SPEAKER_00: hey everybody welcome back to twist this is alex and i know you're probably just coming back from the open ai browser stream don't worry we're going to get to that tomorrow but today on the speaking startups we are talking to founders first up adil khan he's the founder and ceo at a startup called magic school that wants to bring ai into the classroom responsibly think about things like helping teachers with their lesson plans creating more individualized setups for children that might need it and on the student side ai literacy and perhaps even getting early feedback on papers it's a really cool idea it's growing like a weed and of course yes we do talk about privacy a little bit and the risks of increasingly digital classrooms and what that might do to our children's brains but based on all the data i can see ai is coming to school and magic school wants to do it well then after that we're going to take a founder question this is a chat back from when we had eric gleiman on the show the ceo over at ramp you may have heard of it and we thought it was a really fun one someone wrote in asking about how long it should be for an employee to vest their shares four years

SPEAKER_03: six years should it be different than what a ceo sees in their own pay package well we dig into that

SPEAKER_00: and more and then to wrap up today perhaps our favorite ever on-screen pitch as part of our gamma pitch event this is a company that i didn't see coming that i hadn't even thought of as an idea but i absolutely love and i got to learn quite a lot about material science during the conversation so sit back enjoy we have a three-part show for you today and each part is absolute gold have fun

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SPEAKER_00: it's doing great in the realm of software engineering it's taking a big chunk out of the legal market it's showing up everywhere in the world of fintech and one other place where ai has found an enormous footprint is in the world of education now when chat gpt came out everyone became worried what will we do if the students just use ai to write their assignments well the picture is a bit more nuanced than that and some people especially entrepreneurs are taking ai tools and bringing them to the classroom in an official context offering tools and services for educators and students and administrators alike and one of those companies magic school seems to be doing quite well it raised a 45 million series b earlier this year so i had to learn more so please join me in welcoming to the program it's adil khan the co-founder and ceo of magic school hey adil how you doing alex thanks so much for having me ah my pleasure man i love talking about bringing ai to places where people might not expect it to go and also to kind of flip the narrative because i feel like ai in education has gotten a pretty bum rap so far and so i like the idea of taking a tool that some people are worried about and turning it into good so let's start there what does magic school offer to students

SPEAKER_07: and then teachers and then school districts let's kind of go up the chart here so magic school uh ends up being this teacher co-pilot so it is ai for educators where they can use it for their daily tasks

SPEAKER_12: like maybe building a rubric for a project they're bringing to their students differentiating materials for students who are ahead of the curve and students who might need additional support english language learners students with special education plans who might be behind grade level in certain areas of academics so it's their co-pilot for their daily work and then they also can craft these ai experiences these are all teacher labs they have to actually build the experience themselves and then launch them to their students these range from things like a chat gpt for kids with guard rails and you know doesn't give them the answers but helps guide them through they're supportive uh to support them with their academics to more targeted personalized learning tools like a writing feedback tool where students

SPEAKER_16: can submit essays that they've written on their own and then get ai aligned feedback feedback that's aligned to a rubric that the teacher is going to grade them on eventually areas of strength areas of growth instantly instead of waiting two weeks for their teacher to grade it and give them feedback

SPEAKER_12: they get formative feedback before they get their final grade it's yeah it's uh it's incredible as a formal former english teacher this would have been a godsend for me in my classroom and then for for

SPEAKER_18: districts they end up picking up magic school because they kind of want to make their own closed sandbox version of generative ai for their teachers uh and there's their district so they can infuse their own district knowledge with rag technology into the platform and make sure that it's aligned to their

SPEAKER_16: districts priorities and goals and not just a generic ai that their teachers might be picking up in different ways so they get to kind of create their own ecosystem of gen ai tools for their educators so

SPEAKER_20: let's talk about the ai tools for teachers and helping them create rubrics and do some bits of

SPEAKER_00: grading or assessment and so forth my immediate concern is oh lord the ai is going to be designing lesson plans and you and i are both ai bowls i believe but i would say that the teachers that i grew up with were so experienced and so kind of in tune with students that they could certainly do a better job so allay for me my concerns that feel very luddite ish now that i say them out loud and maybe give me an example of a rubric that a teacher could put together with magic school that would be better or more in-depth or more flexible for students than they could do on their own yeah so that's a

SPEAKER_16: great question so one of the ways that we think about this is that you know the teacher is still the center of the classroom our slogan is teachers are magic and it's a catchy slogan but i know it's good it is uh also kind of the ethos of the company we think teachers need to be in control ai should should not be the one teaching students for the example that you shared a rubric the tools are set

SPEAKER_12: up very similarly where the teacher is asked to give very specific input into the tool before

SPEAKER_16: the rubric is generated they can do things like upload their standards that they're required to teach to their students from the state level um they can do things like uh you know give additional instructions or the the text that the rubric would be associated toward or you know multiple things

SPEAKER_12: that rubric would be associated toward and then they could also uh add whatever additional instructions they they would they would like and they click generate they get the rubric they can edit it in the platform and then more importantly where this becomes really powerful is when you can differentiate this rubric for several different audiences in your second time you said differentiate

SPEAKER_00: my read of that is it means essentially creating variations of the same rubric for students that are at different levels of learning or preparedness is that correct that's exactly right and

SPEAKER_12: that that is when i was a principal our ninth grade classrooms our english teachers would have students who were three grade levels behind in english we had students in the classroom who were

SPEAKER_16: branded the country um just learning english for the first time in ninth grade then we had students who were well beyond uh their grade levels expectations yeah um and the teacher as a single person is required to differentiate or meet all of their needs at once this was kind of like a an imagined thing that we asked our teachers to do but really only the most veteran teachers who had versions of their materials that they had before they could spend maybe the next year doing it now you can do this

SPEAKER_12: in like the snap of a finger so you take that rubric and then you differentiate it in spanish you make a version of it that better serves students who are behind grade level you make a version of it that serves students who are above grade level um and now you have this incredibly differentiated assignment for all of those groups um reading like meeting a very practical need of educators today one of those

SPEAKER_16: uh things that causes burnout is these you know incredible uh expectations we hurl upon teachers and don't give them support to uh to actually execute on them that makes a lot of sense to me and i think

SPEAKER_00: it explains why we need this because on one hand if you imagine like the kind of er classroom environment there's like 12 kids in this fantasy land and teachers knowing them all throughout the you know i don't know third to fifth grade or whatever but in reality classrooms are large they're multilingual they're spread out across the current capability curve and so it makes a lot of sense to use tools to essentially take that one teacher and then accelerate them expand their capabilities i don't know what the correct word there is but we do have a pretty large teacher shortage in this country according to data that i found this is from the learning policy institute there's at least 412 000 positions that are unfilled or filled by not fully certified teachers in the us so it's enormous uh when teachers get their hands on magic school how long does it take for them to go from okay we have a new tool to being able to use it at a sufficient level of proficiency in the classroom to actually reduce

SPEAKER_16: their workload and then reduce the risk of burnout so you know i think that the the core of the product is that it's so easy to use and it's so familiar for teachers one of the compliments i still take a

SPEAKER_12: lot of pride in that we get today is that uh this must have been created by somebody who worked in schools like how is it possible that you really know my job this well um you know there are ai tools for other professions you mentioned when you started like there's a bridge for healthcare there's harvey

SPEAKER_16: for law yeah we just assume that these professions are um you know worthy of like specific ai tools or there's a level of knowledge needed and we don't necessarily as a society think about how technical

SPEAKER_12: a teacher's job is and it is extremely technical there are so many facets of what a teacher used to do every day outside of the classroom teaching including in the classroom teaching things that go invisible to parents they go invisible to uh the general society but those were very intimate to me when i was a teacher and a principal and assistant principal and we tried to build all those things

SPEAKER_55: into the platform i love sending people little gifts little gestures you know and if you're running

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SPEAKER_63: is that it's also solving that problem of like novice teachers in that classroom or under certified

SPEAKER_18: teachers in the classroom we hear from schools and districts that sometimes the non-teachers who are

SPEAKER_12: in the building the long-term subs the maybe the career and technical education teacher who's coming in to teach welding in a school to help help students you can get living wage jobs if they're if college

SPEAKER_16: isn't the path for them those folks didn't get trained as teachers um and gen ai can be an incredible way for them to learn how to build a lesson plan and build content associated with these

SPEAKER_12: subjects that don't necessarily get big dollars for curriculum so magic school ends up being this incredible solve for the practical challenges of schools and districts right now and yeah it's

SPEAKER_16: been incredible to see the impact and the spread of the product i think that the ease of use speaks to how fast it's spread there are over six and a half million users signed up for magic school there are three and a half million educators in the united states and about half those users in that number

SPEAKER_70: are in the united states so it's like a staggering number for distribution i'll show the chart here this is

SPEAKER_45: from uh this is your chart that you shared on linkedin but i pulled it up for everyone today

SPEAKER_00: this is from a company called burbio this is a tracker of the percentage of school districts that have paid to an ai platform in the last 12 months and what you can see here is that there's a company called school ai that has some market share there's chat gpt open ai which does quite well and then in first place there is magic school and i wanted to ask about this because when i think about ai tools that have reached the mainstream i mean clearly chat gpt with 800 million weekly active users has has really crossed over into the you know normal conversation how did you grow so quickly selling to a famously difficult industry because uh selling to governments selling to schools has always been at least when i was learning about metro capital and startups like a big like red flag don't even try and yet you've generated enormous market share so talk to me about uh distribution and sales yeah as like

SPEAKER_10: a non-technology person i learned down the line that i made a lot of mistakes that turned out to be the

SPEAKER_16: right decisions i always think about like when i started the product there was i had no monetization plan um you know we were more or less a team of volunteers who launched a product in the world i

SPEAKER_12: wouldn't even necessarily call it a company at the time but i i figured you know i've been a consumer of technology my whole life i figured if i can get people to use this thing we'll figure out the business stuff later so i started seeding it to my teacher friends folks i'd met through my career and it was almost purely organic we didn't spend a marketing dollar until we got to you know nearly a million educators signed up for the platform that's crazy man when you build something that people want like

SPEAKER_00: they will share with others is that is that just teacher word of mouth like teachers saying look this is really helping me organize my lesson plans handle you know having lots and lots of kids and then it

SPEAKER_10: just kind of spreading across the nation yeah that's exactly wow it turns out that um you know teachers who are you know wired to help right that's in their dna when they find something that's

SPEAKER_16: genuinely helpful they will tell the teacher next door um and we certainly caught a moment of generative ai kind of coming to the world and finding utility but i think there was the ease of use it being really directed to their profession and knowing them really really well all that in combination ended up in this extraordinary red trajectory so speaking about the business side

SPEAKER_00: of this i was curious who you sell to because on one hand i know he says you know free for teachers on the site um you also have stuff you know aimed at the district level so are you selling to individual schools can a teacher buy more magical capacity themselves or is it district only talk

SPEAKER_89: to me about the uh the revenue side of things yeah so it's very very generous free product for

SPEAKER_12: teachers we have a plus version of the product that has a couple extra features but it's not very uh heavily gated intentionally we want teachers to get a lot of value out of the product even if their

SPEAKER_18: district hasn't purchased it yet and then our primary customer is the district we want to sell directly to the district and again the reason why a district wants to join is similar to um you know the easiest

SPEAKER_16: comp is like a chat gpt then chat gpt plus then chat gpt enterprises you know they want data security and protection they want single sign-on they also want to be able to infuse their own knowledge into the platform they want to create their own customized versions of our ai tools that are backed by their

SPEAKER_07: state standards their district policies so it's gonna be different based on not only if you're in

SPEAKER_00: louisiana but if you're in you know the new orleans uh school district or a different part of that state

SPEAKER_16: just to pick an example that's exactly right so you know education is incredibly regional um yes so

SPEAKER_18: like we have teams that are based more or less every state and region uh that understand like hey in this state the district's priority is typically this um and they actually work directly with the customers to help customize the product to their needs so and usually they're heavily contextualized to

SPEAKER_12: that area so right now in florida we're working directly with districts to build customized tools for the florida state standards and there there are employees are in the school districts working with their district technology leaders and academic leaders to make sure this tool is customized to their needs in in broader tech this is considered like you know forward deployed engineers or

SPEAKER_16: you know we call them solutions architects at magic school and they are doing this work to really deeply customize the platform for the district and you know one of the things i share with our team especially on our customer experience side is the next greatest thing that magic school builds as a feature is actually the application of the current technology like if we can apply it really deeply and thoughtfully to the district's needs then we can you know we can change the world it's not about waiting for like the next shiny feature it's about taking this incredible tech that we have and

SPEAKER_103: making it incredibly contextualized to the enterprise or the district and underneath magic school you

SPEAKER_00: guys actually use a variety of ai models you mentioned a couple different providers on the site um is the underlying technology still improving at a material rate to help you guys do more or is there already maybe enough capability inside of you know i don't know open ai's 4.0 and gemini 2.5 to accomplish uh everything you're currently working on at the current moment i would say that yeah the

SPEAKER_12: models are pretty extraordinary for the tests that we have them do right now they do most everything exceptionally well um we we use mostly anthropics and open ai's models in the platform okay

SPEAKER_18: where i think they can still improve would be in for us like things like guardrails for students

SPEAKER_12: yeah like evaluations around text complexity audio models we partnered with 11 labs for some of our audio tooling in the platform one thing that ends up being pretty challenging is when younger students are using like text to or speech to text they will often you know pause or stutter or you know these

SPEAKER_114: things that normal language uh wouldn't adopt adapt to wait they're not they're not typing students

SPEAKER_45: need to learn students need to learn how to type i i have heard i've heard from employers of recent

SPEAKER_00: graduates uh that they type like this and we're roughly the same age ish and like yeah i don't know growing up like we had to go to typing class like i sound like the world's oldest man but bring back

SPEAKER_07: typing class but you know typing class is kind of like i mean ai is the new typing class right i know

SPEAKER_121: i just as i was saying that i'm like but you use voice mode on chat gpt when you're tired i'm like

SPEAKER_03: okay fair enough yeah yeah um what's your general philosophy about students using ai in the classroom um the college board says that uh the percentage of high school students who report using gen ai for school work rose from 79 to 84 percent between january and may of this year so it's gone from nearly everybody to nearly nearly everybody and again i haven't been in k-12 for half my life because time passes but i can't imagine like my school handling it well in terms of how they approached changing maybe curriculum or expectations or so forth so what do you think is the right amount of ai for students to use and interact with in the classroom because i know we want literacy but we also don't

SPEAKER_85: want a lack of creative thinking yeah well i can uh you know quell your fears like schools have done an

SPEAKER_16: extraordinary job of really thinking deeply about how they want to implement ai we have been so inspired by our partners and how helpful they've been in in their implementation so i'll give you my own opinion but i think that a lot of districts will exist on a spectrum of how students should or

SPEAKER_18: shouldn't use ai but for me i think that there's real risk in cognitive offload to students um early

SPEAKER_16: in their lives and it should probably be pretty limited uh as kids are really early and maybe very for for very specific use cases um and then as kids get older i think it ends up being this still needs to be really thoughtfully guard railed and like you know grade by grade um scaffolded in a way that ends up uh ensuring that the students aren't getting too much uh support along the way but i think it can be really really powerful the writing feedback tool i shared earlier ends up being this really powerful tool to grow students and their writing abilities and they're still writing completely on their own um but just getting feedback right in time to revise and improve so um you know i'll capture this in a story of uh a student that i talked to recently who's in 10th grade there's a friend of mine's daughter and we're talking she knows i used to be a principal and she's asking me what i'm up to and i say you know we're at this company called magic school she's like oh she had stopped me she's like oh we use this in school i was like oh amazing like tell me about how you use

SPEAKER_80: it um how tall did you feel in that moment oh i felt 10 12 yeah nothing gets more exciting when

SPEAKER_18: students say it like they're excited about it um and so she tells me about it her history teacher

SPEAKER_12: uses the writing feedback tool with them so she writes her essays and history gets feedback on it

SPEAKER_16: she very articulately explained to me why it was valuable and how useful it was to get the feedback revise her essay and why that was like a good use of ai i wish i could like you know she could have

SPEAKER_12: been the best advertisement for magic school you should have recorded that moment and just blast it nobody gets better so she ends up then i ask her you know well tell me about your friends you're in 10th grade like you know ai is kind of this big thing happening in the world what else are they doing with it like what's happening with ai just like well you know some

SPEAKER_16: of my friends are using it to cheat um and i know that's like you know something i can do too um and it's like an easy shortcut sometimes but you know i've chosen to use it like in a really limited way sometimes i use it like to as a thought partner i really like when magic school happens in

SPEAKER_146: my classroom but launch is a fast-growing organization we've got more than a dozen

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SPEAKER_12: much like my brain's in this important development stage and uh so i'm thinking about using it in a really limited way and trying to be creative but again like when i take my tests and i'm applying to

SPEAKER_80: college like i know my voice is going to matter and it's going to be proctored anyway so like you know i'm not going to have this ai tool with me when i'm doing those things proctored for folks who

SPEAKER_00: haven't been in this system for a long time is when you're essentially doing something by hand and people are watching you take the test you can't you can't cheat you can't have julie or something up on your

SPEAKER_12: screen that's right so um and uh the first thought i had was like what a thoughtful young lady like how incredible it is that you've been you have this much agency to decide how you're going to use ai it gives me hope for the future frankly i hope i hope everyone's like her that same thought and then the second thought that i had was she must have an incredible teacher who like helped her

SPEAKER_16: understand you know the difference between good use and bad use and and again shouldn't every child be able to have that articulate response that thoughtful a way of experiencing technology in the

SPEAKER_12: world yeah um so so that i think that captures the story of how i want the world to evolve and students to use ai is have tons of agency um and use it for the right reasons and be careful around

SPEAKER_00: uh the risk as well i bring it up because i was reading um your guys's post from august 5th 2025 calling uh called magic school's commitment to responsible ai use in schools and you have um i'll just pull it up so everyone can see it you have a bit of a kind of like demo text i think this is uh what a minister a school district might say to children about how to use ai and this 80 20 rule stood out to me it says let ai handle the initial 80 of your draft and then add your final touches the last 20. um is that a standard rubric that schools use or is this just an example that i'm over-indexing on because i'm paranoid about people not being able to write in the future mind you

SPEAKER_169: this is not the message for students that is the message for teachers ah lovely okay good so yes yes

SPEAKER_16: you should be fair to i would never say that to students like they need to be doing 100 of the

SPEAKER_12: cognitive lifting okay and uh so that my message uh is when a teacher signs into the platform we let them know that hey magic school can be this incredible augmentation to your work and help you feel really efficient but be be careful about uploading too much of your work to magic school

SPEAKER_16: make sure that you're looking at every piece of material produced by the platform before right in front of children because of other things we know like there can be bias uh hallucinations sure so still trust your expertise but yeah that that rule would definitely not apply to students

SPEAKER_00: not okay we're encouraging makes perfect sense just wanted to bring it up while i had you so just to summarize what magic school has built is a series of tools to help educators not only differentiate their lessons to better fit each student but also just to do more and also provide better faster feedback to students with tools like the writing assessment on the district-wide side you can ingest your own information standards and so forth to create essentially a centralized ai tool to offer to schools and on the student side they get better education the more tailored lesson plans and so forth okay this all sounds fantastic to me i'm glad things are going so well for the business but i am curious what's next because you've really touched on a lot of the places where i can see ai fitting into k-12 education in a positive sense so i'm kind of curious to deal like what do you want to build the next couple years because one thing you said in your funding announcement was we're gonna go build stuff so i'm really kind of curious what the next year or two of a product looks like for magic school so one like i mentioned before i think one of the

SPEAKER_16: most important things we're going to do is forward deploy our solutions architects engineers two

SPEAKER_103: districts and make this deeply deeply uh integrated with their challenges that they're facing every

SPEAKER_16: day so that's going to be and that's not cheap and that is not cheap um and then what does that actually look like in practice is kind of where the product will be going in the next couple years so one um we think that there is a huge opportunity to contextualize the use of both educators and students for the product um so if you think about uh like a unified knowledge graph for a student's experience with the product that could include maybe their grade level their categorization as a student who has who needs a certain level of text complexity because there may be a special education designation or an ell designation or a language learner and then all of the tools magic school can very much directly support the student in their zone of proximal proximal development so they're not you know the the material isn't below their grade level or so far above their grade level that's inaccessible but it hits that zone where it's stretching them and helping them grow yeah in a way that is uh incredibly valuable to uh you know to the student and then also ends up being really valuable to the

SPEAKER_12: teacher because no teacher can carry when they're looking at a student building that relationship and having that connection they also can't carry the student's last literacy uh test score their last

SPEAKER_16: sat score they're all of the designations they have that can help them learn better it's really hard to carry all that with you so can ai be this partner for the educator that helps them understand the students in context of what they can learn what they love okay deeply contextualize to their world and then on the educator side you know magic school needs to connect with their world more deeply too if you had a real assistant teacher you would first train them on your students their needs the systems that they worked with like maybe all messes and then you could be more effective as a teacher so magic school is going to kind of get even deeper into all those places to be this truly personalized

SPEAKER_183: education system for uh students as well as a teacher's assistant for teachers if we're going to end

SPEAKER_00: up in a world in which there is an ai or an instance of an ai tool per student that knows them from let's say k through 12 we're going to need to have relatively robust memory and context tools because i mean i i love my instance of gpt5 but it's dumber than rocks and can't forget me telling you i don't want emojis please roughly twice a day and it just can't hold on to it so i know we're not at a level yet when i can say hi i'm alex i'm in grade 11 and it knows that in grade eight i had a remedial english

SPEAKER_03: clash or whatever but i can see us getting there and then you would have essentially for each student a buddy for really an assistant teacher for the student at that point because the ai would know yeah lots about them they'd have the context yeah it'd have incredible context and still be driven

SPEAKER_10: through the teacher right the teacher still have to uh ensure that the ai was accountable to the student this knowledge also ends up being super powerful for the teacher like i told you the way

SPEAKER_16: that the teacher is differentiating the platform or the materials they're creating through the platform currently but how incredible would it be if it just auto differentiated for you with the knowledge of each of your class periods and um it did it in a way that was even more precise to your classroom so it ends up being a really great assistant for the teacher as well because it has knowledge of all

SPEAKER_00: of the students in your class when it makes materials that's fantastic huh how far how far from that do you think we are in terms of bedrock ai capabilities and also magic schools ability

SPEAKER_178: to take advantage of them and implement them and bring them to market uh our technology team um uh

SPEAKER_10: would tell you uh i think that we're i think we're pretty darn close um we're doing some really really cool work i expect that some of these bits of what you're we're talking about will be available as early as january and i think that in the next year it can feel like a wholly different world especially for the districts that partner with us um they'll get kind of like the earliest like

SPEAKER_16: testing and access to these things we have really incredible partnerships with the foundation models uh who are really excited to support us it ends up being just do they subsidize you guys at all do

SPEAKER_00: they offer a discounted access to their apis because you're actually trying to help kids because if i was open ai and you guys were using my model i would try to find some way to shave off a couple of basis points just because you're trying to help kids you hear that open ai we could we could use

SPEAKER_03: a discount uh sam we've met a whole one time for seven seconds that makes best friends come on there

SPEAKER_12: you go yeah no we do not um but we have a you know very sustainable business model that allows us to to do this work and and you know great funding so it's been um well we don't feel like these things are outside of our capabilities but and you know while they don't give us you know free

SPEAKER_16: tokens they do uh end up being incredible supporters of us like anthropic has a beneficial deployments team that supports us open ai has an education team that supports us so we feel really

SPEAKER_80: close to the model providers and they've been incredible partners so all right one last question

SPEAKER_00: to deal before i let you go the us is one small slice of the world and i think we're all kind of seeing you know peak college student and that's going to trickle backwards in the k-12 so we're not heading towards you know opening tons of new schools in the us i don't think um which makes me

SPEAKER_03: curious when you're going to take this abroad and which markets are going to be the most most um second for the product i mean i immediately think of similar-ish schools in perhaps europe maybe but

SPEAKER_81: what does the world look like to you so we will absolutely take the step to the world we have a

SPEAKER_16: massive amount of usage internationally uh without any marketing or or direct sales we do get inbound customers and partners from international schools and places all over the world one uh i mean it is also kind of the staggering number of us adoption we'll find countries when we look at our data sometimes and like the uae we have reason to believe like 80 percent of educators in the uae are using magic

SPEAKER_07: school um now the uae is not the largest nation in the world but 80 of any nation that's insane

SPEAKER_16: with no direct marketing no presence there whatsoever and that's why the 45 million

SPEAKER_03: dollar series b was led by valor equity partners and bane adobe atreides and smash all kicked in cash

SPEAKER_63: because everyone loves low cac yeah it is one of those incredible things people ask us sometimes like how do you how do you acquire so many folks well we have this incredible product and legion of

SPEAKER_56: educators who want to support each other and that ends up being a really big superpower all right

SPEAKER_00: ideal well i'm i am i'm not only now less concerned about the state of k-12 i'm actually

SPEAKER_03: more bullish about it so godspeed to you and the team and um whatever you do put out in january send me an email we'll have you back on to talk about because it sounds like you have quite a lot cooking thanks for coming on lots of good stuff coming thanks so much for having me alex your startup

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SPEAKER_228: founder questions here we have two good founder questions let's do it thanks for having me jason i

SPEAKER_231: really appreciate it okay so uh number six we got a founder question i think is pretty interesting yeah

SPEAKER_233: so one person was asking about how long employee shares should take to vest they were looking at an offer from a company heart in the hardware realm and they were offered 0.023 of the company over a six-year period and so the question is is that a standard term that employees should be willing to accept or is that something you might want to have only for founders that are raising venture capital

SPEAKER_230: money your take six is definitely abnormal uh i would say market standard is a four-year vest is is fairly typical um there are companies that diverge from it like i think probably the most you know the extremes on one end you'd see six or you could see like even i think like the stripes of the world have every year you get a an extra tranche of of uh rsus that vest over a 12-month period which is a one-year kind of vest and every year they kind of re-underwrite uh where you are but they're kind

SPEAKER_237: of a public company it's a little bit different they're essentially offering the the google

SPEAKER_239: no but it's a good point if you were going to come to a brand name company they can extract a longer

SPEAKER_229: vesting period because the shares are worth more right i mean that makes logical sense it's not as speculative as a earlier stage company to your point out what i would i would say ultimately is

SPEAKER_230: in some sense a six-year can be good right if you believe the value of the shares are going to multiply presumably if that stock is going up two four ten times what you're going to be vesting into in the sixth year is going to be worth a heck of a lot more and so you may be willing to elongate it but i i think to like any negotiation you need to look and say like do i believe in this um and is this enough you know if you look at the total value of the compensation over the next year cash stock in kind benefits does it meet your bar or not and so while i'd say it's unusual sometimes it would make sense to to uh take that kind of an offer but if i were friends with this person i i would say like it should meet this level for you and hopefully you believe you know in this company enough that you're willing to uh wait for six years and want to be there for for for this period of time to see where this

SPEAKER_233: goes six years is a long time jason do you recommend the company is going through the launch accelerator offer employees four or six year vesting schedules this is one of these like quirky things where

SPEAKER_239: um founders who are a unique species in the world i certainly was when i was starting companies you

SPEAKER_229: want to reinvent everything so you look at a vesting schedule you look at shares you look at the convertible note you're like oh i can innovate on this so and i would do stuff like that and i would like over negotiate like totally meaningless things early in my career and uh you know at some point i think rule off said you know my best advice over at sequoia is the best advice just keep everything standard so then when people ask you to do weird things on the other side you can say i prefer standard and everything i do is standard so if you're not elon or colson brothers or somebody like really unique in the world maybe keep it simple and focus on the product innovation in your product not in the legal documents a great example of this would be bezos and amazon he went with this like 5 15 40 40 i think is what it was where you first year you get five percent next year you get 15 percent of your equity grant and it's backloaded what this does is lets the company if they really value their shares say you know what we assume some number of people aren't going to make it to year three when really the magic happens and you tip over from being a drag on the company where we're investing in you to you're actually providing massive value for the company because you've learned how to be an executive here you've got executive training but you're bezos you can get away with that and also it's a bit of a test because if somebody argues that on the other side eric you would be like okay why does this person want it the biggest tell i ever did was like one time in my career somebody told me it was standard to give people like six months severance or three months severance and i did it and like i gave them three months severance and literally the person became a disaster six months in and i was like oh my god they're working for their severance package and so then i just probably you know in startups you don't get like a there's no such thing as severance in a startup if you do a riff or a layoff sure you can get people severance but i'm talking about like if you leave and you're or you're fired you don't get severance i mean that's like for tommy mottola at sony or like some you know i don't know barry diller at columbia pictures or something like that's something a major executive can extract so anyway it's a really interesting question i would keep it standard just so that you can focus on other things what i do like i don't know if you've done this eric with like high performers but somebody's a high performer you just layer on a parallel grant so like you're like this person's killer like year two you're

SPEAKER_257: like i'm giving you another four-year grant so now you have them for six yeah you know you have just

SPEAKER_259: overlapping ones and then it gets really costly to leave if you're that employee because you got

SPEAKER_233: double grants you've done my last my last job jason they they layered on extra merit comp on top of my salary and i was like well i guess i'm never leaving but sometimes people do leave and a question that i wanted to ask today jason is what happens when a co-founder exits a company well before we

SPEAKER_263: get that one i wanted to ask if he's done the the layered trance first of all yes and i agree with

SPEAKER_230: your advice i think innovating on the business model what makes you different really good idea in general i think what you and real often everyone is saying is is right keeping it easier just reduces friction to people getting to say yes and and frankly too there are some people in your business that like they are not twice as valuable or four times as valuable they will be 50 times as valuable yes and once you find it like hold on uh invest and spend against it because frankly one you should do the right thing for people who are um just care uh at the level and can have the impact but second it's it's just very clearly good business um and so that's where i i think you should hold

SPEAKER_266: the equity to invest in those situations we have a friend from the gamma pitch competition i'm really

SPEAKER_269: excited to bring up chris kennedy he's the founder and ceo of a company called on the fly energy and jason i was initially skeptical until i realized what they're building and then i became an enormous fan please everyone welcome to show it's chris chris hey how you doing good how are you welcome to the

SPEAKER_272: show chris uh why don't you uh go ahead and put on your presentation here powered by gamma great way to do ai presentations that look really sharp and crisp we'll have you pitch us here and we'll give you a

SPEAKER_278: little feedback hi guys i'm chris kennedy founder of on the fly energy and i'm here to tackle one of today's toughest emerging challenges we talk about like we take electricity for granted until the lights go out our grid is fragile and a split second fault can knock out critical infrastructure and ai data centers are making this worse gpus swing from zero to 100 in milliseconds destabilizing the entire system the day solutions all fall short batteries are expensive degrade and can burn diesel generators are slow and maintenance heavy take for example last summer in virginia a lightning

SPEAKER_283: arrestor failed forcing 60 data centers offline in an instant nearly triggering a cascading blackout industry and ai alike need resilient energy storage and that's the gap that on the fly energy fills

SPEAKER_278: here's our solution the rotor seed is a 10 kilowatt hour modular flywheel that installs like a backup battery charging storing and releasing energy rotor seeds stack into rotor pods and scale into the rotor farm capable of delivering megawatt hours of distributed protection for everything from a single server to the local electric grid on the fly energy is built for america's backbone where uptime is non-negotiable rotor seed delivers instant fire safe backup and conditioning for sectors that matter most with over two decades of life and it's built in america to strengthen energy independence now we're targeting over a hundred billion dollar energy market consisting of over a hundred thousand us facilities from ai data centers to manufacturing hubs all where batteries fail diesels lag and uptime is priceless eating to capture just one tenth of a percent to get to 100 million in market share on the fly energy wins where it counts there's no fire risk no degradation no 30 second lag or upkeep like diesels and scalable beyond capacitors for real long duration protection it's simply a better spin on backup power the rotary seed units are offered as a monthly subscription and collect revenue on demand shifting and energy delivery additionally we plan on offering utility support and active ai energy optimization all with a straightforward upgrade path that grows with the customer's business now what makes this model powerful isn't just lease storage it's the network functioning as a virtual power plant to help regulate the grid we don't compete with the utilities we help power the paths to market so far we've built our proof of concept to validate the core physics design and functionality in early 26 we'll conduct mvp trials at beta sites in 27 we plan a small commercial launch targeting telecom and small data centers and in 28 we expand into large ai data centers and full grid scale storage capacity i'm chris kennedy the hands-on founder of on the fly energy inc and for nearly a decade i've built automated manufacturing solutions at companies like tesla and other startups i still run a small machine shop out of my garage and my teammate justin ogborn brings deep electrical controls expertise together we're building on the fly energy with as9100 level standards and automation from day one because engineering quality and manufacturing scale on the fly energy we're tackling a hundred billion dollar market with hardware that outlasts batteries outpaces diesel delivers protection where america needs it most the grid's future doesn't burn it spins thank you all

SPEAKER_239: right i'm a little confused as to what the physical product is i understand the problem yep people need

SPEAKER_146: extra energy i understand there's a flywheel involved and there's like a cut out of it what what is this

SPEAKER_278: physical product so the physical product yes the physical product is essentially a battery energy storage system but with a kinetic uh energy storage rather than chemical so we're storing rather than lithium batteries we're storing in kinetic energy form explain what that means to yeah yeah somebody

SPEAKER_152: who's not an expert in this it's it's you're basically putting batteries into data centers but

SPEAKER_278: they're different types of batteries essentially so rather than a lithium battery which stores energy in chemical form we're storing energy in kinetic form which is a flywheel that spins and so you take that

SPEAKER_283: excess energy and you put it into the form of inertia and you spin a disc around really fast and then you can

SPEAKER_278: pull power from that or buffer power into it whichever way you need to to uh bubble out these spikes that

SPEAKER_00: the ai dinosaurs eat so chris a question about that um because there's always going to be some friction in stored uh momentum so how much if i had this uh wheel which it appears to be spinning very

SPEAKER_304: quickly in my data center just waiting for me how much energy do i have to put into it to keep it at

SPEAKER_278: max kinetic energy potential so depending on the size of the system that you're using uh we see about a 95 return currently from the power that you put into the power that you get back out and that's in our

SPEAKER_00: sounds very good to me that is pretty good okay so 95 energy that i put in i get to take out and because it's a spinning what is it iron what's the actual thing that's spinning it's a carbon fiber

SPEAKER_309: composite that sounds light wouldn't you want something to be heavy and it is light but so

SPEAKER_283: where you wind up storing because the way that energy stores in kinetic energy is it's a to the power math equation so that every rpm that you can gain is actually a significantly larger amount of energy that you can store so if you can spin faster and not have the material weakness that say steel or something heavy would have you can actually store significantly more than you could in just a

SPEAKER_00: heavier mass and how big is this uh rotor seed the 10 kilowatt hour module that you're describing

SPEAKER_283: if i want to call it in my hands yeah so the current version that you're that uh we have is basically an 18 inch uh diameter by an 18 inch long length and that makes the 10 kilowatt hour uh base unit that's not very big does it not very vibrate it does not vibrate it is on magnetic bearings so you can just you

SPEAKER_278: can stack these you can stack these into something say like an iso shipping container or another form factor like that that's easy to distribute if needed so as long as they're not moving there's no pushback

SPEAKER_00: from the wheels motion itself so okay that's that's pretty awesome what does it cost to build one of

SPEAKER_283: these right now the prototype that we're at right now is sub 10k and i'd like to be significantly lower than looking at what um the business model is going to wind up being for uh roi potentially being in the

SPEAKER_318: one to two years okay and then for a 10 kilowatt hour battery what does that cost today so a 10

SPEAKER_283: kilowatt hour battery can cost you anywhere from ten thousand dollars if you get it really cheap and you're doing you know kind of getting a little scrappy and you're buying 18 650 cells off of ebay you can do it for probably a couple thousand dollars and if you do it the uh legitimate way and say you're

SPEAKER_278: buying like a tesla powerwall that's pretty close to similar uh energy density you're probably in the

SPEAKER_322: 10 to 15 000. okay so this is interesting i i asked producer claude to explain it to me like a 10 year old because you know i just still not getting it i mean i was getting it but it's like spinning a top

SPEAKER_239: you have this thing that you start spinning like a top so you put some energy into it it spins you don't need to keep adding energy to it it keeps the spinning going through magnets etc yep then when you need it it slows down and slowly lets that energy back out so they use this in space and on roller coasters and

Chamath Palihapitiya: buses this is the other use case for this technology yeah so the original the original bit of this

SPEAKER_278: technology it did exist in buses i believe before the trolleys and sf existed as by understanding that

SPEAKER_283: there were uh large mass spinning flywheels that existed wow so this is like you're bringing back an old

SPEAKER_239: energy source with new uh modern materials ah so genius so i think like as an idea it's extraordinary

SPEAKER_272: because people need more energy and they need more backup energy so data centers have a ton of money to spend so that's the best place to go right now and there's cheap energy available when you want to fill these up right at certain times during the day so you can do that arbitrage you can

SPEAKER_286: fill them when energy is cheap correct exactly you can fill them when energy is cheap and then you can also do this little bit where you're getting to condition these ai power loads that like to spike

SPEAKER_283: and then drop loads every time someone wants to generate their their image the ai data center goes up that usage on the grid goes up and the grid was really built for a pretty continuous load system so we can kind of do this as the energy arbitrage with the virtual power plants and then you can also condition the power that's going into the building so let's say the ai data center's load is actually all over the place but you can basically make it so that this is the buffer zone between the ai data center and the grid so the grid sees the constant we saw this jason with uh base power and

SPEAKER_304: zach dell oh yeah sorry no no go ahead finish it yeah you can oh i was gonna say we just had base power on chris a couple a couple of shows ago and he was discussing how they were putting batteries in front of houses in the grid and how that would also dampen the spikiness exactly

SPEAKER_286: the overall um grid that we lived with yeah and being i'm in california i can't do kind of the same

SPEAKER_283: uh model that they were doing california's energy grid is a little different than ercot um so we're

SPEAKER_239: targeting being texases yes being texases which is completely deregulated and you can add and take

SPEAKER_272: energy out in a much more fluid way yes they're much more free much more free so i guess would this also work for air conditioning in places where it's very hot so you go mexico city you know dallas houston austin phoenix you know all those kind of places where you have really a hundred days of a hundred degrees or hotter you have these things attached to buildings at night they fill up and then during the day instead of hitting the grid when i think it's a 5x price difference yep you could power all the air conditioning

SPEAKER_283: you can do exactly that and something that if you weren't what uh there's a model like that or you can do something that's following what's the duck curve is basically we get a lot of solar cheap energy right when solar is peak and there's really not a whole lot of residential load at that point and you get a really tail end the tail end of the duck that curves up that is a high demand speed peak right when uh solar and well generally solar starts to taper off you can kind of play that arbitrage game where you're going where do you where's the uh what makes the most sense to charge up do you charge up at night when the base load is uh steady and the peak's really low do you charge up when solar is really cheap in the middle of the day and there's not a high demand and you store that for a few hours and you can dissipate that when everyone's coming home and turning on their ac and then across the industry there's uses for this all over the place one of the one of the other sectors that i'm looking at but we're not focusing on that because we're focusing on the ai data centers just trying to try to get ourselves into it you look at um all these ev fast charge uh systems that are being installed places it takes 12 to 24 months to get these uh utility and permits set up to be able to do these fast chargers and some of them don't have the support to be able to do 250 350 or 500 kilowatt orders so you can do kind of this portion where even a kinetic energy storage system or just a battery energy storage system sits between the grid and this fast charger and your your technical site could only have 100 kilowatt hour hookup but you could have multiple 150 or 250 kilowatt hour chargers because you can charge this and level out that peak you're basically doing the same thing that you're doing with the data centers trying to make this a level uh energy draw for a longer period and then when you get a load say a vehicle showing up and

SPEAKER_285: wanting to fast charge that's your spike but you're buffering it with the battery energy storage so

SPEAKER_239: that the grid doesn't see it and if you uh that's the duck curve and here's the duck curve as you can see yep um you know in the morning 9 a.m uh then it goes 12 3 and 6 the energy usage can go down and you're like wait why is it going down well people return home solar stops working and you right at the worst time at the worst time so the sun goes down everybody returns home alex they decide to do a load of laundry maybe they put the air conditioner up or in the i guess they could also put their heat on and sure and um it looks like a duck and that's it's a brilliant technology but also it just goes to

SPEAKER_00: show how complicated the power question is between baseload power variable power sources and storage but between exowatt storing industrial heat base power doing batteries at the house and the hydro

SPEAKER_304: store doing compressed air energy storage and now we have on the fly energy using flywheels jason i'm

SPEAKER_231: actually a little bit optimistic right now you know here's the thing we talked a little bit earlier

SPEAKER_239: about truth and the search for truth and how you know generative ai during this weekend uh protests or anything you know during the debate over uh the southern border people can use data sources that aren't true to try to manipulate and or fight for their position or their you know tribe whatever it is and with energy one of the interesting things is the data is the data chris right like

SPEAKER_283: there's a price of energy that you cannot fake yep and it's well metered and it's reported at most

SPEAKER_239: places easily accessible literally with ercot you can pull up ercot's data in real time alex because it's a real time exchange of energy so when you know i'm interviewing chris wright and we're talking about you know the the administration's love of clean beautiful coal and you know solar is intermittent and then elon is saying well look solar is the best thing in the world because you can just build it and it you know it's cheap and clean and there's it's free um and then other people are like well what about geothermal or you have a new technology or a new approach uh like base power or here what chris

SPEAKER_272: is doing you can just start to pull together reality by just looking at the data chris it's become very political and very sharp elbowed what what's your take on overall if our country needs to invest a massive

SPEAKER_239: amount of money in energy and you were in charge i make you the energy secretary how would you think long term and when i say long term you know 10 20 30 years for america and let's say you have a trillion dollars you're going to deploy over those 30 years just on a percentage basis where would you you know hey get us the short-term energy get us the midterm get us the long term how would you advise doing it obviously you have your own book and you know that's a portion of it but just broad strokes what should we be doing with energy i'm sure you think about this all the time i i do think about

SPEAKER_283: it all the time and uh kind of the broad strokes the way i see it is kind of like you mentioned so uh short term we need a solution right now well whatever that looks like whether that be natural gas peak or power plants i don't believe that coal is the solution maybe we're uh looking at other other forms there's uh all these solar wind renewable things and if you can have a way to store it that's kind of where on the fly energy is falling in you get to get to uh play on that game but then on the broad stroke as we're going america needs energy independence and how do we get there we

SPEAKER_286: really need to be self-reliant and if that means we can generate all of our energy as we need it and

SPEAKER_283: store it i mean that's the biggest thing if we can have renewables and be able to take out the downside of renewables that is uh production fluctuation and unpredictability depending where it's at and being able to store that and being able to redistribute that across the the grid to where you need it that's kind of the solution that i see so if you could do other renewable options being wind solar and then kind of base load with nuclear power yeah you'd be able to cover that entire grid and be able to be essentially entirely energy independent as a country okay i have a question

SPEAKER_269: about scale here because in your your deck that we went through uh which by the way very nice

SPEAKER_00: appreciate that uh it looks like a small device 18 inches by 18 inches spins inside of it very very cool why not make a really big one like i mean huge like uh why can't we make one of these at a city

SPEAKER_364: scale for example so the physics of it get really limiting so kind of what has advanced in the last

SPEAKER_283: 50 years from the heavyweight flywheels um is really a materials question and where we've come is these composite high-tech aerospace materials and what you're getting is a higher strength option here so that you can spin it faster and faster and one of the limiting stresses here is basically how fast the surface of that rotor is actually spinning so the larger your diameter you make this the faster the surface speed actually winds up going and because that fact that higher surface speed is there there's something called hoop stress and i'm hoping cloud will hop uh hop in here and give you a little definition that hoop stress is basically uh a function of the tensile strength material that you're making it out of on the outside diameter and it's basically what's trying to burst this thing

SPEAKER_367: it's basically why like a hot dog when you cook a hot dog why a hot dog splits down the scene yeah it

SPEAKER_00: doesn't split in half the other way so what if we put a large iron rod like an old wheel around the

SPEAKER_368: edge of the i'm i'm kidding with you but like my question is why do we have to make this in small units why can't we just make large ones well we can make large units yeah you can make

SPEAKER_283: significantly larger ones that are uh power density actually works out kind of similar but you'd get

SPEAKER_286: other uh scale factors where you have lower lower uh number of components that go into it okay well

SPEAKER_372: i'll i'll just say i like the small ones i like the big ones and i think you know ai data centers is a great place to start because it'll attract investor attention there's a lot of money there but also like i want one for my house because this sounds awesome like the first prototype set chris what's the

SPEAKER_239: story here with funding i mean i'm not an investor in this company i feel like this is like uh going to be if you figure this out and it actually works you've raised a lot of money so far you're

David Friedberg: funding it yourself you're a test i'm finding it myself right now really yeah that's my kind of founder what's going on here maybe i can can i you gotta can you save a slice for jcal i might want

SPEAKER_367: to get i will save a slice i'll put a little sticky note right on the uh the cap deck for you i'm not

David Friedberg: saying like i have to have the whole pie like if you order a giant pie i'm just you can even cut me a

SPEAKER_322: half a slice is better than no slice i love what you're doing this is great uh let's stay in touch and thanks to our friends at gamma for making great pitch software and then helping us find great founders like chris and great startups really well done you can build amazing presentations in just minutes using gamma and they hosted this incredible pitch competition which chris i don't know you might be the leading uh you might you might wind up taking this down and winning hey i'd love to hear that oh okay maybe i'm i'm intrigued all right chris great job and we'll talk soon let me know when you're in thank you guys yeah come we'll do let's get some uh i'm going to take you out for some barbecue and try and weasel my way onto that cat table uh great great job chris i'll drop chris off uh and if you're

SPEAKER_272: feeling inspired head to gamma dot app app g-a-m-m-a dot a-p-p so you can start working on your idea and you can change the world like chris is doing and maybe we'll see you on a future episode of this week in startups well done