Chamath Palihapitiya: All right, everybody, it is Sunday. And Molly has questions for me, because if it's Sunday, it's VC Sunday School. What do you got for me today?

SPEAKER_01: I'm just learning more and more every day. It's amazing. I'm going to add we're going to talk about corporate venture capital today in VC Sunday School, how it differs from VC, which is not the hard part. The hard part is how do we evaluate the signals when we see it on the cap table. So we have a little interesting conversation about corporate venture.

SPEAKER_04: And as a founder, should you take it or not? Like, what's the upside? What's the downside of corporate venture capital versus purely financial venture capital? This is a discussion that happens all the time. But you might not have heard it before, because it's

SPEAKER_06: kind of inside baseball. And that's what VC Sunday School is all about. Just taking you inside baseball, you're in the dugout.

SPEAKER_01: And Sunday is, of course, also about this week in climate startups, and have a really, really interesting, real world, really hard problem, nodal power, capturing energy from landfills to use for Bitcoin mining, to incentivize a ton more renewable energy. It is a counterintuitive, at least for some of us, interview. That's just a great lesson.

SPEAKER_09: Well, it's going to be a great show.

SPEAKER_10: Stick with us.

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SPEAKER_21: All right, it's Sunday, everybody. Welcome to the first day of the week. Should we consider this the, we always say we're going to end the week on Sunday. Should we make it this is the start of the week? Yeah. Like what if we were like, this is an order. All right. Welcome to an

SPEAKER_25: aperitif for the week. I would like to know what week of the year it is on Sunday this week. Cause

SPEAKER_27: I love talking about the 52 weeks of the year. It is now week number. Cause they, you know, they number every calendar year. Yeah. Each of the weeks. I mean, we're into the forties.

SPEAKER_01: Late forties. Cause there's only a couple, there's like four more, five more Sundays left in

SPEAKER_27: the year. Oh my God. It's almost my anniversary. Oh, really? Yeah. Right. One year. Yeah. Right. Okay. So this is week 45. And so that means it's week 45 for you. But what I like about this is we can talk about our progress in whatever our goals are. So I'm gonna make some goals for 2023. And we just, we'll talk about it. So welcome to week 45 of this week in startups. Uh, and this is probably, I don't know if we did, uh, VC. I don't know if we started doing VC Sunday school the moment you 30th or 40th episode of this. Yeah. And I would like to do a one year overview of this. If somebody is obsessed with the series and they want to make a notion page or something with all the episodes and write it up, I might be looking for a freelancer to do that. Agreed. You have a

SPEAKER_35: question for me in week 45 of the year 2022. I do. So corporate VC, not a new thing. In fact,

SPEAKER_01: I remember doing a, I think now back on some of the stories I did at marketplace about VC and how like darling, they were in the sense that I didn't really understand, but it was kind of, you know, I did one of these darling stories that was like, you know, who has like, you know, who's setting up VC funds is like big companies, corporate VC. So it's been around, but I am seeing it a lot more show up and on cap tables. We've had a lot of different conversations about it. And I think it might be a good week to sort of break down the differences between corporate VC and the kind of VC that we practice and then the signals that it sends to us as an investor when a corporate VC is

David Friedberg: in a round. So corporate venture capital is strange because a corporation is funding startups, which could come and compete with them. So why on earth would you give oxygen to potential future competitors?

SPEAKER_27: Intel capital is probably the most famous of all these venture firms. And it was started in 19, in the early 90s, 91, 92, something like that. And they started investing in US companies, they were

SPEAKER_39: known for putting $1 million checks in being passive investors, not joining the board, and just letting everybody else, you know, make the investments. They did some famous investments. In fact, they invested in

David Friedberg: CNET where you worked previously, you know, they were just known as filling capital, they did WebMD, they did VMware. And sometimes, these are run. Because the company has a ton of cash, and they think this is a

SPEAKER_39: way for us to get early signal on where the world is going. So some god, king or queen CEO says, Hey,

SPEAKER_27: let's chip off, we make, I don't know, a couple of billion dollars in profits a year, but 50 million on the

SPEAKER_44: side over here, we'll hire a couple of execs, and let them drop a million dollars into 50 companies a year or 5 million into 10, whatever it is. But they have a different motivation. And that's where this all gets super complicated. Because if a company has the money to fund a venture arm, instead of giving it investing in their own company, one would wonder, like, do they not have the confidence in themselves to innovate? So why are they giving it to other people to innovate? So you have to

SPEAKER_47: really started thinking, to be fair, I think that's genius, because most most big companies

SPEAKER_01: after a certain size do not have the internal will to write, they have too many silos, they have too much sort of calcification, they have too many business divisions that are too profitable to disrupt. So it, I think when I did the reporting on it, it seemed very clear that a lot of big companies do this, because they know they're going to get disrupted. They want to be in on the signals. And they either want to grow themselves, the future business lines, or avoid disruption. So

SPEAKER_39: this has been a very variable thing, it comes out of fashion comes into fashion. Yeah, here's just a quick chart, you can see CVC is corporate venture capitalists. And you need to see over time, it goes up and down. It's very spiky, it's, you know, it can be a lot of money being put to work, they can be very excited about late stage deals, because those can do really well. And then it gives them like, the ability to participate in the success of people who are

David Friedberg: partners with them. So, you know, if you're Yahoo, let's say, and you were allowing Google search for people don't know started as they would they sold their search tool to Yahoo and Yahoo plugged in Google search. So when you do Yahoo search, it would give you the directory and then say, and here's some other websites on that we crawled on the website, it's probably not going to be good results. But you could

SPEAKER_27: check it, the directory is really much better. But you know, as a fallback, your search for some long tail thing. And they just put power by Google on it. In that case, if Yahoo had said, you know what, we have a

David Friedberg: corporate arm, we're going to do this business development deal with you, we should also probably put a couple million into that Series A, oh, my Lord, what an incredible bet that would have been. But you really do need to think you nailed the discussion that occurs internally at a corporate VC firm. Hey, we can't possibly be innovative in all vectors and know all this stuff coming if we have

SPEAKER_27: to focus on this money printing machine sitting before us. So it's a great way for us to get intelligence. So now you have to ask the question, Well, what's the motivation of a founder to give

SPEAKER_44: intelligence to a big company that can wind up competing with them? What do you think it is?

SPEAKER_47: Well, they want that because they want that company to become their customer, and their biggest customer, presumably, also, they get money. So those are the two reasons, right? I think so, right?

SPEAKER_38: Cash and customer and potentially building a business development relationship, I will typically stop

SPEAKER_27: the founder when they bring me these. And I say, Hmm, you're gonna take money from somebody who doesn't

SPEAKER_44: care about the return, but does care about the intelligence that you can provide them about what

SPEAKER_27: you're learning? How do you feel about that? And they're like, Well, I can't close the round, or they offer me a higher valuation. And I'm like, Okay, would you rather have on your team, somebody who's aligned with you, who wants to see the stock go up in as pure as a fashion as possible without any constraints? Or do you want to have the fox in the hen house, who's watching this growth, and then taking that information and then applying it to how it impacts their core business? Which would you rather have, you want the rabid, aligned person next to you? Or do you want the person who maybe has a misalignment, and that becomes a discussion on boards, right? And it's typically a when, when would you want to do this, when you're at the moments before going public? Well, these companies can go buy your shares in the public market if they're so interested. So it doesn't really matter in the last year, before you go public, it does matter dramatically in the early years. And then if you do do this, you want to have them have no information rights, maybe top level information, right? So you really want to drill down and understand that they're not going to get a board seat, they will not get an option to buy the company, sometimes desperate companies will give rights to CVCs, but they shouldn't, like a board seat,

SPEAKER_66: or information or granular information, customer information, you know, and so, if you do take this,

SPEAKER_27: ask yourself this question as a founder, am I taking this because I can't clear market with the best investors in the world? And why can't I clear market with them? So I'm going to this, I don't want to say

SPEAKER_44: second tier, but perhaps compromised group. And why am I potentially it's not always but potentially

SPEAKER_39: letting the fox in the head. One of the first things I do before I invest in a company is I look them up, and I check on their SEO, I want to see if they understand how to get that free traffic from search engines, you know, that one of the most basic things you can do to drive free consistent traffic, and make it easy for your customers to find you is SEO. And a lot of people, it's a little scary for them, right? They think it's like a black art, they don't understand the basics of it, a lot of the basics of it is just very technical content and basic blocking and tackling. And so you got to call our friends over at smash digital smash is hyper focused on SEO, and they specialize in high end link building. This is not a generic digital marketing agency. They only focus on world class SEO founder Travis, also an investor, and he started smash digital to help grow the businesses that he runs and invests in an in house SEO expert, I would say going to cost you 75 to 100k a year, and you're going to still need a budget to make great content to try to get people to link back to you for that content to send signal to the search engines that you're worthy of traffic. Well, smash starts as little as 3500 a month. And for a limited time, smash is offering free audits for twist listeners at smash digital.com slash twist. That's right, you're gonna get a free personalized video audit of your startup's SEO for free smash will map out the exact steps you need to take to

SPEAKER_27: outrank your competitors. Again, they're going to do it for free to try to build that relationship with you and show you they're good at what they do. So go to smash digital.com slash twist smash digital.com slash twist. And it seems like there are a thing for the founder to do is to ask as

SPEAKER_01: many questions as possible about what type of CVC they're dealing with, right? Because there definitely are some that are strategic, full stop, like Unilever ventures, which invests in a consumer product, let's say or CPG. There are some I think that are financial that are pretty separate from the parent firm that are set up as an additional kind of, you know, possible risky asset, power law, revenue generator. If it's one of those, and it's aligned, but not strategic, you could imagine that then it would be fine for a founder to take that money. But it does seem like it's a it's a caution. It's a cautionary tale for founders.

SPEAKER_70: Um, there was a company called Alphabet. Um, there was a glomerate that had the Google search

SPEAKER_44: engine inside of it. And back in 2013, I remember I had invested in a cab company called Uber. And Alphabet invested 250 million in Uber, then somebody who was in the self driving division of

David Friedberg: Alphabet, Lindowsky wanted a job and he came to work for Uber. And he allegedly

SPEAKER_84: or actually I think he was convicted. Yeah, it was convicted. Yeah, it's like one of the few instances

David Friedberg: where I can just say, he was convicted of showing up at work with like, a bunch of documents and information from his previous employer, to which Uber said, get out of the building. Do not bring that stuff with you. Go destroy it. We now have to inform Alphabet that you even did this, and chaos

SPEAKER_44: ensued to the point at which Lindowsky wound up getting a pardon from Trump.

SPEAKER_87: Uh, Lewandowski. But yeah, Lewandowski. Sorry, I apologize. So anyway, Lewandowski wound up getting

SPEAKER_44: pardoned eventually. So there's your example, right? How things can go horribly wrong, right? Google wasn't in the cab business. They had no interest in this. But then self driving happens in it. And

SPEAKER_27: they both wind up and this happens all the time in a VC portfolio. But when it happens like this, oh boy, can create some bad feelings. There are other people like Qualcomm Ventures, uh, who have like, they want you to use their chips. So they make these investments to try to get people to use their chips, right? Sometimes people have a new app platform, like say Facebook could, or Meta could create a venture firm, or a pool of funds where they invest in people who build

David Friedberg: for Oculus. So those are very specific ecosystem driving investments. Those work really well. Because right up front, we're going to give you a million bucks in your $3 million seed round. And we just want you to make a version of your app for BlackBerry for Android during the app wars and the platform wars of the early days. I believe like people like RAM and BlackBerry, Nokia, Docomo in Japan, a lot of these folks would invest in companies. And for them, it was great. I'm going to give you a million dollars, you build something that helps our jump starts the ecosystem. And yeah, maybe this winds

SPEAKER_20: up doubling our money, or if we just get our money back, we got y'all to build stuff for the ecosystem and the ecosystems where the money is anyway. So you will see a little bit of that.

SPEAKER_93: That's really interesting, because I think that probably explains why I feel like I'm encountering a

SPEAKER_01: lot of corporate venture, because climate is a new ecosystem. And I think you're seeing a lot of companies try to invest in jumpstarting that ecosystem for whatever reason, again, it could be their own business transfer transformation. There's a really big, like fortune 100 or fortune 50 utility called NextEra that I keep encountering on cap tables, like that's clearly investing in all kinds of things related to energy transition, because their own business is changing. So I wonder if that is a part of why I'm seeing more corporate venture, like because it's a newer ecosystem.

SPEAKER_94: If you want to jumpstart function of a downturn?

David Friedberg: No, I don't think it's a downturn. I think sometimes, sometimes an executive team needs to see something exist in the world to help the core business, but they want to use entrepreneurs to make it happen quicker. Yeah, and they'll use their balance sheet to do that. Famously, Google wanted, and this didn't come out of Google ventures, which is called GV and GV runs like a venture firm, independent, totally different office, that's why they call it GV, they have a different and they and they really don't have to go clear of investments with the mothership, they don't have to go to Sundar and say, Hey, is this okay? So they act autonomously, I think it's pretty well known in Silicon Valley, they act autonomously like this, which doesn't mean they can't get you a meeting at Google, but it does mean you can feel pretty good about those investments.

SPEAKER_27: Google, though, additionally, wanted to see renewable energy because they wanted to get to zero carbon emissions for their data centers. And they invested in, I believe, a large number of solar farms, or residential solar, they became, I believe, at one point, the biggest investor in solar projects in the US, we can have the producer look that up or whatever, but they got big into using their balance sheet to invest in this stuff. Now, that wasn't venture investing, it was kind of investing in partners to go build this capacity. They have some upside as an equity owner, and they were a customer, right? So if you want to see something in the world, like, you know, more solar energy or clean energy, you can jumpstart it with your balance sheet, kind of tangentially related to corporate venture, it's great that exists in the world, go in eyes wide open. And you probably want to see the here's the other problem I see with these, the person who did the deal is not going to be there, you know, for the whole lifespan of your company. So just be prepared, you took money from Qualcomm, let's say, yeah, and the partner who did the deal. You know, they probably the tenure of partners at these are half the tenure of venture partners, or a third, they typically use it as a stepping stone, somebody from corporate, you know, they were a VP, they went to the venture unit for four years, they did a tour of duty, and they left because they don't get paid. Like venture capitalists get paid, they typically don't get the same carry structures, they kind of just get paid salaries, they might get a little upside. Google Ventures is run purely like I think they get $1,000,000 from Google, my understanding back in the day was they were getting $1,000,000,000 from Google every year to invest. And they just got paid like a yearly fund. So it was incredible to be a GV partner is dang, yeah, it was like you have one LP. And I don't know if they have more LPs now. But back in the day, it was like,

David Friedberg: you have one LP. Larry gives you a billion bucks, you deploy it. Every year, the fund closes,

SPEAKER_102: good luck. And so man, it was a pretty sweet job. And they paid them carry like a normal fund. So yeah,

Jason Calacanis: that kind of explains why everybody I've ever met from GBA. Let's say has some has some swagger.

SPEAKER_01: Um, let's say so what? Okay, so from the founder perspective, great advice, what should it mean? What should what signal should I take from it as an investor?

Jason Calacanis: Um, if I see that as the lead, or I see that as on the on the cap table, you know,

SPEAKER_39: if I'm being honest, if it's the lead, they couldn't clear market with in, you know, Sequoia,

SPEAKER_06: on a Perkins, whoever you use climate, climate's like, climate's a hard space. You picked a very hard space. Yeah, it's a hard space. It's an emergency space. So, you know, listen, like, you have to get

David Friedberg: money in the coffer somehow to get the startup going. So I'm not too judgmental having been a founder. But I do think it is a negative signal. If they're the lead. It's a fine signal if they're putting a small amount in if they're 10% of the round, it's like, notable, it could even be

SPEAKER_27: notable. It's like, Oh, yeah, we talked this company, you know, Intel or Qualcomm, whoever to be involved. Great. You know, the lead means they're gonna, they have too much control because the lead typically gets a board seat. So then information rights, the lead. And that means they could change the direction of the company. Right? Even if you don't think they can, some big company thinks you're a threat, you know, or they don't agree the direction you're going, or you're helping one of their competitors, like, you just don't know what their motivation is going to be. And then your person, or we say in the business, your rabbi, your rabbi at the corporate venture capital

David Friedberg: group leaves. And now you have no advocate. No advocate, you lose your advocate. This is the problem with corporate deals is some advocate does it and then the CEO of the company changes and they're like, Yeah, we don't need a venture arm, I don't believe in this. So you will also see venture arms come and go. And then a lot of times the venture arm does really well, and they spin it

SPEAKER_27: out and they give it a new name. So SAP famously had a venture capital arm. And it became back in the 2014 era. They changed the name to sapphire ventures. So sometimes the leadership would be like, you know what, on either side, the leadership of the venture side, or the leadership of the

SPEAKER_118: corporate, say, you know what, we are not, we like this, we don't love it. Why don't you go find some

David Friedberg: other LPs and we'll slowly, you will reduce our dependency on us as a sole investor of capital,

SPEAKER_27: or the GPs, the general partners might say, you know what, we're going to go start our own fund, or you can be in our fund to be the anchor. And so you'll have both parties kind of reduce the dependency on each other, right. And that's what you saw with I think SAP ventures becoming sapphire

SPEAKER_38: ventures. Interesting. Fascinating. All right, see, good topic. I think it's a good topic. Yeah.

SPEAKER_39: And that was, I'm looking at the history of SAP ventures last sapphire, the firm was founded in 1996.

SPEAKER_102: And was spun out as an independent company in 2011 rebranding as sapphire ventures in 2014. So

SPEAKER_27: this is the nature of these things. It's fickle, because management is fickle. Now the business has a downturn, like what's a business that's getting their ass kicked right now a big one Facebook meta. Imagine like he was putting, you know, 500 million into a venture studio, and then the stock collapses. Now it's like, what's not essential here? Oh, the venture arm, right, Facebook ventures, boop,

SPEAKER_128: poof, gone. God, king, queen decides not for us anymore. No more venture. Interesting. Yeah.

SPEAKER_129: Okay. All right. Good. Love it. Good to know. Thanks. Or what do you got this week in climate

SPEAKER_01: startups? Molly, what do you got for us today? Okay, this is super interesting, because you know, it's been a big week in crypto. And you know, that I, you know, my feelings on Bitcoin, and I think it's environmentally indefensible. And then people are always coming to me being like, yeah, but Bitcoin is going to be super incentivized to find more renewable sources of energy. And that's going to actually incentivize more renewable energy. And I'm always like, shut up, call me when that happens. Okay, well, turns out, we went out and found a startup who is making that

SPEAKER_25: happen. Yep. We have, wait, I okay, just to reiterate my understanding of this, because because

SPEAKER_04: Bitcoin is a race to find the cheapest energy, more the theoretically, what people are saying is, oh, you know, it's going to drive people to make cheaper energy. I don't know, that seems a little

SPEAKER_10: cause correlation. Right? Seems to me that if you could find some coal and burn it on the slide, you might do that as well. That's the cheapest energy. And I was like, if you're going to generate

SPEAKER_01: renewable energy just for Bitcoin mining, that's not additional. Like if you're going to generate renewable energy power school with it, right? Don't use it for Bitcoin mining. So this is the mindset with which I come into this interesting conversation with Daniel Seacrest, who is one of the co-founders and CFOs at nodal power, which builds independent power plants in landfills. And you know, that landfills obviously off gas, a ton of terrible emissions, 50% of which is methane, which is like 80 times more warming than CO2. The mission is to create this next generation of independent power plants. And then what they do is they co-locate Bitcoin mining facilities at these landfills because the revenue from the Bitcoin mining incentivizes the power plants to run all the time. And then they sell renewable energy back to the grid. Awesome. So these are like the turbines that

Chamath Palihapitiya: they install at landfills because the methane is blowing off of them. It's what they do is they

SPEAKER_01: capture the energy from flaring. So the way that landfills have to do it now is they're required

SPEAKER_10: by law to capture all of these gases and then burn them off. And then they flare.

SPEAKER_01: Yeah, you see that when you drive by that. Exactly. So that can be captured and converted into energy as opposed to spewing the worst crap into the atmosphere. And so they discovered that the Bitcoin and it's a great origin story with Daniel talking about how one of the co-founders is a Bitcoin maximalist. He and the other co-founder are like, but they got talked into it because they realized like this is the mining is the financial incentive to create the renewable energy that currently has not existed. And I was like, well, hell. Yeah. And it turns out of methane emissions,

SPEAKER_04: there's been some debate about this, but it's 15% coming from US landfills or some studies are saying it might be two or three times that. So this is just one of these great things where, you know,

SPEAKER_103: these lemons can be turned into lemonade. So great find and I'm really interested in hearing about this

SPEAKER_01: company. It's fascinating. Yeah. So I have to say the only regret that I have about the pandemic is that I did not appropriately take advantage of the opportunity to be a digital nomad. I did this recently in a house I rented and it was incredible. I was so productive. It was so quiet. There were no dishes staring at me. I'm sure a ton of you listening right now are working fully remote and we know that a lot of remote workers love living that digital nomad lifestyle. And if that nomad life is for you, you need to check out blue ground. Blue ground is a global network of beautiful move in ready apartments that come with everything you need for working remote. This is such a genius idea. They manage over 10,000 apartments across 15 countries and 27 cities in the US, Europe, Middle East and Asia. You could work from literally anywhere. Here are some of the cities they're available in Barcelona, Madrid, London, Copenhagen, Dubai, Paris, Vienna, Berlin, New York City, LA, Austin, Miami. This is also super flexible. You can stay for a month, a year, or longer. Browse available apartments in real time, book in a few clicks, and move in as quickly as the next day. Blue ground makes apartments available wherever you want, when you want, and on the terms you want. And kind of what could be better? With blue ground, feel at home and be free to roam. And here is the best part. Get up to $1,000 off your booking at promos.theblueground.com slash twist. That's promos.theblueground.com slash twist for up to $1,000 off. Daniel Seacrest is the CFO at nodal power previously worked at Microsoft as the strategy lead for AI and mixed reality devices. And Daniel, I'm going to let you

Jason Calacanis: explain if you don't mind first, welcome to the show. Thanks for coming on. And tell us what nodal does.

SPEAKER_151: Yeah, nodal power is a independent power producer that specializes in developing landfill gas to energy power plants. What is that? Yeah, great question. Tell me more.

SPEAKER_150: Yeah, there's a lot to it. There's a lot in there. Yeah, definitely. So, a lot of people don't know,

SPEAKER_151: but as waste, municipal solid waste, household waste is landfilled, over time it decomposes and creates landfill gas. And landfill gas consists of roughly about 50% methane, 50% CO2. And when methane or CO2 is vented into the environment, it's obviously a very harmful greenhouse gas. And so, the EPA actually requires landfills of a certain size to put gas control and collection systems in place, which funnels that gas into a central collection point, at which point most of the time it's combusted through a flare stack, so lit on fire. What we do is we come in and we partner with landfills to take that gas that is otherwise being combusted at a flare and funnel it into a generator, which creates electricity. So, and we should clarify here that methane in

SPEAKER_53: particular, especially in recent years, there's been this realization that it's way worse, isn't it?

SPEAKER_47: Yeah, yeah. 50 times worse than carbon dioxide emissions or something?

SPEAKER_150: Yeah, so it depends on the horizon you're looking at. Over a 20-year horizon, methane is actually

SPEAKER_151: 84 times more potent of a greenhouse gas than CO2. So, if you're trying to make inroads on climate change on a quick timeline, methane is where you should be focusing. Over 100 years, it's 28, 30 times more potent. So, it's still a very harmful greenhouse gas. It just doesn't stay in the

SPEAKER_01: atmosphere as long as CO2 does. And how hard is it? I mean, burning a substance to create electricity is kind of what we've always done in terms of creating energy. How hard is it to create this,

SPEAKER_162: the infrastructure the way that you are doing it? Yeah, it's certainly not simple. There's a lot

SPEAKER_151: of processes that go into place. As the gas is created in the landfill, it's typically coming out of the landfill at a really low PSI. And you have to really compress the gas in order for an engine to actually take it. And in addition to the compression motion, you need to purify the gas a little bit more, take out some of the particulate matter, and make sure it's a really nice quality for the engine to take. So, there's a lot of infrastructure that goes into place just to get the

SPEAKER_53: gas ready for consumption by the engine. And is that why landfill operators and even say PG&E or other electricity generators have not done this previously? What's the nut that you cracked to make

SPEAKER_150: this possible at scale? Yeah. So, it's pretty interesting. These projects have been developed

SPEAKER_162: for 20 or so years now by traditional developers. And most of them develop projects with the eye of interconnecting the asset to the grid and providing that base load renewable energy to the grid. What we do that's a little bit different is that we actually take what's maybe more considered the

SPEAKER_151: chaff in terms of landfill gas. These aren't projects that are typically viable for a traditional developer. And we actually come in and we co-locate a Bitcoin mining data center on site, which allows us to derive economic benefit from the gas immediately and front load a lot of cash flows from the development process, which allows us then to interconnect and bring that base load renewable energy to market that other developers couldn't. And that is an even trickier proposition than just getting the gas to a state where you can consume it in the engine. Because when you're building a power plant and you're using that energy to power a data center, whatever it may be, an off-grid solution, it's rather complicated to make sure that the plant is balanced perfectly all the time. And so, there's a lot of tech and IP that we've put into the process to enable us to develop an off-grid plant that we can then graduate once an interconnection is made to a traditional resource.

SPEAKER_53: Got it. So, right now, the electricity that's generated primarily powers, Bitcoin mining operations. Do those interconnections exist or is that sort of step two in terms of future development? What stage

SPEAKER_162: are you at now in this kind of process? Yeah. So, we actually have two projects that are operational. Well, one that's operational, one that's being commissioned here next week. The one being commissioned next week is a true off-grid solution. So, there's no interconnection in place.

SPEAKER_151: Okay. Our existing site that is operational is a 3.2 megawatt power plant near El Paso, Texas, and that is interconnected to the grid. And so, once a resource is graduated to a traditional asset and it's interconnected to the grid, the Bitcoin mine actually stays on site to help balance the plant and also drive capacity factors or uptime for that facility. So, as an example, traditional landfill gas to energy projects run at around a 67% capacity factor or uptime, meaning for a third of the year, they're just not even on. They're not producing electricity at all. When you add an economic resource like Bitcoin mining to the entire stack of the power plant, it gives you reasons to keep that power plant operational as often as possible. So, for that site near El Paso, even though it's grid connected and we get majority of our revenue from selling electricity to the grid, the Bitcoin mining aspect actually drives the capacity factor from a 67% historically to somewhere around 92%. So, not only does the Bitcoin mine drive that capacity factor up and give us economic benefit, we actually dispatch more baseload renewable energy to the grid as a result.

SPEAKER_47: As a result. And that's what you mean by balancing the existence of the incentive basically to keep

SPEAKER_53: producing that energy is the balancing part. Yeah. This is so interesting because I will confess to

SPEAKER_01: having in the past been very skeptical of the idea that, you know, Bitcoin mining was going to incentivize more use of, for example, flaring off guessing. It sounds like what you're saying is that this solution probably would not be developed at scale without that intermediate, intermediary

SPEAKER_176: layer of Bitcoin mining to basically make it worthwhile. Yeah, that's exactly correct. There's

SPEAKER_151: about 4,000 megawatts worth of energy that's just being flared that traditional the developers won't touch just because of the economics around kind of a smaller site. They really look for large projects and it really comes down to economies of scale. If you're investing millions of dollars into an interconnection or infrastructure on these sites, it's not enough to generate 1.6, 3.2 megawatts. You're really looking for 4.8 or larger. As an example, there's some landfill gas energy sites in LA County that will do 80 megawatts. So, there are some really large facilities out there and it's really those that attract the attention of a traditional developer, whereas we focus on smaller projects.

SPEAKER_185: And to give you some context around what 4,000 megawatts look like, looks like that's about 3.5

SPEAKER_188: million homes annually. Yeah. And is it your goal to always accomplish that interconnection?

SPEAKER_53: That's correct. Like the current project that's off grid now, how long will it take for it to become

Jason Calacanis: interconnected? I know this is like a huge topic in terms of modernizing the grid and there's a lot of interconnection backup, but what does that timeline look like? Yeah, that's a great question. So,

SPEAKER_162: typically, interconnecting an asset depends on the jurisdiction that you're in and whose service territory you're in. Traditionally, you'll expect to see anywhere from two to four years, so it's a considerable amount of time. But our goal is to interconnect as many of these assets as

SPEAKER_151: possible. Truthfully, there are some aspects of the landfill business where you want to have landfills be rather remote, right? You're not locating them right next to major housing developments for obvious reasons. Right. Yeah. And so, there are some landfills that will never really be economically viable to interconnect, but from our perspective, there is still a real environmental benefit to mitigating flare at these landfills as much as possible. And so, while our goal and our primary business model is to bring these stranded resources to market as efficiently as possible, there is still a business that exists that is more of a traditional off-grid Bitcoin mining methane mitigation.

SPEAKER_53: Well, and it seems like it's a little bit of a double win, and this is where dispelling the skepticism comes in. It's a double win in that you're mitigating flaring, which is hugely damaging, and you are creating energy for the purpose of Bitcoin mining, meaning you're offsetting energy use somewhere else in theory. I mean, it's probably not additional. It probably will just increase overall mining, but any little bit that is additional seems really valuable. Yeah. And that's really how we

SPEAKER_162: view it. If you wanted to stand up a Bitcoin mine somewhere that's grid-tight, your carbon footprint

SPEAKER_151: of that mining operation will largely mirror the resource mix of the utility that you're drawing power from. So, depending on where you're located, it may be coal-intensive, natural gas-intensive, so on and so forth. So, any megawatt of power that we can bring to the grid, one is one less megawatt power or one less megawatt that we need to depend on more carbon-intensive sources like coal, natural gas-4. And two, by bringing Bitcoin mining to a truly carbon-neutral position, it really shows a way forward for miners writ large to be able to say, this is a responsible way for us to mine, and it can

SPEAKER_53: be very economical to do so as well. Right. I also wonder to what extent you imagine future regulation will be a big tailwind for your business. Like, you just won't be allowed to do Bitcoin on

SPEAKER_151: coal, maybe. Yeah, it'll be really interesting to see what regulations come out in that space. In particular, I can see a lot of folks being quite upset if there is some broad stroke saying, hey, Bitcoin mining in general is prohibited for whatever reason, given that there are countless other energy intensive businesses out there that may also be unsavory. And so, I think the Bitcoin mining, to a certain extent, gets a bad rap in that regard. But I do think that it's likely to be categorized similar to what some jurisdictions do with maybe cannabis cultivation, which is an energy intensive business where there's some sort of tariff on the electricity rate that charges an excise tax or something of that nature. I think that that's far more likely than prohibition. Looking for a better

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SPEAKER_197: for a fraction of the price with Odoo. What's the history of Nodal? How did you get into this complicated, difficult, expensive sounding business? How long have you been at it? How much have you raised?

SPEAKER_162: Yeah, it is. Yeah, that's a great question. So, as you mentioned, I was at Microsoft previously,

SPEAKER_151: and I was in the enterprise cloud space, so Azure, and I primarily worked on large strategic partnerships with the federal government. So, I did pricing strategy for Jedi procurement, which was,

SPEAKER_150: you know, there was a lot of buzz around that for a long time. Oh, yes.

SPEAKER_93: Yeah. That was like the dishiest cloud computing government contract story that ever existed.

SPEAKER_202: Yeah. Well, that's a whole other podcast. It is. It is. I did many on that topic, yes.

SPEAKER_162: Yeah. So, I did the pricing strategy for that procurement, and as a part of my scope of work

SPEAKER_151: at Microsoft, I was also focused on commercial partnerships, in particular when they involve some sort of geo-expansion, new data center footprint in a new geo. So, you can think of, you know, Microsoft's partnering with a bank in Spain. The bank needs to have a data center on site for certain regulatory reasons. So, costing out those data centers and building out those partnerships was really my scope. And as I was working on that, I had a buddy at Microsoft, Matt Jones, who's a co-founder with me here at Nodal, who wanted to pick my brain about data centers and how they work. And he came from it from the perspective of Bitcoin mining. He's been mining Bitcoin for over a decade. You know, he's sold most of it. Otherwise, he wouldn't be here with me running Nodal. Starting a company. Yeah. But he wanted to understand data center economics a little bit better, so we started chatting about it. And I told him what I tell most people, and that is data centers are energy intensive. And if you want to really be competitive in the space, you got to understand power. And so I called my buddy, Brian, who was also a co-founder here at Nodal, who was the COO of a utility in Utah at the time, and started talking about energy strategy. How do you procure energy efficiently? And we ultimately landed on this mindset of the only way to really procure energy efficiently and on a cost-effective basis is to own the infrastructure yourself. So out of that,

SPEAKER_162: no big deal. Yeah. Yeah. Develop power plants. Right. So we started talking about that in the context of Bitcoin mining and realized over time that Nodal wasn't just Bitcoin mining

SPEAKER_151: using flared or stranded resources. This really pivoted to a view of, you know, we're a power producer that's using Bitcoin mining as a tool to bring resources to market that otherwise wouldn't. Mm hmm. So after much convincing of Brian to take a bet on Bitcoin and Bitcoin mining, and also myself, I had to really come around to it. It wasn't, you know, super apparent to me initially, but you know, through a lot of conversations and a lot of work, we realized that this was actually a really unique way to both mine Bitcoin and also develop resources for a grid that really needs baseload renewable energy, right? It's, it's not solar, it's not wind, which are only available around 33% of the time on average. This is baseload, you know, 92% of the time it's up and running. So we are really excited about the opportunity. This is like a pretty amazing origin

Jason Calacanis: story. I mean, I wish I could have been there for this because what you're saying is like, you had one

SPEAKER_01: Bitcoin maximalist, and then two of you realizing the the kind of potential for this as a literal and

SPEAKER_162: metaphorical conduit to a bigger business. Yeah, yeah, definitely. It was, it was pretty, it was pretty interesting. And Matt really had to, you know, beat us over the head with it over and

SPEAKER_151: over. But over time, you know, we finally got the picture and realized that not only that it was, it was something that was really interesting on a micro level. But it's a solution that's very scalable. And it's not like we're out developing five megawatts. And that's the total available market for us. You know, there's just in the United States alone, like I said, 4000 for us to go tackle. In the world, the problem is even bigger. Oh, yeah. Because in developing countries, gas collection and control systems aren't necessarily the norm. So it's a lot more vented methane. And Bitcoin mining can serve a similar function there where it gives you economic incentive to actually cap the landfill, start collecting the gas, and then give it beneficial use.

Jason Calacanis: And I appreciate you saying that it was a convincing process, because this is why we do

SPEAKER_53: this show and have these conversations because I have had that same ram like I don't even talk to me about an energy product that's going to generate energy that just goes into Bitcoin mining, because

SPEAKER_01: to me that feels like, you know, power a school instead. Yeah, sure. Yeah. So at what point in those conversations did you go, Oh, turns out we could also then power the school? Like we'll have I mean, was that it sounds like that was always the plan, build it around mining, grow it from there?

SPEAKER_162: Yeah, it actually was, it really was born out of our site that we developed in El Paso, near El Paso,

SPEAKER_151: Texas. It started as, you know, hey, look, this is an opportunity to develop a project that will give us really competitive electricity. And then we started realizing that, hey, look, this project has an interconnection already in place. Why don't we minimize the Bitcoin mining footprint and dispatch as much electricity as possible to the grid? And once we started looking at the economics of what that would look like, that was kind of the light bulb moment where we said, Oh, wow, this is this is a business where not only can you bring more renewable energy to the market by having this Bitcoin mine on site, but it's just better business to do it. And that's primarily how we started to look at this more than anything was, you know, there's a lot of talk in venture and startups generally about appreciation and equity value growth. And those have historically been really important factors for businesses. We're just not that kind of business. You know, we produce cash flows. And that's primarily what we try to do. And as we as we operated that plant, and we started looking at the economics of each marginal megawatt hour, we realized, wow, this is this is actually the focus is how can we get more exposure to any energy markets with each project rather than than siphoning off the energy for Bitcoin mining operation? Right. Um, on that note, are you venture backed? So we raised just under 13 million in seed round last year. That was mostly a syndicated round. So no lead investor, no nameplate yet. But we are we just kicked off two weeks ago, our series A. So we're in we're in the process of getting a venture partner in place. Let's talk offline.

SPEAKER_77: Let's do it about that. Yeah. How expensive is this? I mean, how hard is it to do what you're doing?

SPEAKER_150: Clearly, it's difficult. Yeah, it is difficult. Um, it's an especially it's difficult if you're not

SPEAKER_151: wielding the balance sheet of Microsoft, like I'm used to, right, right. But you can think of it in, in in terms of megawatts, it typically costs around 2.53 million dollars per megawatt to develop. So a site for us, the minimum footprint we have is about 1.6 megawatts. We're all in, including some GNA just shy of 4 million there. So it's a it's an expensive process just to even get a single power plant up and running. And it's time consuming. It takes on average for us around six months to develop a site. So capital intensive, long development cycles, which is, you know, very foreign for me, certainly coming from Microsoft, but it's been, it's been a really interesting process just seeing, you know, what does it take to get an air permit? You know, what does it take to get construction permits? How do you ensure that the infrastructure you're, you're building has longevity? You know, our site just north of Salt Lake, that's completely off grid, as an example, we're building a containerized solution around the engine. So rather than it being in a building, it's in a, it almost looks like a shipping container weighs 110,000 pounds. How do you build the ground to be able to, you know, in the, in the cement to be able to endure the rattling of a generator with that much weight on top of it? You know, so there's a lot of engineering work that goes into it. But the thing that's nice is once the project's up, you know, strong cash flows, and you're in place for

SPEAKER_53: 20 years. So, I mean, I have to say, I, prior to being a VC was doing a bunch of reporting about geothermal and lithium extraction, and those plants take 10 years. So when you're talking about six

SPEAKER_01: months to spin up a site, I'm like, that's freaking amazing. You must have, you must have little to know. I mean, certainly there's going to be permitting involved, but because of what you said about where landfills are cited, I would imagine that the permitting process, like this is something

SPEAKER_176: that most communities and agencies and states and cities are going to be in favor of. They're going to

SPEAKER_150: help. Certainly. Yeah. And that's evidenced in a couple of ways. You know, we, depending on the jurisdiction, qualify for renewable energy certificates for

SPEAKER_151: the energy that we create. We also qualify for the production tax credits for renewable energy. So the jurisdictions that we operate in are excited to have us. And that's, you know, certainly something that's important to us, but it doesn't necessarily make the business profitable. It's gravy at that point. But in addition to the economic incentives that we're given, when, when you look at our footprint, the generator, the emissions associated with it, as opposed to a flare from the department of air quality's perspective in these jurisdictions, there's, there's not a huge difference. And so, because all these landfills are already flaring the gas, the air quality people typically look at it and say, you know, yeah, there's a little bit more particulate matter coming off of these, but it's not something that we're overly concerned about.

SPEAKER_172: And especially if you get into more remote areas, the permitting process becomes really

SPEAKER_93: straightforward. Right. And then talk to me about how you get paid. Do you have a stake, so to speak in any of the Bitcoin? Yeah. So the Bitcoin mining,

SPEAKER_162: we're completely vertically integrated. We own the Bitcoin mining, we own the miners,

SPEAKER_151: and so we're compensated through Bitcoin mining. Oh, okay. And so we, we typically liquidate. We don't hold much Bitcoin just because it's that mindset of being a power producer first and foremost. So we, we settle on USD on a daily basis. But in addition to that, as you send electricity to the grid, it depends on the kind of facility that you're operating. We can go out and get a PPA with a third party to off take the electricity at a specific price and some facilities. Power purchase agreement. Thank you. Yes. No problem.

SPEAKER_162: Energy nerd. Yeah. Yeah. And well, the one thing that's been a whirlwind for me, side note is just the nomenclature in the energy world coming from Microsoft tech has its own, but energy is just acronym after acronym and it's mind numbing initially. But again, it depends on the

SPEAKER_151: facility. Our facility near El Paso is what's called a qualifying facility. The shorthand on that is the federal government really wanted to incentivize independent power producers, such as ourselves, to bring smaller assets to market. So rather than only providing incentives or giving, you know, a sign off on a, on a 500 megawatt natural gas peaker plant, they wanted to really incentivize smaller developments. And so they created a structure called a qualifying facility. And, and basically what that means is that we just sell more energy to the market almost on like a wholesale basis on a merchant basis. So we're not really pegged to a specific price. We float from month to month, depending on how much the local utility may need and they publish a rate for us. So we kind of float

Jason Calacanis: with the market in our facility and near El Paso. Got it. So will you primarily operate then in

SPEAKER_151: deregulated markets? It actually is pretty universal. It doesn't necessarily need to be deregulated. So our project in, in Salt Lake is in a regulated market.

SPEAKER_239: Right. If you're off-grid, it doesn't matter.

SPEAKER_151: Yeah, exactly. Yeah. Now in a dereg, it makes a lot of sense for interconnected assets to be deregulated, especially if you're not considering a power purchase agreement. And so, you know, for us, we see value in being in both regulated and deregulated. Texas has a lot of appeals, appeal for a lot of reasons. Regulatory, generally.

SPEAKER_242: Sometimes ERCOT will have to pay you $2,000 for one.

SPEAKER_162: Yeah. Yeah. That's exactly right. And that's something that's, that's really interesting as,

SPEAKER_151: as you evolve as a company. And there are certainly landfills that we're looking to develop in Texas. But that's an aspect where maybe you look at oversizing the Bitcoin mine just for that aspect. When power prices go negative, you can be a sink for the grid. Mm-hmm. In addition to powering, providing power when needed.

SPEAKER_171: Mm-hmm. Well, give us a sense of what the next six months look like. What's, what's next?

SPEAKER_150: Yeah, we've got a considerable pipeline in front of us.

SPEAKER_151: We're, we're really excited about some of the partnerships we're developing in the space. It's, it's a relatively concentrated space. The landfill business, 60% of all landfills are owned by three of the majors here in the States. And so we're really excited about the pipeline we have in front of us, both with some of the larger players and also with some municipalities and really excited about bringing as many megawatts to the grid as possible.

SPEAKER_176: So fascinating. Daniel Seacrest is one of the co-founders and CFO of Nodal.

SPEAKER_01: The future is decentralized, whether it's cryptocurrency or power.

SPEAKER_53: That's right. Or both. Yeah. Daniel, thank you. This is absolutely fascinating. I really appreciate the time.

SPEAKER_185: Yeah, no problem. Thank you.

SPEAKER_247: Great interview, Molly. Great VC Sunday school.

SPEAKER_04: We got through another week. It wasn't easy. A lot of hand wringing, a lot of pain and suffering. Sorry to people who lost their jobs this week. Sorry for the people who are going to lose their jobs next week. I mean, we, we lived high on the hog for a bull run of 15 years. We knew it would come to an end. And so it's going to be hard for a year or two, and we're going to work through it together here on this week. And so we're going to talk about how to survive this. We're going to talk about how to thrive during this. And what are the opportunities? Because the boom bus cycle is how renewal occurs, right? It's like, you know, it's terrible to see a forest fire. It's, it's smoky, it's dangerous. It's, it's a bummer, right? I mean, it's no, no, no way to say it's not. But then the spring comes and you see, you know, uh, all these trees start growing and you start to see the renewal. And I always think about that when I, when I drive by like the forest fires here in California, like, okay, here we go. We're growing back. And, and it's, uh, it can be quite beautiful to watch the reemergence. And that's what the next year is going to be about. This is the best possible time as paradoxical as it is Molly for people listening to start a company. That's why I'm starting teaching November 14th founder university. And that's the fourth class. Okay. Like five, 600 people signed up for this thing. I think we're going to accept about 400 where I was going to go.

SPEAKER_176: Like founder university now is the moment. That's the moment you got an idea. Why don't you learn how

SPEAKER_27: to be a founder and see if you can make an MVP, see if you got what it takes. Cause this is when the, this is when the fortunes are made is in the down market. So there is a silver lining. You can put

SPEAKER_04: your head down and work. Yeah. 11,000 people are being let go at, uh, Facebook this week. And you know, last week it was thousands of people at other companies, those people, some number of them, Molly,

SPEAKER_27: this might be their opportunity to, to actually say, Hey, you know what? I had that idea. And there's a little bit of capital out there and I'm going to tighten my belt and a little austerity measures and a little ax to the grindstone, a little elbow grease, a little innovation, maybe put a team together and maybe take a swing for a year or two instead of, you know, slogging it out at Facebook. It's going to suck to work at Facebook for the next year. It's going to be brutal. The cuts are not stopping. So just start your own company and create your own goddamn world. That's my best advice. Create the world you want to live in.

SPEAKER_25: Exactly. Be your own Mark Zuckerberg.

SPEAKER_255: Make your own reality lab.

SPEAKER_256: Make your own reality.