get some, some press and, engagement on it. I said, Great, we want to get some stuff going, too. So we ran $100,000 prize giveaway. GS gave away $100,000 through our platform. We brought in hundreds of startups to pitch. We got down to a 25 startup semis. We got down to a six startup finals. I got, a buddy from Royal Dutch Shell, a buddy from Amazon’s Climate Pledge Fund, one of our advisors, Deb Merrill, who runs a business for EDF and used to run Just Energy, a couple other people, and we had them do the judging. Got one of the investors from the GS Group over and, and we put up the startups, made them pitch.

Cemvita here in Houston won the finals, had a really cool show. Yeah it’s still real. When we want to actuate our network, we just gotta, pull the trigger.

For a long time, I struggled to use the term cleantech because I thought about it as energy. But no, it’s a great term. It’s, it really does give us all something to hang our hat on.

Now, startups don’t call themselves cleantech startups. When they grow up, they call themselves a wind startup or a solar startup or an energy storage startup. But when they’re raising money how do you describe it? It’s still a cleantech startup. But look, that was our marketing project for Jane Capital.

We started, we had Macquarie Bank. We did a bunch of deals for Macquarie. And we would, and a couple other strategics after that. And we would then cherry pick for ourselves. And we did, at one point, we were probably founding and spinning off a company a year out of Jane Capital.

Yeah, and so we’d seed them. And we pick up some, we license some technology out of the university, spun one out of a private lab, did one for a big corporate, one of the first utility scale solar companies, yeah, running around for Meridian Energy, New Zealand state owned power company, did a couple we spun out of Australia, spun one out of a big corporate R&D effort down there and superconductors and smart grid.

I think we had three IPOs out of seven companies, best hit rate. Except for my partner, Craig Lawrence of any venture capitalist in the business. Craig only did two deals at Excel, Sunrun and Opower. The story he tells is that his partnership was done with cleantech. And so they turned him down for Enphase at about two orders of magnitude less than its current price. So category killers, right? That guy’s got a nose. That’s why I partner with him.

Wanted to be a journalist. Like I’m jealous of journalists because journalists are awesome, right? To be a journalist, I got to get a real story. Remember, we did a lot of interviews. We’d CEO interviews and that sort of thing, which are great. They’re easy to do. They’re fun.

Fred Davis: Yeah.

Neal Dikeman: PR firms would send me people, right? PR firms would do; wow, these guys are literally, they show up and they bring

Fred Davis: Never hear of VC, right?

Neal Dikeman: All they saw was I was Cleantech Blog or cleantech.org.

Fred Davis: Okay.

Neal Dikeman: Yeah. Wow. Conferences would give me media passes. I would go with a journalist media pass on. Basic deal, you give me a media pass I’m going to do an article. I got to do, one anyway, I might as well do one on your show or enter, or Hey, who’s your sponsor? I’ll go interview your sponsor. There’s always some good story. I interviewed, I had a great interview with the product manager of the Nissan Leaf.

Brilliant interview. And Oh, fantastic. I broke the story on applied materials entry into solar with the San Francisco Chronicle. How? Because. One of my friends was in a carpool with a guy working at Applied who told me this stuff was happening and I went and pulled their patent list and some job ads and you could see what they were working on. And wrote it up and of course, nobody cares about my blog at the time, it’s still young. So I got the San Francisco Chronicle to pick up the story. I basically partnered with them to write the thing and once it hit there, it got hit elsewhere. Of course, they’re all citing us. And I’m With a broken story.

We then broke the story of IBM’s entry into solar a year later. Yeah. So there’s some real journalism in there.

Fred Davis: Absolutely.

Neal Dikeman: And then some, like, guys, they just write op-eds and they were good op-eds. Yeah. So we had fun because what we found is you gotta make it real.

Fred Davis: And that’s the thing is you weren’t just doing puff pieces, you were doing legit news.

Neal Dikeman: Yeah. And. There was an old, there’s an old phrase that one of my investment banking bosses back when I was at Bankers Trust in Houston Oil and Gas, taught me. It was called Investment Banking by the Wall Street Journal. Which is a pejorative term that says, if you see it in the journal, you’ve already been beat a long time ago.

You need to be making the news that goes in the journal, not reading about it and then calling that company and trying to get in on a deal. Same concept.

Fred Davis: Too late, if it’s in the Wall Street Journal.

Neal Dikeman: Exactly. Same with blogging, you’re either in the mix, you’re not. But I was a partner with journalists and we would swap stories and ideas and leads and I’d cite their stuff.

I was on the blog role of the Wall Street Journal, Reuters, yeah. We did the first blogs in green tech for CNET when CNET launched its blog thing for Christian Science Monitor. I was our first energy voices blogger. It’s real stuff. And so this stuff’s cool, but it’s a marketing projects.

How do you balance it? Look, other places hire a PR firm, you spend marketing money, I didn’t have a marketing budget, didn’t need one, didn’t pay to go to conferences, why? Because we were a conference, right? We ran stuff together. Yeah, conference wants people to show up. They’d send me a note, hey, can you drop stuff on to your network?

Can you actuate your network and bring them there? Not a problem. Give me some free discount codes. I’ll ship them out. We’ll get you a few people, get you. So we were a media partner to everybody. It worked like a charm. Now, to be fair, Jane Capital is a small volume deal shop. We didn’t do very many investments.

We didn’t really do very many deals. So I just needed to find one or two a year. Yeah. So it worked really well. And you know what we, had a few other kind of fun exercises. I got to be the emcee of the cleantech open in nationals. That was probably the highlight of my entire career standing up on that stage that — my comedy act if I’m — No, I wasn’t that good, but it was so much fun.

We, with the Harvard Club of San Francisco, we did one of the very, the something called the Carbon Showcase. It was, basically how to do offsets, which was boring for 10 years before that, boring for the last 10 years, hot again, and very hot then. Standing room only in the Harvard Club of San Francisco.

Awesome show. I designed it, hosted it, recruited the people, put it on. Just a blast! VCs don’t always get to do that. What did we get out of it? We met cool people, cool startups. They show up, they give us a shot to be in their deal and we just got to find our one or two.

Fred Davis: So it really did, what did you enjoy more? The Jane Capital side or the cleantech side?

Neal Dikeman: It’s all the same. You’re writing about the stuff you’re living every day.

Fred Davis: Okay.

Neal Dikeman: Think about all I do all day long. I talk to my CEOs, and I go try and help them do whatever they need to do. Find investors, customers, people, suppliers, what have you. I talk to new CEOs and founders, and try and decide if I’m going to write them a check.

And, or I talk to their investors, their customers, etc. Or I talk to my partners about those people, or I talk to other investors. And the fourth thing is I talk to my LPs or prospective LPs. We just talk, but it’s all the same topics. It’s energy transition, IRA, ESG, this tech, that tech, one of my guys tech, R&D plans, hiring people.

It’s all the same stuff. Just if you’re trying to put on your podcast, and you’re in the business all day long, which you are, right? You’re working in this field. So can you tell us what you’re doing now?

Fred Davis: Absolutely. Marketing consultant with InnoWatts.

Neal Dikeman: InnoWatts, absolutely. Cool little company.

One of its first investors was Royal Dutch Shell. One of my former colleagues there brought that in. Awesome company. We’ve, and you’ve had you’ve had Ampron on at the show, haven’t you?

Fred Davis: I have. This was before I got on with Innowatts.

Neal Dikeman: Fair, fair enough. Competitor to Innowatts. Cool little company doing very well.

They were in our shop a while. What’s the difference between your day job? You just gotta make it real. Do you want to have good content on a podcast? You just gotta be in the game. Now, I did tell my colleague Craig, we need to run a podcast. Craig said no. What do you mean? I can totally do a podcast. He’s no.

Fred Davis: Now, why did he want you to do in a podcast?

Neal Dikeman: I think it’s that theory that when the VCs start doing the podcast, they’re done.

There’s a lot of product managers in consumer and tech. And there are a lot of them on the coasts. There are not very many in Texas. We do projects, not products. There’s no people in the valley that know how to do a big energy project. It’s a combination of, for, say, for green hydrogen, right? It’s a power business development IPP-type cost structure with a midstream project-y thing and downstream customer offtake things. Built by an EPC.

There’s nobody in Silicon Valley that knows all three or four of those worlds. There’s 50 of them in Texas. The ones in Texas don’t know tech. They don’t know startups. So these worlds have to talk. Yeah, as a venture capitalist, I think part of my job is to meet a lot of people, look at a lot of opportunities, have a lot of coffees.

Somebody, this lady today, they were showing me a really interesting little technology and it’s part of kind of the little get to know you. First part of the chat. She apologizes for taking time. Appreciate it. All that, whatever platitudes. But my response to her is truth. Coffee’s cheap. My job is to have those 30 minute conversations and then to see patterns.

And then after that, the job is connecting people to make us all money somehow, to progressive technology, to get employees to join, get, new investors in. Yeah. And these are interesting. These are actually Silicon Valley problems that Silicon Valley has solved. Silicon Valley understands how to scale businesses in really interesting ways because they understand how to build and utilize networks and connections to create products and drive businesses and scale and form capital and customer relationships and that sort of thing.

The rest of the world that knows energy like Texas, gotta figure out how to do some of that to scale this stuff in the energy transition. Cause it can’t be done the way it was done before.

Fred Davis: What is it, the young lady that you spoke with today, what does it take for Neal Dikeman to take a meeting?

Neal Dikeman: Persistence. I’m gonna tell you, you’re gonna love this story. Alright. So we funded, earlier this year, a company called Renew CO2. We’re turning CO2 into monoethylene glycol, MEG. The precursor to plastics.

Fred Davis: Ok.

Neal Dikeman: Now, the main competitor to that process is from gas, and it’s Royal Dutch Shell’s process, called the Omega process.

And the Saudis have a different process, but there’s only two big processes, and a whole bunch of plants making all this plastic stuff. These guys are out of Rutgers, and the two inventors, Karen Calvino and Anders Larsson, had worked with their professor and created a novel catalyst to allow them to selectively reduce CO2 in a water electrolyzer, just like the little hydrogen electrolyzers, into, all the way into a chemicals product, a very interesting one.

Really cool. They had gotten an SBIR, government grant. And one of the tendrils of this government grant said, you got to go commercial, do some commercialization stuff, do some feasibility, some techno economic, find some customers, try and raise money. You have to go do something.

Government’s figured out, really bad idea if they don’t go get some venture capital money at some point, so they put in the deals, go try. So they won a bunch of competitions and all that, but now they got a little bit of money here from one of these grants, and so they hired a guy by the name of Peter Shepard.

And so Peter’s an old chemicals hand. He was at a startup, knows this stuff, run a couple of businesses and yeah, come help him out. So they brought him on as a consultant to come assist. So Peter, I was at a Greentown Labs event right across the street here in Houston. Talk about connectivity.

Yeah. The Greentown Labs original headquarters is Boston. There are only two of them, Boston and Houston. It was essentially launched with Shell as an anchor tenant way back then, and Shell and Chevron helped launch Greentown, Houston, as part of the Ion District, where ETV is headquartered. And one of the ladies over there, yeah, Juliana, who runs Greentown Houston, yeah, I helped her get her job. I. e., one of the guys there, who was a former start up guy, who was working at Greentown, and used to have a micro turbine company, had called, said, hey, I We’re gonna bring some people on. Who do you know? And I gave them some names, and she ended up being one of them. These are connections. She was one of the first people I met when I came back to Houston ten years ago.

Obviously they think we’re pseudo nice at least, so they invite us to things. And she’d set up a panel and invited me to speak on this panel. So I go speak on this panel with some other people, and I was saying snarky stuff. Can you

Fred Davis: So hard to believe. Can’t see that happening.

Neal Dikeman: Set you up there.

Peter was in Boston, watching the event, because they streamed it. Greentown streams everything. And sends me a note. Said, hey, saw you at Greentown. Great, whatever. I get these notes all the time, right? I blew Peter off.

Fred Davis: Why? Because you get them all the time.

Neal Dikeman: No, I sent a note back, said, sure. And we just, the follow up didn’t happen. But, whatever. Yeah, for whatever reason, it didn’t. Blow Peter off. Didn’t mean to blow just happened, right? Yep, time passes, right? Eventually he sends me another email.

Peter’s very persistent. And part of why he’s been successful at running companies all. And so he sends me another email, and right, great, fine, they send me over a deck. I read the deck and I just, by this time it’s getting close to holidays get in the way, Thanksgiving gets in the way, the meeting takes several weeks to happen.

Yeah, alright, whatever. Finally, we get on a call. He brings Karen and Anders, and they deliver their pitch. And to be fair, the deck didn’t blow me away, and it’s stuff that we looked at at Shell, and it’s, It’s chemicals, right? This is a hard area for venture. Yeah. Had a few little red flags in it, whatever.

After the call, I sent him a note and I’m like, yeah, send me some papers. They had me papers in a few hours. And I sent a note to Peter saying, I’m sorry, I didn’t take the meeting. That was stupid. This is a very interesting company, right? Needed the 30 minutes on the phone With the founders in the pitch.

How’d it start? Literally a cold email. Blown off cold email. Twice. From some random little panel that I sat on saying snarky things that he wasn’t even in the room. And he didn’t even work for the company. He was just an advisor to ’em. Now, the moment we funded that company, start working on Peter to join.

He’s now the COO. It’s a great story. Very exciting.

Fred Davis: Did you know that you part of if you invested that you wanted Peter?

Neal Dikeman: Oh yeah. Peter’s awesome. He’s awesome. Yeah. It’s this business about collecting people. Yeah. But so something like that kind of shows. So how does somebody get a meeting?

This one today was referred by another investor as a corporate investor. They’re smart. Corporate investors struggle to do early stage stuff sometimes. Especially if there looks like anything that doesn’t have like a rocket ship, venture financing, because they’re not company builders. You’re in a corporate, you’re trained to be nice and partner with companies, or you’re trained to go steal their stuff.

Preferably the first, not the second. But you’re in one of those two camps, and certainly if you’re nice, you’re not going to, you don’t want to go have to build the company and make the hard decisions all the time and force them. Yeah, and make them have to grow up. We’ll get a call from him.

Then I said, hey, we met him on the phone, having this chat. He said, oh, you’re interested in that area. I know a new technology that you might be interested in. Sends it over. Take the call. Why? It’s interesting to him. Means, if it’s technically interesting to those guys, it’s not stupid. It might be dumb, but it’s not stupid. And it turned out, this is pretty interesting. First thing I told her, I thought, great. This is an area that I don’t quite know enough technically to handle myself in, I know enough to get myself in trouble. But I got a guy back to the network.

Fred Davis: Yeah.

Neal Dikeman: Right? 50,000 people on our LinkedIn groups. Yeah.

I got a guy. He happens to be the perfect guy for this tech. He was working on this stuff 20 years ago. 30 years ago. Yeah. So I said I need the papers. Just send me something technical. Cool. For them to read. Yeah. That hopefully encapsulates the whole thing so he can read one paper and tell me Yeah. Your name and I, what I tell these startups is real simple.

When it’s a technical thing, not a SaaS startup or a little all, just all about the business metrics and product market fit and all that. When it’s a technical thing, you need to give me something in as an encapsulated a form as you can. White paper, a stack of papers, technical press, something that was going to tell a scientist as good as you — they don’t know your stuff — but they’re as good as you, who is familiar with the state of the art or capable of understanding it as soon as they read it. That person needs to be able to look at what you give them and get their eyes to light up and say, Ah, I understand how it works. I understand why it works. I understand what it is and how it’s made, roughly. And then I understand what they’ve demonstrated that has moved the state of the art. You got to make their eyes light up.

When I was in high school, I worked for a wood floor company. The guy running that wood floor company at the time was a former Harvard MBA and West Point grad who basically turned around small businesses. And I don’t even know if he knows the story, but the way I understood his strategy to be and what he told me one time is when you walk into a situation and it’s not working, something’s broken plants losing money product didn’t get now, whatever the issue is, go back in time until you figure out what they changed and tell them to unchange it and see what happens.

Fred Davis: It seems so basic and easy, right?

Neal Dikeman: Sure. But it’s hard to do.

Fred Davis: Yeah.

Neal Dikeman: Of times we walk back in this history. Oh yeah, it’s not a rocket ship. But it looks like it should be. Why not? Let’s go figure out what happened. Maybe, They just weren’t stepping on the gas because they didn’t have some resources.

Maybe, yeah, they were focused on product A, and hey, we had one we passed on the other day. He sold me a business plan, and I’m looking at it, and I’m like, and he told me a little bit about his history and his backstory and the product they’d done as an afterthought, and I’m like, I don’t like your product.

I think that’s going to kill your company. I think this is a really dumb area to go after. I like your other product. Can we do that one? And I’m not in his deal. I have the luxury of just looking at it and saying, I like this over that. That looks interesting. So you try and put yourself in their shoes and say, okay, yeah.

Number one, is there a fatal flaw problem in case we’re not going to fund or is it a fixable issue that could go to market? Have they screwed up product pricing? Now if you’re in a SAS company and you go into playing the little product market fit and all that game and that sort of thing, got your little metrics. Either the team’s figured it out or they haven’t. You’re just backing people and then helping them figure it out.

But this is energy, right? So the tech has to work. And the customer and the policy’s got to allow it and all that stuff. And then you get to things like, maybe it is just, y’all not pricing that not a problem. We can fix that. In fact, that can be tried in 60 days. So why don’t you go try that before I fund you? Because you don’t want to take my money and go pound a rock in the wrong direction on purpose. Trust me, we will both do badly out of that.

Fred Davis: Right.

Neal Dikeman: So maybe we can go figure, let’s figure out a playbook.

Usually by the time we fund the company, it takes some time to get a deal done. There’s the intro stage and all that. Usually by the time we fund them, we’re all on the same page with what to go do.

Fred Davis: Yeah.

Neal Dikeman: And we may be wrong, but we’re usually not wrong.

Fred Davis: What different folks along the way have helped really shape and guide the Neal Dikeman that is sitting across from you today?

Neal Dikeman: Look, you get raised by your family and you learn all these little life lessons and you don’t really realize all the things that have been sunk in yet over the years as you’re growing up. Actually, I wrote a little book, haven’t published it, but I wrote a little book for my little girls who are seven and nine. I wrote a couple years ago. Actually, when I left Royal Dutch Shell, one of the things I didn’t sit down and I wrote these wrote this book. And the book was basically how to manage your money, personal money. If I die, somebody’s got to explain it to them because all this stuff written out there is dumb.

Fred Davis: Can you send that book to me afterwards?

Neal Dikeman: And then I wrote a second book, which was It’s an aphorisms book of just basically a list of all the anecdotes and stories that I’d grown up with from my dad and our family that you don’t realize how formative they are. So then you get into business and work and the same thing happens. So I started at Bankers Trust.

I had no idea how good the people that I was working for were. Yeah. They, there were a bunch of future CEOs and CFOs in that group. A bunch, a bunch of people that were junior staff who went off to BMDs as well and do a bunch of fairly interesting things. So you get lucky, right? Yeah, the places I spent the longest time at, when working with Jane and Woody at Globalgate and Jane Capital, etc.

Man, there were some sharp people there. Yeah. The two of them founded more companies than all, but half a dozen people in the world. They’re just prolific.

Fred Davis: Yeah.

Neal Dikeman: So you pick up lessons. In ways that are super neat. The Macquarie experience. In fact, when we were working on Macquarie, nobody had heard of Macquarie.

It was brand new to the U.S. They had a hundred people in New York and that was it. Now it’s a fairly household name, especially in our sector. I still refer to the incubation acceleration company launch model that we use. It’s a combination of the Macquarie model, and actually you can go, he’s still in the business, you can go find a guy by the name of Dan Phillips, who founded that group way back in the 90s.

We’re still using a variant — I’m still using a variant of his model, and the Woody and Jane ‘How to Launch a Company’ model. And I took that model to shell and that’s what I was shoving down Royal Dutch Shell’s throat. Not always so successfully, but because it works. And that’s what we’re, when we’re launching startups here, when we’re working on spinning one out of ETV right now, hopefully it gets launched here pretty soon.

But when I get a very young startup, what I’m teaching them, I’m teaching them those models, right? Yeah. We know how to get companies up off the ground. We know how to launch them. We understand the steps and the process to go from a blank sheet of paper or nothing to a shot on goal. Now, to make the shot, your tech’s gotta be good. You gotta execute well. You can’t run out of cash. But most of the startup world today, thinks around terms of, the agile startup and lean and all these really cool toolkits and things that didn’t exist for us back in the day. Yeah, but I tell most of my teams the first, it’s like playing a board game.

Like a, one of the German strategy style board games that exploded in the 90s and early 2000s. The first phase is usually a card acquisition phase. You got to get resources and then you start playing resources and sometimes you need to play resources earlier than you need to cause what other people are playing and sometimes you can hoard them.

But the first phase is getting resources in a startup the same is true. The first phase, you got to get some cash. Sometimes you got to get some IP and some tech if you don’t have it sometime and you got to get people, you got to aggregate some resources to take a shot on goal. And then, you got to get a bunch of shots on goal, or you got to keep shooting, or something to keep progressing forward.

But you have to aggregate the resource, and if you can’t aggregate the resource, there is no shot on goal. You got to get to your A or C round. And I think a lot of the startup world has learned this over the last decade, where we’ve got the advent of the seed and the pre seed and the prize competitions.

There’s pathways to accumulate non dilutive capital. Non dilutive used to be a very bad word in the Valley. We don’t use that. That’s, that’ll defocus you. We’ve learned, no it doesn’t. It’s a tool. Yeah, so we try and explain to our startup founders who haven’t been through it before. Look, it’s okay to spend some time getting everything ready.

Getting, pulling together, grabbing resources, setting the stage, and then hitting go. Yeah, it’s okay to, yeah, if you take a deal out, and you make five phone calls, and it doesn’t sell, the conventional seed Twitter wisdom says, oh just keep selling, you need hundreds of them. No, they should be like my conversation with Peter and Anders and Karen.

As soon as you get my attention and we’re sitting down and actually talking, it moves fast. You need to select your investors. Not just ones you want, but ones that want you. It’s stock is your product. Hey, are you interested in a deal in CCU and carbon capture utilization? If the answer is no, don’t pitch them.

Yeah. Do you lead deals? If the answer is no, don’t pitch them. How big a check do you write? If the answer is different from what I’m looking for, don’t pitch them. If you’re a good salesperson is there a budget? Do I got a decision maker? Do they want my product? Are they actually a customer? Are they in the market for this?

If the answer is no, Don’t waste your time.

Fred Davis: Your thoughts on the IRA. We’ve got a looming recession, at least that’s what we’re hearing, depending on who you talk to. How does that factor in and your thoughts on 2023 for Neal Dikeman and Energy Transition Ventures?

Neal Dikeman: Oil prices are high, gas prices are high, the cost in cleantech technologies are still falling even when prices aren’t.

All I really see is tailwinds. Yeah, recession be painful, higher interest rates be painful. The IRA? It’s like net half a trillion dollars of government money flowing into my sector. Everybody’s going to get rich off it. Did I think it was needed? No, I thought we had this handled. I thought, we’re short people and startups.

I’m not sure we were short cash. It’s nice to have. Yeah, we did not underwrite for in any of our startups. We thought we were off to the races regardless of what Washington did. And now Washington has decided to drop half a trillion dollars on everybody in my sector. Yeah, so I don’t know how to, I’m a libertarian. I don’t know how to tell you whether that’s good or bad, but it will probably do well by me and my startups and a lot of other people’s. Will it accelerate the energy transition? Probably. Yeah. Some of these numbers are absolutely insane. Did we talk about this the last time?

Fred Davis: Not on the recorded part, no.

Neal Dikeman: Back when I was doing carbon, if I had told people you’re going to get 40 bucks a ton for an offset, for… call it five or seven years, just a few years, but I’ll guarantee it, they’d have shot their grandmother and fed her to alligators.

And the government’s decided they’re going to give us $60 a ton to convert it into stuff, and $85 a ton to shove it down hole? For a decade? It’s like free alpha. We thought green hydrogen was going to get to the $3 a kilogram and well south of that, without any subsidies, we thought we were already there.

That’s what we backed Ohmium for. The government’s going to give us $3 a kilogram to our customers on top of everything else? That’s insane, but awesome. So now, within say 36 months, the fuel’s basically free. Yeah. So, it was a huge shot in arm for everybody. Yeah. Was it needed? I think the world’s real issue has been policy makers, have thrown kinks into the system that keep all of us from getting the problem solved that we know how to solve.

I don’t think we’re short on cash. I think we’re short on smart people and smart startups and companies working in the area. I don’t think we’re short on technology. There’s a lot of technology out there. I do think we are long on really stupid policy makers.

Fred Davis: Would you ever run again?

Neal Dikeman: Ran for U. S. Senate against Beto and Ted.

And I lost, by the way. For those who forgot, I was the Libertarian nominee in 2018. Yeah. And I might not be sitting here today had I beaten Ted Cruz.

Then again, I don’t think there’s actually any restrictions on people in Congress running businesses and front running stuff, so possibly I’d be doing the same thing the rest of them are.

Yeah. That was a pejorative.

Fred Davis: [laughing] you could have better intel.

Neal Dikeman: Far as I can tell, they all do. That’s of the game is: front run the law you’re about to do. Part of why I ran was to stop that stuff. Look. My wife told me I’m not allowed to run again until the girls can vote and the oldest is nine. We might have a discussion on that, but it was yeah, it’s not happening in the next cycle or two.

Fred Davis: Thank you so much for that. Mr. Neal Dikeman. You can catch all of The Power Connect podcast over at Apple podcast, Spotify, and of course over the website as well. thepowerconnect.Net. We’ve got a lot coming up here in the very near future. Buck Martinez from the ACES program and a former Florida power and light executive.

Great information and just overall great story from what Buck is doing over in South Florida. Syd Kitson from Kitson and Partners, former NFL guy, now running one of the most impressive real estate development operations in all of Florida and what his Babcock Ranch was able to do after. Hurricane Ian.

We’ll get into all that more with Syd, Brad Wills from Schneider Electric, Harold Överholm from Alight Energy. And then we’ve got a great conversation that we’re going to record this week with Mr. Kevin Kushman from Electrada and much more to come. So as always got a shout out to the entire Innowatts team.

Shout out to Syd, Krishnan, all the folks over there. And all, of course, all the audience, the guests, everybody. Thank you guys for tuning into the program to shout out once again, to Mr. Neal Dikeman as well for his time and just for being an overall good dude. This has been The Power Connect podcast, connecting the energy transition, one conversation at a time.

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