- Duration: 32 min
- Platform: meet
- Source: Read.ai 01JYPM3H7WYC2560S0HQG6B08H (https://app.read.ai/analytics/meetings/01JYPM3H7WYC2560S0HQG6B08H)
Transcript
[German Peralta]: But yeah, I mean, let’s do intros and then we can briefly talk about the business and based on that, we see kind of where this goes. [Michael Houck]: Cool, man. So I’m Michael Houck. I’ve been founder, investor over the past few years. Originally was part of the early team at Uber Eats. So different angle of the food delivery world than Joker, but similar, similar space, helped grow that business. Then jumped over to Airbnb for a bit, founded a company called Launch House. We ran living houses for founders actually much like HF0 even before they were doing it. And then we ended up away from that, rolling it into a venture fund, but we’d raised an A from Andreessen. And so they were sort of involved in that too, which was nice. Still have the fund, but I prefer these days to invest as an angel and have built up a personal brand and personal holding company over the last few years. I have 200,000 followers. On Substack, 100k between Twitter and LinkedIn. We have a newsletter that goes out to 75,000 founders every week, and we do sort of content distribution services for them with a creator network of 500 creators with 60 million combined followers. So, wide-ranging things I’m doing right now, but yeah, I think Dave is a friend and was super excited to come out and see you guys. [Michael Houck]: So, yeah, excited to chat more and learn more Great, yeah, no, thanks for coming to the demo day. [German Peralta]: Hopefully it was a good time. They’ve put on a show, and I think it’s a different experience. So yeah, great, and great to see that come out. I mean, the turnout was great, lots of people. So yeah, good networking, good connections, which I’m happy to have had that experience. Great, so I mean, background on myself, and then we can talk a bit about the company. So I am Colombian, grew up between Colombia and the US, ended up moving to the Northeast for business school, stayed in New York for a bit, and then moved to Mexico. I was a consultant for McKinsey for three years at the New York office and then in the Mexico City office. And kind of the last year of that consulting journey, I only worked with one client, which was SoftBank, particularly with Marcelo, who is Latin American and he had like a big vision to try to ignite entrepreneurship in LATAM. So from kind of the consulting angle, we supported in just creating that innovation fund, which is a five billion fund that in my opinion, did a lot of good for Latin America to like have people like spark that believe anything type of mentality. I was part of that, did a lot of deal flow for them, did also a lot of diligence work on companies that they ended up investing in. And then at the end of the process, there was like too much money, not enough companies to invest. So my, or our proposal as a firm was, why don’t you guys bring companies from Division Fund to Datom, given that there’s some markets in Asia that have similarities. And the first one was Oyo. So Oyo is a hotel chain aggregator. They like aggregate independent hotels and just help them run better. And we, We like structured our JV to launch out in Latin America. So we did that in Mexico and Brazil. And at that point, kind of the South Bank team told me, hey, why don’t you like come and run this? So I did. I left. I left kind of the consulting side and got my hand dirty, operated that business in 2019. We became the largest hotel chain by property count in both Mexico and Brazil in less than a year. And then COVID happened in 2020, which meant that I was the one that stayed behind and kind of restructured the company. So to like make that LATAM effort survive, uh, which was good and bad, you know, like tough on the people element because a lot of people had to be let go, but a good gaming experience because like that, like those things really teach you stuff. So I restructured the company, like built a bunch of processes that could run remotely and hand it over most of the operations to the India team. And after that, I, ruled off in 2021 but we have created a great team of the OYO days and the Softbank operating team also wanted to leave because Marcelo had also left. So we started Joker. Joker was a quick delivery delivery platform like very similar to GoPuff or Gorillaz or any of the others that were very big back in like the COVID days. We raised a bunch of money, it was like super high growth exponential, seven countries, in like less than a year, made to like unicorn status in 10 months, 200 million annualized before like two years. So wild growth, but also we proved that that grocery like fully integrated model doesn’t really scale well internationally because you need to have like the density to have buying power with suppliers. So like after two years, we decided to do only Brazil, which was our largest market. And we sold our operations in Peru and sold kind of the license to the tech in Mexico to a large player there. And we’re operational in Brazil. We do like over 150 million in revenue, and it’s a profitable business. So we’ll likely kind of sell privately, which is what we’re working on. And in 2023, that’s when I kind of rolled off, gave like full control of the company to the Brazilian operator. And I was planning to like go to Europe and take time off, which didn’t really like end up happening because after a month I was already talking to people, ended up starting a new company there. I just like, I don’t know, I’m bad at doing nothing. So, so yeah, I mean, I spent, I spent, you know, a couple of, a couple of weeks in, in Madrid. I was planning to do like a big bike, bike parking trip and so on, but then met my co-founder in Madrid and he was like very much into energy efficiency and HVAC in general, like his And it’s just a hardcore engineer, very climate purpose driven. And he had seen the need to decarbonize home heating and cooling through heat pumps. He’s French-Canadian and had moved around a lot, but has experience in both markets, the North American market and also Europe. So we started the company there, and we really think that there’s there’s a massive opportunity on like shifting HVAC, particularly for like traditional systems into electric heat pumps because they’re just a great technology. I think like what’s happened with EVs is also gonna happen at home, like heating and cooling. But just like the transition is gonna be a bit more tricky because it does require kind of physical change of hardware. Like a car, you just like go and sell your old one and get a new one. And this is a bit more complicated because you need to like actually switch a system. And we started the company trying to learn the pain points, like did ourselves. We sold the heat pumps, like interacted with the customer, hired the contractors, went on site, and like lived the process. And we learned that like this shift is quite complicated from like a technology standpoint. Like the equipment is more complex because it’s like electrical and has refrigerants and it has an outside unit and inside unit. So it’s like many more parts that need to be combined very well and also have to really complement each other in a perfect way or else the machine doesn’t work. And the core of the people that are doing these upgrades are just traditional HVAC people that have not been trained for this specific technology. So we set out to build tech to help these guys move into electric heat from traditional systems. And that’s when kind of our third co-founder came in. He’s a CTO. And we’ve, we’ve built technology from like the, you know, probably 2023, late 2023 up to now. All of last year, we worked with like five big enterprises as design partners. We built a product with them. I kind of got them from not working with like these systems into like actually working with the systems. And then in 2023, we got the product to a state where we could massively roll it out, offer it to a bunch of contractors, have people sign up automatically, and we think that there could be a big opportunity there. And that’s kind of the state of the business. Over the last three months, we’ve been locked in a basement here in NSF and working our ass off to just get the product to a better state and move as fast as we can. We focus our go-to-market efforts in our local markets, because that’s where just the product was already ready to like be shipped. So we ship that and like grow from like zero to a hundred contractors in less than two months. So that’s like great. The ACV of the customers is high. So it’s like between 20 and 50K a year. And then we’ve also adjusted the product for it to be able to operate in different markets. That’s kind of where we are. We’ve also learned that North America, particularly like the West coast of the U.S. Has a massive opportunity, just there’s a big shift to electrification, particularly in California. There’s a mandate to get off fossil before 2030. So we see this as a white space that we can’t ignore. And we have also learned that Europe has its complexities, because Europe has the multi-language setup plus the multi-country with different regulations and so on. So that’s also the reason we came to HF0, and that’s also the reason we’re talking to partners, because we’re readjusting our structure to move the company to the U.S. And focus on the U.S. Market, because we think that that’s just a massive opportunity. [Michael Houck]: Do you think that the same regulatory infrastructure that’s either happening or has already happened in Europe and probably will continue to happen will also be in the U.S. With the same switch? The U.S. [German Peralta]: already has that, particularly at a state level, California is the most aggressive one. And just California as a market is larger than all countries in Europe except Germany, so it’s just so big. And then Washington and Oregon as well. So if I combine the West Coast in total, that’s just bigger than any market in Europe. And it’s the same language, which is a bit hard to ignore. There’s the regulatory aspect, but there’s also the consumer sentiment. Like even with the current administration, a lot of the federal stuff that was like geared to electrification is probably going to go away. But at the state level, there’s still a big push. They got net zero, and particularly the utility providers are pushing that agenda quite aggressively. And there’s also the consumer, right? The consumer here is already moving into like solar panels. People have EVs, they have EV chargers, they have the Tesla battery. So like all of that stuff is just like already happening. Um, and yeah, Europe continues to have like a big, big more like political incentive agenda. But what we’ve seen here is like the customer in the US has more disposable income, they can actually like afford to make these changes. And, and we see that the demand is there, like on the consumer aspect, but the friction is the same. So like guys, like these contractors, they’re upskilling and they’re training to like have to like build these jobs out and like make sure that it worked that that they can seamlessly design, work, install, and control the quality of an installation is something that they don’t really do. So that’s a problem that we’ve built. [German Peralta]: And I think we can apply it pretty well to the US as well. [Michael Houck]: That makes sense, especially in, I’d say, the coastal states, except for maybe some in the South. You’ll be able to get the same sort of sentiment that’s over in Europe. What about, I don’t know. About the approach you guys are taking. So you guys are taking sort of every step of the process. We handle everything. You guys take sort of a cut at every step, which is obviously great. [German Peralta]: Yeah. Yeah, it’s a vertical SaaS. So I think that there’s a couple of things that we have. I mean, we’ve built a full-time vertical SaaS, which I think works well. I think we need to continue building an AI layer, particularly at the interaction of the customer when they’re off office, which means when they’re either driving or at which there’s just so much good stuff that can be done with agents there. But ultimately, our product is a vertical tool that just interacts with the customer. Since you can embed it into the website, so an end user would just give their data, and based on that, you start the flow. And from that, you go to, all right, customer data turns into an initial estimate, very rough and seamlessly done. Then you can like enrich the information and get a customer a quote that can be just binding. So like an offer that you can have them sign. Then after the customer signs the deal, then we do like the design for them. So our product is really geared for like taking the full work, the full back office work of their plate. So they just like get a full design of the job that needs to be implemented with the full part list, with the instruction manual as to how to put it together, electrical schematics, next hydronic schematic and all that stuff. And then finally, when the contractor is actually performing the tasks on site, we have a QA process in which they need to upload pictures and video. And then we can check whether the work is correctly being done, which is a major pain point for these contractors, because either you go on site and check it yourself, or you need to trust that the guys did the work correctly. So yeah, it’s kind of a full-on vertical suite. We have a SaaS fee, which is just we used to use the product. We have a per job fee for every design that we make. We also connect, since we do like the design, then we can also connect the hardware supplier with the contractor so they can buy kind of through us. And we have a platform which will also make a commission. And then finally, we have a design, like a check fee for the certification. And there’s also documentation, which is just like, how do you, how do you like process all the documents that are required for the customer to give them to their end user so they can get their grants and subsidies and everything that’s available. [Michael Houck]: Do you see this as a place where these folks can run their whole business eventually? Or is the electric heat pump market within their business large enough and growing fast enough where it’s going to get you to where you need to be? [German Peralta]: Yeah, so the customers that we work with are typically HVAC contractors and plumbers, because you do have both hydronic systems and electrical systems. So customers that have radiators, would need to call a plumber and the customers that have ducts, they would need to call an HVAC guy. The technology we’re building is, first thing we’ve built has been heat pumps, but like an AC is also a heat pump, right? So like a traditional AC is a heat pump and also getting more efficient and better. So what’s happening is a customer would like get rid of their furnace, get rid of their old AC system, install a heat pump and the heat pump will like service both. And yeah, we intend to be the full operating product of these companies from a technical standpoint. What we’re not building, and I’m not sure whether we will build, are, like, you know, payment models or… I think we need to, like, add other players to, like, interact with that. So, like, make sure that they can just send an invoice, they can pay through us, and so on. But that’s not really at the core of what we see initially. We just, like, if we’re able to integrate with Stripe, DocuSign, and those types of features, so they can send the contract and that kind of stuff, that’s fine. But yes, the flow is a flow in which they should be able to manage their workload, like every customer, so we become kind of their operating system. We still need to add more features, right? So, like, the whole process of, like, building the product out is we need to continue adding capabilities for different systems, like, whether you’re, like, implementing, like, a heat pump for a swimming pool is a different technology. So like all of those use cases need to be integrated and the market is just massive. So these guys service both residential and commercial. So we need to like build that stuff for commercial, build that stuff for residential. We need to think about swimming pools. We need to think about ducted systems, ducted systems and like multiple things. And that’s why I have kind of two co-founders and one of them is the engineer. So he’s the one that like starts adding more R&D. And then the CTO is the one that’s making that R&D, like a technology that can be used. [Michael Houck]: Yeah, I think that’s really exciting because the more generalizable it is there, as long as you see strong adoption with the product initially, you’re going to be able to have a massive, massive, massive market there. So, OK. [UNKNOWN_SPEAKER]: Cool, man. [Michael Houck]: I like it. I’m excited. What’s the plan for the round? Yeah, we’re doing 5 million. [German Peralta]: We have a million from data. We have a couple of other folks that want to come in for smaller checks. The plan is to get those $5 million together, push on the AI features that we need to add. Because the way that we envision this is these guys should be on their truck driving from place to place and interact with a voice agent. And the voice agent should grab the information. So when they get to their office, everything is already on the system. Same when they’re on site. They should interact via text with a buddy or an agent, take pictures, pictures, and data and so on, that should all flow seamlessly into the process. And I think that’s the major thing that we need to build. Because if we’re able to do that, then the friction is just going to be very, very low. They’re not actually implementing any software. They’re just using their phone the way they usually do. So that’s where the core of our product investment is going to go. And then there’s also the go-to-market part. So we need to build out capabilities so we can reach out to more customers. Build that for the US. And we’re primarily also looking for partners that can like help us in that process as well, right? Cool. [Michael Houck]: Yeah, I mean, happy to happy to ping my network. I know some some folks in commercial real estate, more so in the Northeast, I would say than the out West. But I mean, yeah, everyone’s got a, everyone’s eating in the Northeast, too. [German Peralta]: So I’m sure the Northeast also has a massive tailwind. Because there’s a ton of incentives that go unused. I like the utility players are the ones that are need to like, hold them out. So like Con, I’ve talked to like Con Edison and like a couple of the other utility players, and that’s a major pain point for them. And what’s interesting, which is like, funny fact is there’s over 2 million homes in the Northeast, like New England, mostly that still use fuel oil, which means there’s a truck that goes to the homes and like pumps fuel oil, like every month or every, you know, two weeks when it’s the winter. So that’s what really needs to change, right? [Michael Houck]: Yeah. My, my, my parents have, uh, have, have one of those properties. [German Peralta]: I’ve been trying to change. There’s a buddy of mine that has a house in Princeton and I’ve been trying to help him change his like shitty system for a heat pump. And he doesn’t have like any economic constraints. Right. So he would pay whatever needs to be paid because he just wants his home to run off the grid. And I can’t get a guy to want to do it because they don’t feel comfortable doing it. They can’t decide it. They don’t know what it is. Hardware like this. That’s a perfect perfect case in which you see like shit like this isn’t real opportunity Come in Look, as I said, I’m excited about it. [Michael Houck]: I think you’re approaching it the right way Yeah, we’d love to be part of the round probably just as a small angel check and try to add value where else where else I can I’m not quite as liquid as Dave, but I can do something small and I would love to be a lovely part of it All right. [UNKNOWN_SPEAKER]: Cool. Yeah, I mean, what do you usually do? [Michael Houck]: by 10k or under If that’s in range. [German Peralta]: Yeah, I mean, we can we can kind of figure out like what we do with the angels and probably do like an angel list. So if you agree, so I’m glad you’re excited. Let me let me kind of fill you in as soon as like we get this goes out and then cool. [Michael Houck]: And if you if you also want like, I mean, you probably know all the all the big investors and everything already. But if there’s a particular lead that you guys are looking for, I’m happy to help there. I have, you know, Worked with or I’m friends with a lot of folks in NSF and in the bay great. [German Peralta]: Yeah, and I’ll keep you posted We have a ton of like second interviews and so on with a bunch of Reese’s today and tomorrow So it’s like that progresses. I might need a hand, but I’ll just maybe ask if you know anyone so you can back channel Yeah, anyone you back general with I’m here to help man. [Michael Houck]: Great. Awesome. Thank you, man. [UNKNOWN_SPEAKER]: Oh Great to meet you