Host Bill Nussey talks with Bryan Hassin, Co-Founder and CEO of the “rocket ship” accelerator for climate tech innovation, Third Derivative (D3). This new startup accelerator was born from a collaboration of two pioneering firms, RMI (previously Rocky Mountain Institute) and New Energy Nexus. Hassin shares how D3 is bringing startups, investors, and corporations together with regulatory and policy experts in radical new ways to increase the speed to market and long term success for climate innovation.
Here are a few of the insights from Bryan…
“… this really gets to our theory of change. We believe that this deeply integrative approach can not only increase the success rate of promising early stage climate tech innovations, but almost as importantly, increase the speed to success. And if we can do that, we can de-risk the entire category such that the millions of dollars we’re investing today can attract those trillions of dollars that need to be invested in the category.”
“…We really have a global service mandate and we’re going after major scale because that’s what the problem demands of us. And that, that actually gives us opportunities to invest, not just in specific technologies, but in entire value chains.”
“…Startups actually face four distinct valleys of death. And every time they successfully navigate one, they’re kind of back to square one. They are having to educate an entirely new set of stakeholders. At best, this slows down the rate of climate tech innovation and at worst really promising climate tech dies on the vine. “
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Transcript
Bill Nussey:
Well, hello and welcome to everybody in the Freeing Energy world, as we start the wonderful time of the year, the fall. Down here in Georgia where I live, it’s just gorgeous and we’re excited to continue sharing the great stories from innovators and champions of local energy all over the country and the world with all of you.
And as always, I always like to take a moment and thank you for your time. Everybody is incredibly busy, and for those of you that spend a few minutes listening in, sharing your comments and suggestions, we are very, very grateful, deeply grateful.
And our mission, just to remind all of you and to introduce ourselves to our new friends, we are a nonprofit media organization, started with a TED Talk and turned into a podcast that took off. We have a website and then a book coming out in December by me.
And the mission is to help create a bit of an on-ramp for some of the most talented innovators, entrepreneurs, scientists, and policy makers in the world, to lend those talents towards clean energy. And particularly our focus is local energy, the small scale things where entrepreneurism can thrive.
But we love everything that is moving us towards clean energy and the broader scope of helping save the world for our children and so on and so forth. And today’s guest is someone who’s running an organization that everybody needs to hear about. Most of you have.
I’m super excited to have him, but if you haven’t heard of Third Derivative, this is an organization that is taking the free energy mission to an entirely new level. And we’re going to talk with their CEO, Bryan Guido Hassin. He is a dyed-in-the-wool technology entrepreneur.
He’s been all over the world and he is bringing all that talent and perspective to a organization that is helping entrepreneurs make their visions, their promises, their technology, their science into real world-changing commercial opportunities. So Bryan, welcome to the Freeing Energy show.
Bryan Guido Hassin:
Thanks, Bill. Really excited to be here and love the work that you’re doing.
Bill Nussey:
Thank you. Thank you. So I’m just going to spend a moment or two or three or four or five, going through your amazing background and giving folks a sense of who they’re going to be hearing from today.
Bill Nussey:
So you are a technology entrepreneur. You were the co-founder and CEO of Smart OES, which stands for Smart Office Energy Solutions. It was an IoT company using artificial intelligence and behavioral science to optimize the energy use of large buildings and electric grids. And it was acquired in 2019.
Bill Nussey:
So the only thing cooler than being an entrepreneur is an entrepreneur with an exit. And Third Derivative is clearly trying to help a lot more people follow in that illustrious path. And one of the things I love about Third Derivative, and we’re going to talk to you about, is aligning that entrepreneurial vision and energy with things that make a difference socially, making the world more fair and equal for all the folks who don’t have some of the opportunities that we do.
Bill Nussey:
He was also the founding director of givewatts.org, to that point. It deploys solar energy in schools and clinics throughout east Africa. For those of you again, who have listened in for the last year or so, we have been to east Africa. We’ve talked to lots of folks who are building businesses out there. It’s one of our favorite topics.
Bill Nussey:
And previously, he has led the climate and energy tech ventures around the world with a few big wins and a few more big learning experiences we’re going to hear about today. Before all that, he got an MBA with honors and leadership distinction from IMD at Lausanne, Switzerland. He has a master’s in computer science and an undergraduate degrees in computer science and electrical engineering from Rice, where by the way, he played football for the Owls and later served as an entrepreneur in residence.
Bill Nussey:
So that is quite a diverse background, and as you’re going to hear in a few moments, it’s even more diverse than that. And today, he joins us as the co-founder and CEO of Third Derivative, which is a joint venture of the Rocky Mountain Institute, now called RMI, and New Energy Nexus, which launched operations last year.
Bill Nussey:
And they describe themselves as a fully integrated rocket ship of climate innovation. Now, that is a serious phrase. So again, Bryan, welcome and really glad have you here today.
Bryan Guido Hassin:
Thanks, Bill. Like I said, really excited to be here. Glad to share the stories of things that we’re working on with your listeners, and also just kind of be part of the conversation, as we keep pushing this entire journey forward.
Bill Nussey:
Excellent. Well, let’s roll back the time machine, and you were a fullback on the varsity football team for Rice University. Go, Owls. And you played in high school too. Did you ever think about going pro, or were you born … you know, two or three years old, “I got to be in clean energy, and the climate change.” What was your path?
Bryan Guido Hassin:
Playing American football at the elite level, generally players have either amazing genetics and physical prowess, or incredible heart and determination and hard work. And I was definitely more on the latter side, and the ones who have both of those are the ones who go play in the league.
Bryan Guido Hassin:
But interestingly, I would say football was probably the path that brought me to clean energy, right? I mean, Rice University and certainly my high school, the Thomas Jefferson High School for Science and Technology, neither of these are football powerhouses, right?
Bryan Guido Hassin:
So I was used to, and inspired by, being an underdog and fighting against impossible odds and finding ways to dig it out through grit, determination, leadership, teamwork. And that’s very much the situation we’re in when it comes to effecting an energy transition and fighting the climate crisis.
Bryan Guido Hassin:
It’s not a coincidence that I played football on the very field where JFK gave his incredible speech that inspired a nation to go tackle an impossible challenge of putting a person on the moon.
Bryan Guido Hassin:
And here again, that’s the situation where we are today. So yeah, football’s a big part of the story. And I’m inspired by the fact that teams like NC State find ways to beat Clemson. Teams like Rice find ways to beat Texas, and teams like humanity are going to find ways to solve the climate crisis.
Bill Nussey:
I’m loving hearing this passionate story and I’m even more inspired. One of the fun things about the Freeing Energy Podcast is, we’ve had a real diversity of experiences and skills that fall outside of the professional realm we focus on.
Bill Nussey:
So we’ve had race car drivers, bakers, Olympic skiers, and drummers, all esteemed guests on the Freeing Energy Podcast. But to my knowledge, we’ve never had an oenophile. Probably have had some oenophiles and didn’t know it, but you were the president of the Rice University wine society.
Bill Nussey:
So I’m thinking football player, wine connoisseur, oenophile. So I’d love to hear how that all ties together. And my producer and co-host, Sam, wanted me to ask you if you had an opinion on a 2010 Valdicava Brunello di Montalcino. So, apparently …
Bryan Guido Hassin:
That’s wonderful. So, yes. I fell in love with wine, actually, while I was living in Italy, which is a great place to fall in love with wine, food, and broadly, it was an experience that, although I was an engineer at the time and I was pushing hard and I was an entrepreneurial founder, you couldn’t help, in Italy, just taking time to stop and smell the roses.
Bryan Guido Hassin:
And that’s an important reminder, even for me. And I would say for all entrepreneurs today, to stop. You can’t have your foot on the accelerator all the time. You’ve got to take time for yourself. You’ve got to pause. You’ve got to recover and you’ve got to savor the journey along the way.
Bryan Guido Hassin:
I mean, otherwise, you can get completely burnt out. So wine plays a pretty big role in my life as a … I don’t know, a forcing function, as a mechanism to force me to stop, pause, savor, and recover.
Bryan Guido Hassin:
As for your producer, so Valdicava is one of my absolute favorite producers of Brunello di Montalcino. The 2010, I had actually earlier this year for the first time. Graphite notes, bright red fruit on the palate, a really enticing undercurrent of mushroom, and kind of a more umami-y notes, tightly integrated tannins and it really, briefly, was an incredible blockbuster, but then it faded on me pretty quickly and became pretty acidic. So I think maybe it’s still a little bit too early to drink, but I think there’s an incredible wine in there if you wait for just a few more years.
Bill Nussey:
Oh, man. You have just tripled my knowledge of wine. That’s impressive. Well, let’s switch gears now towards what you’re doing now, which is helping early stage promising people and ventures in technology into the real world. And Third Derivative is not your first one of these, which is kind of cool. You were doing this before this most recent organization. So you started OwlSpark, which is an incubator at Rice University, while you were an entrepreneur in residence there. So how does that work?
Bryan Guido Hassin:
That was a really neat story. I was between ventures. I had sold one. I didn’t yet know what I was going to work on next, and so I took a little sabbatical and returned to my roots at Rice to help kind of build the entrepreneurial ecosystem there.
Bryan Guido Hassin:
And let’s give credit where credit is due. OwlSpark was actually a student project. I was teaching a course on Lean startup entrepreneurship, where over the course of a semester, students had to build a business. Not a business plan, but a business. And four of my students, Veronica, Vivus, Akosh, and Darren, decided they would build a business that was an incubator in and of itself, and it was solving a pretty critical challenge for us at Rice.
Bryan Guido Hassin:
There was a lot of latent entrepreneurial energy. We had faculty who wanted to commercialize technology that was in their labs. We had students who wanted to start companies, but just the way that the university, I don’t know, social calculus worked, all those students were going off over the summers for internships with big companies.
Bryan Guido Hassin:
So we started OwlSpark, essentially as a summer internship program for students, but instead of working for a big company or doing research with faculty, they started companies and we provided the mentorship and the guidance and the curriculum, and they were there on campus so they had access to all of the labs and resources that that had to offer, which usually, you don’t have access to when you’re starting a company.
Bryan Guido Hassin:
And it’s now, I believe, just completed its ninth cohort. They’ve had more than 100 startups go through, have partnered now with University of Houston’s RED Labs, so it’s a more collaborative kind of Houston, broader Houston-centric organization.
Bryan Guido Hassin:
Since then, since we launched it, it’s been ranked one of the top university-based incubators in the world. Both Rice and the University of Houston have achieved very high rankings, including number one rankings for top programs in entrepreneurship, and we know OwlSpark is a big part of that as well.
Bryan Guido Hassin:
So just incredibly proud of what a few motivated students with a little bit of support, and kind of a hand on your back and inspiration and empowerment can do. And we need a lot more of that, not just in clean energy, but kind of throughout the world.
Bill Nussey:
Well, you’re taking that mission and the gift for leadership to help pull it together to a national, really international scale. And so, let’s talk about what you’re doing today, and what you and the team have put together.
Bill Nussey:
The organization is called Third Derivative, interested to hear about that name. Sounds very cool, but what is Third Derivative and how did you guys come into being?
Bryan Guido Hassin:
Yeah, so at Third Derivative, we’re working to find fund and massively scale the most promising technology solutions around the world to the most pressing climate and energy transition challenges, right?
Bryan Guido Hassin:
We believe, and our math shows that technology’s going to play a crucial role in building the sustainable, prosperous and equitable climate future. Our math indicates it’ll take $100 trillion US invested over the next 30 years to effect that transition.
Bryan Guido Hassin:
And that money’s not going to spend itself. It’s an incredible opportunity, once in a generation, or maybe once in a human civilization kind of opportunity. And yet, early stage climate tech as a category is woefully under-invested. Orders of magnitude less investment than traditional kind of SaaS and other categories.
Bryan Guido Hassin:
We believe that’s because commercializing, deploying and scaling climate and energy tech is hard, right? It often has long paths to market, significant capital needs. That’s a challenge in of itself.
Bryan Guido Hassin:
It’s especially a challenge when founders go to raise funds and they’re competing against apps and cryptocurrencies and things with very different return profiles. And I should say we’re sensitive too, to the challenge of investors, right?
Bryan Guido Hassin:
Investors have small teams, and trying to do diligence on hard technologies across a broader rate of categories isn’t what they’re really set up for. But then, for founders who do successfully attract the necessary capital, get off the ground, their path to scale invariably leads through at least one big, slow-moving, bureaucratic, risk-averse, corporate entity as a customer or a pilot partner type of organization, where it takes them a year, even just to find the right person to talk to, not to mention getting a deal done.
Bryan Guido Hassin:
And here again, we have great empathy for the corporates. Corporates tell us every day that their boards and their CEOs are making bold climate commitments, and they have no idea how they’re going to meet them.
Bryan Guido Hassin:
They know it’s going to require new technology, but they’re not set up to find early stage technologies, test them rapidly, and then scale them up throughout the organization.
Bryan Guido Hassin:
And then finally, for a startup that successfully navigates all of those challenges, their path to scale is still set against a policy and regulatory landscape that broadly favors incumbents, not disruptors.
Bryan Guido Hassin:
So Bill, you know this as well as I do. We often think of a startup as facing a valley of death along its path to scale. And we would submit that climate and energy technology startups actually face four distinct valleys of death.
Bryan Guido Hassin:
And every time they successfully navigate one, they’re kind of back to square zero, having to educate an entirely new set of stakeholders. At best, this slows down the rate of climate tech innovation, and at worst, really promising climate tech dies on the vine.
Bryan Guido Hassin:
It gets lost in one of these valleys of death where the entrepreneurs give up hope, because it’s such a slog. So Third Derivative is working to transform that system at unprecedented scale and speed, specifically by bringing all of those stakeholders together: the transformational entrepreneurs, the visionary investors, global corporates, even policy makers, to get everyone aligned and kind of rowing in the same direction toward better and faster climate innovation goals.
Bryan Guido Hassin:
We have a deeply integrative approach where … This is not a startup accelerator that happens to have some partners who show up at a demo day. We look at each of those sets of stakeholders as co-equal participants in what we would call a systems accelerator.
Bryan Guido Hassin:
So Bill, this really gets to our theory of change. We believe that this deeply integrative approach can not only increase the success rate of promising early stage climate tech innovations, but almost as importantly, increase the speed to success.
Bryan Guido Hassin:
And if we can do that, we can de-risk the entire category such that the millions of dollars we’re investing today can attract those trillions of dollars that need to be invested in the category.
Bryan Guido Hassin:
We’re super early stage. A year ago, we were a PowerPoint and a few people. Today, we’re a team of about 20, growing rapidly. We’ll probably double head count here by the end of the year.
Bryan Guido Hassin:
And we’ve built what we would call an MVP, a minimum viable product that is an ecosystem of about a dozen global multinational corporate partners, about $4 trillion US in market cap behind them, an investor network of early stage venture capitalists with more than a billion dollars of investible assets, and ability to deploy on five continents.
Bryan Guido Hassin:
And 46 startups and growing, the largest cohort of climate tech startups in, as far as we know, the history of the universe. And that was our first shot on goal. And we’re only going up from there, but we’re still, I’ll say, just getting started in building this rocket ship while we fly it.
Bill Nussey:
It’s a great story and it’s … I love it. And the world needs what you’re doing in such a large way. One of the things that I find so compelling about Third Derivative is the origin story.
Bill Nussey:
For the folks that have listened to the podcast for a while and read my book in December when it comes out, my own journey has been incredibly influenced and has been a part of Rocky Mountain Institute, RMI.
Bill Nussey:
And their famous founder, Amory Lovins, is quoted throughout my book and was one of the big influences that caused me to get into this industry. And you think back on the legacy of the movement he started, with the Small Is Profitable book back a million years ago, and the world is a fundamentally different place because of his work, and certainly my own life is.
Bill Nussey:
And I think it’s really cool that RMI played a rather large hand along with another organization, which is also mentioned in my book, New Energy Nexus. So tell us about how those organizations and others came together to create Third Derivative.
Bryan Guido Hassin:
Yeah, it’s one of these classic stories, Bill, where it’s not very linear, right? I mean, it winds up being quite serendipitous. Let me give you the perspective from my own viewpoint, but then it leads to kind of how it all came together.
Bryan Guido Hassin:
So I sold my last climate energy tech startup in 2019, and had to take a hard look in the mirror through a career in which I’d had some big successes. I’d had $100 billion exits. I had some big failures. I say we call them “learning experiences,” and I had everything in between.
Bryan Guido Hassin:
But I had to recognize that I’d helped a lot of investors make a lot of money, and yet the planet was still getting hotter. Right? So it was clear to me that to optimize my own life for impact, just starting in another startup probably wasn’t going to be optimal.
Bryan Guido Hassin:
So I was starting to become interested in, well, how could we actually transform the system such that all climate and energy technology entrepreneurs could be more successful? And I was having coffees and conversations and catching up with people I hadn’t caught up with for a long time, because I’d had my head down negotiating an acquisition, et cetera.
Bryan Guido Hassin:
And it’s like, it was one of those moments where the universe is clearly conspiring to lead you somewhere. I had multiple climate VCs say, “Oh, you know, you ought talk to RMI. They’re starting to think along the same way.”
Bryan Guido Hassin:
And I had multiple entrepreneurs saying, “Oh, you ought talk to Danny Kennedy,” who’s a clean energy entrepreneur whom I’ve long admired, and is currently the executive director and chief energy officer at New Energy Nexus, “because they’re starting to think along the same way.”
Bryan Guido Hassin:
So I flew out … This is before COVID, shortly. I flew out to go meet with the folks at RMI. I thought maybe I’d join an advisory board or give them some perspective from my own lived experience.
Bryan Guido Hassin:
And I became so enamored with their theory of change, which matched so well with my own lived experience, that I extended my stay. I said, “Oh, guys. Let’s hop on some whiteboards and let’s work on this.”
Bryan Guido Hassin:
And so, between an incredible organization like RMI, long known for systems-level thinking, now having the system of climate tech commercialization deployment and scale on their radar, and putting their big brains toward it, and having Danny Kennedy and his organization, New Energy Nexus, known for building and supporting a network of more than 100 clean energy incubators and accelerators around the world, coming together to put an ambitious new shot on goal for systems transformation, I just …
Bryan Guido Hassin:
I was on the plane back trying to figure out how to have a difficult conversation with my partner to say, “Look, I know we’re in a very comfortable spot right now. I know we’re not looking for change, but it’s time for us to live our values of living a life of service and adventure, not of comfort and risk aversion. And this is is the adventure that we need to go on.” And we never looked back, and it’s been an amazing ride so far.
Bill Nussey:
It’s hard to imagine a more exciting combination of RMI and New Energy Nexus and yourself with your background and all that coming together to create an organization whose time, whose promise and scale is so on spot with what the world needs.
Bill Nussey:
So I’m thrilled to hear that story. And it certainly seems like the universe is conspiring, not just for Third Derivative to come into existence, but all the companies that’ll come through your organization. It’s seriously cool. So how’d you come up with the name?
Bryan Guido Hassin:
Yeah, so “third derivative” is a mathematical term referring to, if you take position, then the first derivative is velocity, kind of the rate that position changes. The second derivative is acceleration, the rate of change of velocity.
Bryan Guido Hassin:
And part of our raison d’etre is that there are a number of accelerators out there already. There’ve been a lot of attempts to accelerate startups more broadly, and especially in the climate industry, and yet, we still are where we are. We still need massive improvement, massive new shots on goal, tremendous new breakthroughs, not only in technologies, but in the speed to which those technologies arrive at market.
Bryan Guido Hassin:
So we thought “the third derivative” was appropriate in capturing our mission, not just to accelerate a few startups, not just to help some investors make better returns, not just to help some corporates improve their sustainability innovation, but to transform the entire system, to accelerate the rate of acceleration. That’s what we’re all about, and anything less will not be success in our eyes.
Bill Nussey:
That’s so spot on. So let’s talk about what’s going on in the broader industry and what you guys at Third Derivative are trying to do on top of what are certainly many other, perhaps at a distance, similar efforts.
Bill Nussey:
For many people, when they think about helping create these next generation climate tech, energy tech companies, they think first and foremost about venture capital. Raise a fund, sit around, and choose companies to invest in. And that’s only a part of what you’re doing.
Bill Nussey:
So what is it that you guys are doing differently than traditional venture capital? And even from there, what are you doing that other incubators and accelerators may not be doing yet?
Bryan Guido Hassin:
At the end of the day, we have to reconcile the fact that the traditional venture capital model is what got us where we are today. So we don’t think just launching another VC fund is the answer, or just launching a bunch of new VC funds or just launching a larger VC fund.
Bryan Guido Hassin:
Again, we have to transform the system. And I’d say one of the big differences here is that we tried not to have the hubris to think that we know, ex ante, what all the solutions are going to be.
Bryan Guido Hassin:
We are trying to lift up an entire crop of solutions and let the free market ultimately decide, but support and accelerate their path to going through the crucible of the free market, as it were.
Bryan Guido Hassin:
And we’re not just putting them out there to do it on their own, right? We’re not betting on success and just trying to put a chip down here and put a chip down there.
Bryan Guido Hassin:
We’re trying to co-create success with all of these startups and innovations, by bringing them in, working with them, connecting them with our corporate partners so that they can get deals done and pilots launched, connecting them with our VCs so that they can kind of shorten the pathway to follow-on funding, et cetera.
Bryan Guido Hassin:
So it is this really deeply integrative approach, and we’re starting to see the results of that. Again, we’re quite young. Our first startups only launched in our program less than a year ago, and already … We made initial investments in them as part of coming into the program, and already, nearly half of them have closed a follow-on round of funding to the tune of more than $100 million in total closed in just nine months, right?
Bryan Guido Hassin:
So we’re starting to see some validation that this deeply integrative model can shorten these commercialization cycles, shorten these funding cycles, which is what we need to rapidly accelerate, the rate of acceleration.
Bryan Guido Hassin:
You also asked about kind of other organizations and other accelerators that are out there as well. And let me be clear. Our mantra is that together, and only together, can we build the sustainable, prosperous and equitable climate future.
Bryan Guido Hassin:
So we work openly with all these accelerators and other startup support organizations. A number of our startups in our portfolio are also in other programs as well, but we are addressing what we see as kind of a gap in the market right now.
Bryan Guido Hassin:
One thing that we’re doing, which we don’t see a lot of is … As I said, we really treat all of these different types of stakeholders as co-equal participants in a deeply integrated systems accelerator. And the implications of that are that we’re on everyone’s side, right?
Bryan Guido Hassin:
They’re sometimes in different programs, it’s … It can create a bit of an antagonistic relationship between, I don’t know, the startups and the investors, or the startups and the partners, whereas we’re fostering an environment in which everyone is working together, kind of side by side, toward common goals.
Bryan Guido Hassin:
We also, and I won’t claim this is unique, but it’s more rare than it should be. We have the willingness to take hard tech risk … Not even the willingness. I would say the predisposition.
Bryan Guido Hassin:
We would actively seek out really hard, risky tech. And then we use our team of PhDs that’s further leveraged by RMI’s incredible team of deep subject matter experts, to diligence and do the techno-economic analysis and really de-risk the perception of incredibly hard tech startups.
Bryan Guido Hassin:
We also have an explicit global remit. We’re not trying to create jobs in this little town, or change the economic numbers in this other area. We really have a global service mandate and we’re going after major scale because that’s what the problem demands of us.
Bryan Guido Hassin:
And that actually gives us opportunities to invest not just in specific technologies, but in entire value chains. If you take something like hydrogen, for example, we all want hydrogen to work, but no one knows exactly what success is going to be for hydrogen.
Bryan Guido Hassin:
But if it’s going to work, we need ways to generate it. We need ways to store it. We need ways to transmit it. We need ways to use it. And so we think some of the great opportunities in climate tech innovation involve moving entire value chains and creating entire markets at the same time.
Bryan Guido Hassin:
So that’s one of the reasons why we really go for scale. As I said, we started with the largest climate tech cohort in history. We’re only going to make it larger from there. We’re about to announce our next cohort that’s coming out here pretty soon. And so, scale, baby, scale. That’s what the problem demands of us, and it’s what we’re after.
Speaker 1:
What is a BLEO, and why should entrepreneurs and innovators pay attention to it? Bryan is sharing how Third Derivative is helping find, fund and scale climate tech innovations. But what are some of the biggest opportunities for them to go after? Big challenges that need to be tackled?
Speaker 1:
In his newly published book, Freeing Energy, author Bill Nussey offers what a prominent reviewer describes as a passionate, valuable and detailed blueprint for remaking the shape of everyday energy production.
Speaker 1:
And as part of the blueprint, Nussey lays out what he calls “BLEOs,” or “big local energy opportunities,” for innovators and entrepreneurs. Nussey writes, “Each of these has the potential to unleash a billion dollar market, and many are already there. Each of these require extraordinary effort by innovators to reach their full potential. None of the BLEOs require waiting on bureaucratic government mega policies. Each one can work with a bottom-up, outside-in effort.”
Speaker 1:
Nussey touches on more than 40 BLEOs, and there are certainly many other BLEOS out there, just waiting to be addressed. And Organizations like Third Derivative are standing by, ready to help innovators and entrepreneurs accelerate the adoption of those ideas.
Speaker 1:
We encourage you innovators and entrepreneurs to jump in and make a difference in this transition to a clean local energy future. We suggest a great starting point is reading Freeing Energy. Now, back to Bill and Bryan for more.
Bill Nussey:
We talked about the unique DNA of Third Derivative. And did I see that you are also a nonprofit? Is that correct? And if so, why?
Bryan Guido Hassin:
So we are a nonprofit, if only out of momentum. Nominally, we’re a joint venture between RMI and New Energy Nexus. Legalistically, we’re a subsidiary of RMI, which is itself a nonprofit, but as someone who has been a founder and CEO of a bunch of for-profit companies, I will say that people tend to stereotype nonprofits as being, I don’t know, slow-moving and bureaucratic, and not really able to get a lot done.
Bryan Guido Hassin:
But the only difference, like the only fundamental difference between a for-profit and a nonprofit is that for a nonprofit, when it kind of creates excess revenue above and beyond what it spends, instead of returning that to shareholders through dividends, it’s obligated to reinvest them back in its mission. And so, frankly, I think that’s actually a really appropriate model for an organization like ours.
Bill Nussey:
I think it’s awesome. I mean, you talk about trying to get a bunch of folks, other incubators, venture capitalists, large corporations, and you want to make the case to them that they should invest their time with Third Derivative and Bryan and his team over the multitude of other things they could choose to do to make an impact on climate change and energy transition. And the fact that you’re a nonprofit, to me, tells a different story.
Bill Nussey:
This isn’t a “Get rich, and oh, by the way, here’s the niche we picked.” This is a, “We really are putting our money where our mouth is to make the world a better place.” And that is a stronger statement, personally, maybe I’m reading too much into it. Maybe that was just the corporate structure that you were handed, but I got to tell you, man, it’s a heck of a story and it’s as inspiring … It’s not quite as inspiring as your pitch of the story, but it’s very inspiring as a structure.
Bill Nussey:
And you think about the New Energy Nexus and RMI coming together, well, what’s a more perfect way to do it than to continue their “make the world a better place first” missions? I love it.
Bryan Guido Hassin:
So Bill, I was actually just having that conversation with a VC firm based in Nairobi, Kenya this morning. We were talking about kind of the typical spectrum between missionary and mercenary. And we don’t judge, at Third Derivative, if you want to be in funding early stage climate tech ventures because you think there’s an incredible financial opportunity, mission be damned, great. We’re still going to find a way to work with you.
Bryan Guido Hassin:
Our organization, as you’ve discerned, is very much on the missionary side. We believe there’s an incredible mission, the greatest kind of challenge of our generation here. And we do think being a nonprofit sends a pretty clear message that we’re not here to be predatory. We’re not here looking out for our own interests.
Bryan Guido Hassin:
We have a single mission in mind, and it happens to be one that’s incredibly compatible with enormous financial success of every participant in our ecosystem: the startups, the investors, the corporates, and well, even the policy makers, because if they can get it right, well, they’re going to do an awful lot of good for their constituents.
Bill Nussey:
Listening to your stories, by the way, I have a startup which started before Third Derivative, but I guarantee you I’d have been banging on your door with my application, given your mission. And so I’m excited to hear about it.
Bill Nussey:
So let’s talk about what kind of companies you are looking for. So if I was to have a startup and it’s to knock on your door and say, “I really want to be part of this exciting program that Bryan and his team has put together,” who are you looking for? And what advice would you give to folks who might be interested?
Bryan Guido Hassin:
Yeah, so as I say, we’re really going for scale and we’re investing way across all kinds of sectors, because we think the intersectionality of all of these startups is incredibly important.
Bryan Guido Hassin:
So right now, our portfolio includes everything from novel battery chemistries in the United States to light electric vehicles in India, to mushroom-based leather in India, to optimized cold chain logistics in Nigeria, and kind of everything in between. And that’s going to continue being the case.
Bill Nussey:
Pretty diverse.
Bryan Guido Hassin:
Pretty diverse, and we’re starting to take a more thesis-driven approach, but we’re always going to be opportunistic. If you’re an incredible startup, you don’t happen to line up with our theses, which we’ll be publishing soon on our website, great. Just show us the math on how you think it can be impactful and we’ll want to take a look.
Bryan Guido Hassin:
We do have a significant bias for hard tech startups, so these hard science-based startups, companies that are going to be, as you say, dealing with atoms, not just bits. Companies that are going to need to build plants, manufacture things at scale.
Bryan Guido Hassin:
We do have some digital startups who are part of our portfolio, but we think we can be most additive for the companies that are dealing with hard tech. And as maybe a bit of a teaser, we have one of our first theses where we’re taking a deep interest is in direct air capture.
Bryan Guido Hassin:
We believe, A, that direct air capture is going to become a very significant part of the kind of climate change equation here in the coming years. We believe that current approaches to direct air capture are thermodynamic dead ends that can only kind of reach a certain cost point that’s not really tenable without a lot of extra support.
Bryan Guido Hassin:
But we’ve seen some evidence that there are some novel approaches that could get us down to, say, $50 a ton through direct air capture, which could be transformational in changing the economics of how that works.
Bryan Guido Hassin:
So we’ll be making a big push to bring in direct air capture startups as one of our thesis-driven cohorts and providing specific tools, resources, networks, experts, aligned capital to help those companies rapidly test their innovations and scale.
Bill Nussey:
So, let’s say I have my new startup idea and I want to become part of Third Derivative and I … What’s the application process like? What’s the decision like? And then we’ll talk in a moment about what happens if someone’s accepted.
Bryan Guido Hassin:
So Bill, this may not surprise you, since you’re talking to someone who’s running this program and is a multiple time founder himself, but our application process is very founder-friendly. It’s not very onus.
Bryan Guido Hassin:
We commit to a response within 45 to 60 days. Time is the one thing founders can never raise more of, right? So we want to be very sensitive to get them feedback, help them along, help them either move onto the next thing or not.
Bryan Guido Hassin:
But everyone who applies, whether they turn out to be a fit for our program or not … and we have to be clear here, again. We’re not in any position to say, “Oh yeah, you’re going to be successful, or you’re not going to be successful.” There’ll be plenty of startups who don’t make it to our program who have tremendous chances of success.
Bryan Guido Hassin:
They just haven’t … They don’t thread the specific needle for us of significant potential impact, interest by our corporate partners, interest by our VC investor partners, et cetera.
Bryan Guido Hassin:
But everyone who applies also joins a much larger, our new energy network, which provides additional resources, funding opportunities, guidance, advice, mentorship for now thousands of startups as well.
Bryan Guido Hassin:
And some of them have gone to there, profited from there and then reapplied and actually got into our program, because as they’ve evolved or as our own kind of ecosystem has evolved, it’s become a fit, whereas a few months prior, it, it hadn’t been.
Bill Nussey:
So a startup gets accepted into Third Derivative. What does the program look like? Is there a physical dimension to it? Are they going to come on to your campus? What are they going to go through and how long is it going to take?
Bryan Guido Hassin:
So we built this program to be virtual by design, and we made that decision maybe a couple weeks before COVID shut everything down. It’s looking like a very smart decision in hindsight.
Bryan Guido Hassin:
But we’re a global program. We don’t need startups from around the world flying all over the place and spending their money and time just to come be with us in person. And frankly, we think they’d be better spent their time talking with the corporates and talking with the investors in ways that can definitely happen virtually.
Bryan Guido Hassin:
So as a startup joins our program … and understand again, when a startup joins, they already have sponsorship and interest from at least one of our investors who has made an initial seed investment in them, and at least one of our corporate partners, who’s looking to them for help in meeting their own sustainability innovation goals.
Bryan Guido Hassin:
So the first thing we do is sit down and try to understand what that startup needs, what their gaps are, what their areas for growth and development, what their uncertainty points are, and then try to leverage our network of resources to help plug those gaps or help kind of fill those areas for development as efficiently as possible.
Bryan Guido Hassin:
And our network of resources ranges from … I’ll say there are some curricular resources. We have a strong and rapidly growing mentorship network. We have RMI and New Energy Nexus who provide tremendous additional resources ranging from techno-economic analysis and access to policy makers, to specific guidance on market entry in all parts of the world.
Bryan Guido Hassin:
We have the VC investors themselves, and we also run our own funds that co-invest alongside our VC partners. And then we have the corporates who we think are massive potential vectors of scale and market proof for all of these startups.
Bryan Guido Hassin:
And so then we have essentially, you could think of it like a concierge service. We have a team that’s dedicated to helping these startups navigate this complex set of resources and get the most out of them and to do so frequently, right?
Bryan Guido Hassin:
Because what a startup needs upon entry of the program, if we’re doing our job right, and the startup’s doing their job right, it’s going to change pretty quickly as they grow, as they evolve, as they enjoy some success.
Bryan Guido Hassin:
And so, we have routine and periodic checkups with them. We develop kind of deal roadmaps to help make sure that if they’re trying to negotiate a deal with one of our corporate partners or venture partners, that both they and the other partner are meeting their obligations and hitting their milestones toward getting a deal done.
Bryan Guido Hassin:
Just kind of stewarding that and shepherding that across the finish line, trying to take a lot of the things that you know from your experience as an entrepreneur, and Lord knows I’ve felt this pain point, things that just take a lot of time and focus away from just building the business, growing the business, increasing the impact, getting so caught up in navigating corporate bureaucracy or getting a … moving from term sheet with an investor to actually getting it funded, trying to essentially templatize those things so that they can be done efficiently and done at scale.
Bill Nussey:
A lot of value add there. And my friends that have gone through Y Combinator talk about the incredible depth of experience that’s at their disposal. And a lot of it’s just in sort of consumable pre-done contracts and things.
Bill Nussey:
I mean, there’s just a lot of wisdom that they’ve encapsulated for folks who go through that program. And once you go through that program, you’re part of it forever, even though the intensive phase is capped in time.
Bill Nussey:
And when you talk about the cohorts you’ve gotten, is there an intensive timeframe in which these companies are interacting with you? I’m assuming it goes forever, but is there an upfront defined program?
Bryan Guido Hassin:
Yeah, so nominally, and this was our kind of initial hypothesis, we set the program at 18 months.
Bill Nussey:
Oh, wow. Okay.
Bryan Guido Hassin:
Much longer than traditional accelerator programs, but here again, we’re dealing with hard tech that often has a longer commercialization cycle. But we also wanted to make sure there was plenty of overlap time between cohorts, right?
Bryan Guido Hassin:
So we launched one cohort at the end of last year. We are launching another one right now, and we want to make sure there’s plenty of opportunity to rub shoulders and build relationships, and as I described earlier, kind of push entire value chains that can collaborate together by maximizing that overlap.
Bryan Guido Hassin:
But you used the term, and you beat me to it, we hope that this is more of a forever relationship as we continue to build out capabilities, both in even earlier stage, but also later stage companies as they really hit growth inflection points. We hope that we’ll be able to provide some value to these startups for their lifetimes.
Bill Nussey:
Yeah. I have a startup that has gotten into the Department of Energy’s solar prize program and we were the first winner of their first prize, and they are doing a remarkable job. And I’m particularly impressed because it’s the government.
Bill Nussey:
Love the government, but they’ve been agile and creative in a way that I really tip my hat to, and I’d love to talk to you about my experiences there another time. But I learned a lot, and I had already seen a lot. I was impressed with some of the things they’re doing to build a permanent ongoing community among the people that have won that prize.
Bill Nussey:
And then, I guess my last question is, how structured is your financial investment with these companies? You said that they typically would have an investor already committed from your partnership, but then you guys are also putting in money. Is it well-defined, or does it vary by company? How does that fit?
Bryan Guido Hassin:
Yeah, so we pre-negotiated with all of our VC investor partners, a common set of founder-friendly deal terms for a seed investment. So the way it works is, a company comes into our program. At their option, they have access to a $100,000 US seed convertible note with no cap from one or more of our VC investor partners.
Bryan Guido Hassin:
And then again, we have a fund that we just go invest alongside them on the same terms. Most of our startups take that. Some don’t. They just don’t need the money, or it would complicate some existing round.
Bryan Guido Hassin:
Some of them negotiate bigger deals on separate terms with our VC partners. And here again, we have a co-investment fund that will just take whatever terms are negotiated there.
Bryan Guido Hassin:
But the point is that the default is already negotiated. We eliminate the transaction cost of trying to negotiate an investment with every single startup or every single investor. But it’s always at the option of the founders. The power is always in the hands of the startups where it belongs.
Bill Nussey:
All right. Yes, exactly. Well, hey. This has been so informative and fun. I am completely enraptured with your enthusiasm in this vision and mission you have. I have made a couple of quotes I just need to say again. “Looking for folks with epic ambitions to be part of a movement.”
Bill Nussey:
I mean, I have chills just saying that back again. And accelerating the rate of acceleration. I mean, that’s ambitious, bold, audacious. It’s almost something I’d expect Amory Lovins to say, but you say with such fervor and commitment. I’m a full believer. I love it.
Bill Nussey:
So Bryan, let’s spend the last few minutes of our conversation on what we call here in the Freeing Energy Podcast, the lightning round. So just want to get your quick, off-the-cuff thoughts on four questions we like to ask everybody. So are you ready?
Bryan Guido Hassin:
I was born ready and I love lightning. Renewable energy.
Bill Nussey:
Now, someone who comes to you with a startup that taps lightning, that’ll get your attention. So, what excites you most about being in the clean energy business?
Bryan Guido Hassin:
So I often … Maybe I’ll take a deeper, specific answer, on being in the clean energy entrepreneurship business. I’ve often found entrepreneurship is empowerment, right? You’re not some cog in a wheel where things are out of your control. You get to be the change that you want to see.
Bryan Guido Hassin:
And in the clean energy space specifically, it was a Nobel Laureate at Rice University, at my alma mater, who convinced me long ago, Dick Smalley, that if you could solve energy, you take the top 10 problems facing humanity over the next 50 years. If you could solve energy, you get the next nine of them: water, food, poverty, et cetera.
Bryan Guido Hassin:
You get them almost for free. So being the change that you want to see in clean energy is empowerment to, solving some of the world’s most significant problems.
Bill Nussey:
I wish I had met Professor Smalley. I love that. And that was actually the reason I decided to get into energy. I just, through my own slower, less articulate analysis, determined that energy is the first principle of most everything we do as human societies.
Bill Nussey:
And if you solve energy, cheaply, widely, fairly available, many of the other problems become much more attractable. All right, second question. If you could wave a magic wand and change just one thing, what would it be?
Bryan Guido Hassin:
So for me, and just based on what we see and the kind of sources of friction and the challenges that entrepreneurs experience as they’re really trying to scale up disruptive climate technology ventures, it would be for major corporations to have a special procurement process for dealing with early stage innovators.
Bryan Guido Hassin:
They have it for historically underrepresented businesses. They have it for all kinds of things, but they need something that does not require navigating their normal bureaucracy to get some kind of deal done or at least tested.
Bryan Guido Hassin:
And let me build on that, though. I just said that I think of entrepreneurship as empowerment. And so, we as an organization try to be that magic wand, and we’ve kind of in some ways, solved it on the investment side with this common set of deal terms. And so we’re working to solve it also on the corporate side.
Bill Nussey:
Wow. Yeah, I want that too. Count me in. Third question. What do you think will be the single most important change in how we generate, store and distribute electricity in the next five years?
Bryan Guido Hassin:
You can call me out if you think this is a dodge. This isn’t electricity-specific, but it’s deeply intersectional. I think it will actually be in carbon utilization.
Bryan Guido Hassin:
Now, that’s a term that often could be loaded as a way that oil and gas firms try to greenwash or what have you. But here, I’m thinking specifically of ways that we will utilize captured carbon to displace other materials.
Bryan Guido Hassin:
So for example, I said on the board of a startup that makes these amazing carbon nanomaterials that are stronger than steel, lighter than aluminum, softer than cotton.
Bryan Guido Hassin:
And steel is an incredibly carbon-intensive industry, and we’re working on all kinds of ways to build green steel, but the greenest steel will be if we replace it completely with other materials, including materials that are actually built from carbon that has been sucked out of the air or pulled out of the ocean.
Bryan Guido Hassin:
I think on scale with an industrial revolution over the course of the next couple of decades, we will see a carbon economy emerge worth trillions of dollars.
Bill Nussey:
That’s a great vision. Wow. I haven’t heard that before. Makes a lot of sense. All right. Fourth and final question. I think I know the answer to this for you, but a lot of people come to me and come to those of us that are somewhat in the clean energy industry, the climate tech industry and say, “I really want to make a difference individually. What can I do to make an impact towards this greater change in the transition to clean energy?”
Bryan Guido Hassin:
My broader suggestion here is to put your capital to work. We’re a nonprofit at Third Derivative, but we’re market-driven. We’re capitalists. We believe that capitalism, with the right guide rails, with the right incentives can be an incredible lever for change, for innovation, for solving societal problems.
Bryan Guido Hassin:
And whether it’s capital at a large scale for investing in startups, or capital at a small scale, like which bank you store your money in a savings account, where you put your capital at population scale will move needles.
Bryan Guido Hassin:
It’ll move markets. It’ll send market signals and force actors to step up and adapt. If you’re interested in early stage capital, we’d love for you invest in one of our early stage capital investment funds, but there’s so many ways ranging from where you buy your coffee to, I say, which bank you use, put your capital to work, let your money do the talking.
Bill Nussey:
Well, I have an applause button. I’m looking for an applause button right now. That’s well-said, and you are … I hope that part of going through the Third Derivative cohort is that they get lessons from you on leadership and motivation, because I am now a full-on fanboy of Third Derivative.
Bill Nussey:
I started because of your roots, and now having heard you, I am genuinely really excited and hope I can find some ways to help you guys with your mission.
Bill Nussey:
I think you’ve constructed it very well, and you are in a position like few others to accelerate the acceleration. So Bryan, I’m inspired. Thank you for your time and thank you for all the great work you and the D3 team are doing.
Bryan Guido Hassin:
So kind of you to say, Bill. Thanks so much for having us on. Loved talking with you. I say, love the work you’re doing. Can’t wait to see the book. We’ll get it for our entire team. Please keep us posted and keep fighting the good fight.
Speaker 1:
Thank you for joining us today. You have been listening to the Freeing Energy Podcast: personal stories from the clean energy movement. To learn more about the Freeing Energy project, visit our website, freeingenergy.com.
