- Duration: 40 min
- Platform: meet
- Source: Read.ai 01K119MY4G9HBH14RY7ME71KZR (https://app.read.ai/analytics/meetings/01K119MY4G9HBH14RY7ME71KZR)
Transcript
[Alexander Olesen]: And it’s funny, because I was actually on his newsletter. He has like 75,000 subscribers to a sort of founder scale up startup. And yeah, so it was a great newsletter. And I met him. I was like, oh, sweet. I read your stuff. And so we chatted. He was actually meant to be in Cape Town in January, but wasn’t. So we kind of exchanged emails there. And yeah, I believe he does some angel investing. He looked at the deck, so he liked it. So very cool. Get a chance to debrief in a few minutes. Excellent. [UNKNOWN_SPEAKER]: Hey, Michael, how are you? Hey, what’s up, man? How you doing? [Alexander Olesen]: Good to see you. [Michael Houck]: Hope you don’t mind me bobbing up and down over here. Get the steps in. [Nick Kumleben]: I will be doing that on my next call. Nice. [Michael Houck]: We could have been gym buddies, man. Come on. [Nick Kumleben]: Where are you based? [Nick Kumleben]: I’m not above virtual workouts. Out. I’m in Charleston right now. [Michael Houck]: We’ll see if it sticks long term, but I’m here for three months. [Alexander Olesen]: Lovely. [UNKNOWN_SPEAKER]: We’ll hope you’re enjoying it. [Alexander Olesen]: Yes. What about you guys? Up in Washington DC. [UNKNOWN_SPEAKER]: Nice. [Michael Houck]: Are you guys co-located? Is this a two screen same office type deal? [Alexander Olesen]: I’m from home today, but yes, usually co-working together. You can see a blurry desk in the background, which Alexander’s Well good good to connect man, how you doing yeah, it’s good I’m just sort of catching Nick up we jumped in so we met at the Highland Summit I’m actually going back out there this summer. [Michael Houck]: So I don’t know if you’re gonna be heading to Montana in September We’ll see I’m really I’m on like a journey right now where I’m trying to like choose a new home base. So Anything that takes me outside of figuring that out is sort of like second priority ready right now, but I would love to go back. [Alexander Olesen]: It was so great. [Alexander Olesen]: Where’s top of the list. [Michael Houck]: Charleston. That’s why I’m here. I spent six months checking out eight different cities and Charleston was the best. So now I’m back for like a full three month sort of test. [Nick Kumleben]: I love it. [Nick Kumleben]: I used to live just outside of Savannah and know that part of the country. [Michael Houck]: Well, nice. [Michael Houck]: Yeah, it’s beautiful, man. [UNKNOWN_SPEAKER]: Well, yeah. [Michael Houck]: So hopefully, hopefully back, but maybe not this year. [Alexander Olesen]: When we met in Montana, I was still at Babylon Microforms. That was my previous business. Ran that for nine years. I just moved on to the board there and oversaw the hiring of a CEO in my previous role, which was a learning curve. But that’s all set. So I’ve been full-time on Buckstop since the start of the year, building with Nick. And we just added two new co-founders nearly a month ago. So we have teams coming together, and we’re preparing for a launch in a few months, building a pipeline. Pipeline, now it’s projects. So it’s really coming together. And I don’t know if from the deck, if you want us to give you kind of a backstory of how we got to this concept, but we’re happy to jump into specific questions. Yeah, I mean, we can do that. [Michael Houck]: I think one question that just came to mind as you’re talking about that, how are you guys sort of working things between the four of you? Four co-founders is a lot, right? So like, what’s the plan there? [Alexander Olesen]: Yeah, so it’s interesting. So Nick and I have kind of been working on this idea for nearly two years. And Grayson is led Amazon’s battery stock clarity program. He’s friends with Nick and immediately got it, having done this in a big company. So that moved quite quickly. We were looking for an industry insider and he fits that bill. And then Brad is a CTO where he was the head of engineering at Octoro, which is a leading returns management platform. And it’s a risk. I think with my previous company, we had two co-founders and I would say we had an early team who were just not as bought in. My thinking with this is that we have four co-founders with real ownership. We’re all here to build a company that can be self-sustaining, go public. We’re all on six-year vesting schedules. I think everyone’s on board with the ambition, and I wanted to spread the ownership among four very talented people. So there’s a risk in that. We’ve got to aim high, but that’s kind of what we’re all on board for. Is it 25, 25, 25? No, no, it’s about, I think I’m at 57, Grayson’s at 18, Brad’s at 11, Nick’s at five with a path to 15 based on him phasing out of some other commitments. So a little bit of nuance there, but I think everyone’s like at real ownership numbers. Got it. So serious, serious ownership, serious buy-in. [Michael Houck]: Um, but okay. I mean, that’s good. Cause then you don’t want to get in a place where it’s like, you guys are deadlocked all the time, two and two or something like that. [Alexander Olesen]: We’ve done we’ve done a founders agreement and we’ve got like some sort of collective voting and things whereas I’m it’s not just like well the Equity equity and the monetary ownership is different like the voting and stuff. We’re doing that as a block. So Working through all that stuff up front, which has been good. Actually, I think it sort of hopefully lays the groundwork moving forward Yeah, it’s important. [Michael Houck]: It’s tedious to do up front when you want to just move as fast as possible, but it’s a It’s it’s important stuff for sure. I’ve seen I’ve seen the bad side of that. [Alexander Olesen]: I Yeah Lots of that and it’s nice like already just the team everyone’s been around the block they’ve done a bunch of stuff and like the the Experience and IQ and the team is strong and I feel Feel the momentum and just the way at which we’re figuring stuff out. It’s like actually insane compared to my previous one Love it. [Michael Houck]: Yeah, so I guess give me the give me this like quick quick background And then we can dig sort of more into more into the questions like I love the idea highlight So I’m excited that it’s just beginning. [Alexander Olesen]: So Babylon is one of the leading modular vertical farming providers in the world now. And through that journey, while we were in vertical farming, we were also the manufacturer of IoT device. We were distributing these hardware assets across five countries. When I left, all of them break, customers churn, and all of them die eventually. So there was some sort of truth there that I came to hate in the business and our operations. Team hated them too because it was such a distraction and I was like this it’s like everyone’s worst thing no one wants to deal with it everyone wants to be on the new thing grow the business they don’t want to deal with the old stuff and but it was a like a sort of necessary evil of the business and and I got to know that across other folks in renewables robotics any kind of hardware product that they were all facing exactly the same problem so I I saw that a few years ago I was like damn like surely there’s got to be end of lives inevitable like why is no one trying to like build something something for that, for the machines. And that was kind of the high level of living the problem, seeing it at the micro level. And then, Nick, I don’t know if you want to get your side of it, but we’ve been debating this for about a couple of years now. [Nick Kumleben]: Yeah, I came at this from the commodity market side, having invested and advised in energy and metals over the last decade. I’ve become obsessed over the last few years with the critical mineral problem of undersupply, both for US economic security and for building out decarbonized economy. So when Alexander started to tell me about the manufacturer’s perspective, I put this together with how little of the metals embedded in the economy actually get recycled and put back into circulation in a world where it takes three decades to build a new mine because of permitting and capital challenges. [Alexander Olesen]: So we started working on this about 18 months ago, and here we are. Yeah. And I think that the two pieces we’re trying to bring together is one, this sort of algorithmic assay is what we’re calling it. So they’re sort of understanding the material composition of finished goods. Like this whole thing, you can’t measure, you can’t improve what you can’t measure. And right now, no one knows what their assets are worth off their used assets. So at a material level, that’s a proprietary data set that doesn’t exist. And we figured out that basically by using image analysis and scraping spec sheets and manuals, you can aggregate like a component list and analyze it at a component level what everything’s made of So that data set is super valuable. You then overlay that with the resale values, and you have the foundation for a trading model, which we can then take to asset owners and be like, you have these assets. This is what they’re worth. Let us figure out how to deal with them. And to take it back to first principles, when you look at things in components and the materials, you start to get to tradable price at things, whereas everything else fluctuates. Those are actually truths in this scenario. And to use the mining analogy, we’re mapping the seams of value within the economy. And as Nick mentioned, the recycling and critical mineral recovery is the only option we have in the near term is to accelerate recycling domestically. So there’s a wave of investment coming at that on the processing side. But no one’s talking about the sourcing side. And all of these businesses depend on feedstock. So we’re basically measuring the assets that are out there and identifying and unlocking feedstock to fuel the recycling and resell industry. [Nick Kumleben]: Think of it a bit like CarMax or the Kelly Blue Book, the system of record for valuations in an otherwise disaggregated industry. Makes a lot of sense. [Michael Houck]: You guys are basically hoping for a trade war with China. [UNKNOWN_SPEAKER]: Yeah, it’s smart. [UNKNOWN_SPEAKER]: Okay. [Michael Houck]: I would imagine that not only is there investment coming in, but also on the customer side, people are sort of looking for opportunities to get this stuff domestically more than overseas as well. Right. Yeah. [Alexander Olesen]: I think from the recent value recovery side, we don’t rule out shipping internationally. Like actually we found through a lot of discovery that there’s about five middlemen for the average load of scrap between its end destination and when it gets picked up so that alone just speaks to the inefficiencies and you’re usually people are just dumping the stuff with the first guy they can find. It passes through various aggregators before ending up at a smelter or at an international reseller. So cutting out steps in that supply chain is part of the plan as well. [Michael Houck]: So you guys would cut out what, two or three of the five steps basically? [UNKNOWN_SPEAKER]: Yep. [Michael Houck]: That’s great. Okay. [UNKNOWN_SPEAKER]: Interesting. [Michael Houck]: Yeah, okay, so I guess I want to elaborate on one of the questions I asked over the email, which was, like, you know, it seems like this can get really complex. You guys are dealing with all these different, you said, like, specs, you’re investing into the AI, and all these different, like, size devices that you’re going to have to pick up and move and things like that, right? So, or I don’t know if you guys are actually physically physically going to do that and outsource it to some company to actually do the physical movement. But either way, why not just do it for one type of asset and then expand from there? [Alexander Olesen]: How are you guys thinking about that, I guess? Yeah. So to start, we’re 100% focused on solar panels. A lot of our analysis, we love renewables, one, because the resale market’s very strong. People need energy globally. And two, there’s a really high waste rate partly through obsolescence, but more importantly, through planned upgrades. And so that’s happening in a lot of categories, but so is one where it got super, you know, it’s been in hyper growth in nearly 20 years. All these panels have a 20-year lifespan. So the waste, the kind of cliff of waste is hitting now. And then you’ve also got the fact that new panels are so much more efficient that people are proactively upgrading. So you’ve got to kind of, and we’re doing that kind of analysis for every segment we go into to try and time, like, when does the waste hit? Or successful launch of a vertical. And yeah, so from the moving, there’s only so many ways to move stuff. So there’s a logistic component, which is complex, but you’re either mailing it in the mail, you’re sending it on a pallet, or you’re getting a 40 foot container. So it’s like, we’re using third parties there. Our CTO, he built a returns management platform before that was doing 250 million revenue. So he’s done it at scale and complexity before. So we’re pretty complex. And we can execute on that, like facilitating the logistics without doing it ourselves. And there are a lot of gigs, you know, even Uber Freight down to like localized, big and bulky is what it’s called, where they can kind of come and collect stuff and move it from A to B, all using APIs. So that’s it. [Michael Houck]: Are there benefits to owning that yourself, though, as opposed to outsourcing? I don’t know that much about that space. So educate me there. [Alexander Olesen]: Not in the logistics, not really. Is and we take a cut of that transaction but the expectation today is that people pay to have stuff removed. We think we can actually flip that over time but you know initially people expect to pay for logistics. Yeah which just as we think about that so you have one method of valuing assets which is can be any asset class right looking at the raw material and the resale and then you have one infrastructure backbone which is like the the logistics piece and then you can layer on verticals to expand so solar is 100% the first market but then we use a trading desk analogy just to keep it in the mining theme but you basically open up once we’ve done solar you move to batteries you move to EVs they’re all kind of path dependencies within renewables and then once we’ve done that you move on to other asset classes. [Nick Kumleben]: I would just also add Michael, as a startup, if you’re taking on the overheads of logistics and warehousing, you are capturing more margin, but your balance sheet becomes a constraint to scale. Totally. I wouldn’t want you guys to do that today. That’d be crazy. [Michael Houck]: But I’m just saying, like, you know, in the long run, having your own logistics network, once you guys have millions of dollars to sort of put into it, there could be economies of scale that help you guys there. But I mean, maybe not. I don’t know. [Nick Kumleben]: It’s interesting just to frame that one of our advisors built and scaled Verizon’s Take Back program and then did the same for Cisco and some others. And Brad, our CTO, was previously at Optoro, a SaaS returns platform who worked with Walmart and others. Both of them pretty convinced that using third parties for the moment is the best way, but it’s on the roadmap. OK. [Michael Houck]: Yeah, it makes sense initially for sure. You guys don’t want to, just the mental, strain that would take away from the core business would be too much. [Alexander Olesen]: Yeah I think the other part of it is trying to look at, so I spent some time in West Africa earlier this year and there are people there who will take any electronics you can get and they’ll refurb and resell it, particularly on the energy side. There are a few scenarios where you basically find the right partners who will handle warehousing, refurb and resale internationally or domestically. They want feedstock, right? That’s what they’re business thrives off, it’s just a question of whether we can source it. And from my experience with Babylon and also just the discovery, like the pain is very acute at the asset level. They have this kind of what the fuck moment of like, I have to get rid of this stuff. And that just leads to them dumping this on the first person they can find. And they’re leaving so much money on the table so that the economic story to go to them with a turnkey solution is very compelling. [Michael Houck]: Okay, that makes sense. I’m with you. Yeah, I guess, like, what don’t I know? What would I not have seen in the deck that, like, is on your guys’ mind? What’s keeping you up? What are you nervous about? Like, give me the bear case, you know? [Alexander Olesen]: Yeah, I think so. One big assumption is that we’re trying to design a product and build, like, a product-led growth motion to basically allow operators at these companies to solve this problem for themselves just today. Because this waste stuff has happened And that said, the sort of incumbent set would be IT asset dispositions. They’re big public companies and they do these big corporate, like multi-year IT management agreements to sort of process IT waste primarily. And we’re basically, you know, could their agreements lock us out of some of the big companies? There are some concerns there. Our feedback from them is that they dislike those services so much that actually if you could just show up with a product that does it for them, they probably would. But there’s a risk there that breaking into some of the large segments, they’re captured by some contracts. I think there’s still plenty of other markets to go after. But obviously, we want to design this as something that can tackle large, medium, and large enterprises. That’s where most of the value is. I’m trying to think what else. Is just the circular economy. Obviously ESG is out of fashion. That said, I think the circular economy piece is more common sense than anything. The business case is there. It’s congenital revenue for you. It can boost customer attention. It’s not a touchy-feely pitch. But there is a case to be made that sustainability-orientated initiatives have been deprioritized. [Nick Kumleben]: Yeah, I think the way we think about that is So the people who don’t care about ESG care deeply about supply chain resilience and nationalize and supply these minerals. So you tailor the framing to the customer. Yeah. Yeah. [Michael Houck]: I think you guys actually have a good positioning here where you appeal to the ESG folks sort of naturally, but also you appeal to the sort of ruthless capitalists who are looking for just efficiency in their business as possible, both of which are fair, right? That’s part of the reason why I like it, because I think you can flex to either side of that. Yeah, so that makes sense. [Alexander Olesen]: I’m trying to think what other bear case things are, because I’d love to talk about bull case as well. [Michael Houck]: You can talk about the bull case too, that’s fine. [Nick Kumleben]: The bear case isn’t the most interesting I think the other kind of bear case, which we feel we’ve de-risked, is you look at the apples of the world who’ve built their own trade-in programs. Google do a lot of their decommissioning in-house. That seems limited to companies that are both very technologically sophisticated and have the kind of balance sheets where you can take a swing on this and see if it’s profitable before actually having to execute. [Michael Houck]: Um, the kind of the world in which companies in source this does reduce our our time But we haven’t seen that in hundreds of customer discovery calls beyond big tech Yeah I can’t imagine a case where like smaller companies are able to do that unless they’re You know gonna invest a ridiculously high percentage of their revenue into something like this in the first place to test it out to your point, Nick Um, but I guess like long-term Do you guys see a path or even an interest maybe in going after the apples of the world? Or is it more like, Hey, we have a really big market here without that customer segment. [Alexander Olesen]: I think, I think it’s hard in the scope of going for like large enterprises. I think that’s where the, you know, the most value will accrue and operationally you want kind of big accounts where you’re just managing that backend for them. So I don’t see where you couldn’t go up to that level. I think the, I guess the other way of looking at them doing it is it’s It’s a bellwether for the rest of the economy. Like if they can make it work, everyone’s looking at it being like, how can we do that? And then enter what we’re building. And Nick mentioned Rich, but he built Verizon’s trading program. They were the first cell carrier to do it. That line, it does $3 billion in revenue a year for them, trading the phone. So he's on our advisory board. He's fully like, this is going to happen, and someone's going to do something like an AI native solution that brings everyone else to that point, and that's what we're running towards. [Nick Kumleben]: Yeah, I think we'd also say the consumer side has been solved because if you're Verizon and you're deploying three iPhones for 80% of your throughput and they all fit in an envelope, that's a much easier technical problem than the one we're looking to solve. [Alexander Olesen]: Right. Yeah. Right, that makes sense. [Michael Houck]: OK, maybe let's talk about the bear case a little. I mean, the bull case a little bit. [Alexander Olesen]: I'll start, Nick, tell me if I'm missing anything here. The bull case is geopolitical headwinds mean that there's like geopolitical headwinds and just general supply shortages mean that the price of these underlying materials and minerals go up a lot from here over the next couple decades. Combined with automation and new technologies like sort of bio and enzyme driven recycling, basically dramatically improve the unit economics of recycling. Um, and you combine that with like government mandates. I think that's actually like it is happening It's just question of like to what extent um, whether just the economics of end of life get a lot better and that that drives the need Um and helps us drive, you know value for our clients um, the other piece is there isn't a system of record for um finished end of life assets, so if you can be the system of record for Valuing these assets and finding out what's their worth And that has kind of national significance, if not global. And I think both of those things are kind of converging in a way that makes it super, super appealing. [Michael Houck]: Yeah, I think that makes sense. The idea of the data set, I hadn't thought about the data set, but I think you guys are both spot on about that. If that truly does not exist anywhere, then you guys aren't the only people who are going want that and want to use it in some way. And so obviously you want to protect it, but there's probably ways to leverage that. [Alexander Olesen]: Just on that, like equipment financing and asset-based lending are definitely part of our go-to-market. It's like all lenders have to assign a salvage value or liquidation value to any asset they underwrite. And right now, for most emerging technologies, it's a finger to the wind exercise. They just choose 5%, 10%, and we can actually give them real visibility on that. And it's something we've had a lot of pull from, even just like buying the data stream as being of interest. We don't think that that's the business. They want a whole solution. But how this eventually kind of becomes a plug into financial services from leasing to insurance is definitely as a part there. [Nick Kumleben]: And the way that works today is that fair market value is a pretty rough guess at around 5% to 10% of new asset value. If we can refine and that the equipment leasing guys are a dream channel partner. Got it. [Michael Houck]: It's compelling. What's the plan for the round? Where are you guys at? What are you trying to get to? Give me context there. [Alexander Olesen]: So we're doing a $2 million safe. We’re at about 1.1 committed. We’re on track to close about $3.50 next week. Team is small. Us a long runway. I think right now it’s like focusing on strategics, people with industry backgrounds. Actually, it’s a problem that you responded, because I do think we don’t really have anyone from kind of the VC sphere. And I love, you know, I’m a fan of your newsletter. So I think just trying to get like, we think we’re two months away from like a sales ready demo. And the pipeline is strong, and we’re adding clients. So like the, that changes the picture where we may raise, you know, close 1.1.5 and then do a like institutional seed kind of back off like last quarter into next year. So yeah, that’s how I’m thinking about it. But yeah, trying to get some gap on the door now and trying to get folks who are comfortable in the early stage and know how to help us spread the word about it. [Michael Houck]: Yeah. Well, OK, makes sense. I actually don’t really care about this, but I’m always just curious. Like you guys, you don’t have any VCs. Who is it? Is it all Angel so far? What’s the structure around it? [Alexander Olesen]: Yeah, so a good friend of mine, Arnold Kim, he’s the founder of MacRumors, a bit of a blast from the past, but that’s been in the background for a while. So he’s coming in, and then Nick’s previous firm, GreenMental, the historian, Niall Ferguson, and the partners of that firm are coming in. So they’re all in the kind of institutional world, founder world, but not, I’ve always thought maybe just your newsletters led me to believe you’re like very in that. [Nick Kumleben]: And then there’s a couple other people worth mentioning. There’s a guy, Manny Weiss, who is a longtime mentor of mine in the commodities world. He was a partner at Mark Rich & Co., the precursor of Glencore, led their aluminum and base metals trading for a long time and then ran his own family office. Manny’s also going to help us on some of the commodity risk management side. We’ve got a couple other angels. I think on the we’re talking to a couple of family officers, we think it’s a little more credible to go to institutional VC with a sales ready demo. Yeah, makes sense. Makes sense. [Michael Houck]: I think there are some people who might take a bet on it. Yeah. Even before that, but you’ll definitely, you know, you won’t be sending out a bunch of, you’ll be doing a ton of calls for, you know, lower ROI as you move forward. Beforehand. So that makes sense. Look, guys, I like it. I think it’s very interesting. I think it’s, as I said, well positioned in a lot of different ways. So, yeah, I mean, we’d love to do something. I don’t know exactly what that would be. I got to look at what we’ve already sent out this year, sort of how we’re pacing, but we’d love to be part of it in some way, for sure, because I think it’s very interesting. Thanks, man. [Alexander Olesen]: Well, we’d love to have you on board. How does it work? Do you have a fund or you personally, like how does it work on your end? [Michael Houck]: So long story, the TLDR, I had a fund that I co founded, I’m still like pseudo involved in that. But I prefer to write checks as an angel these days. And then we sort of have a half set up family office as well. That’s like, not totally finalized yet, but in the process of that, so I probably just write this as an angel. But longer term, there could could be, you know, you guys go out raise the next round or what have you, there could be other opportunities there too. [Alexander Olesen]: Great. And then just, I guess when you say so, like if you want to be involved, where do you typically come in and what do you need anything more for us to circle you for something? [Michael Houck]: I mean, as an angel, it varies. I don’t write huge checks. I’d say like, you know, 20 or under is really what I do as an angel. I try to add a lot of value in terms of getting the word out through socials and through the newsletter. And also, obviously, it can help with VC Connects for a future round as you guys sort of move forward. [Alexander Olesen]: Okay. Well, we’re keen to make it happen. I’ve taken many, many sound bites from the newsletter. We have asked some folks to do like 25 minimums. I don’t know if you can flex to that, but we’re happy to. So any other diligence items would be helpful. Or is it more of like a [Michael Houck]: No, I’m honestly, I’m a high conviction guy. If I like the idea, if I like you guys, that’s really all I need. So let me, let me again, take a look and see like where we’d be able to land right now. And I’ll, I’ll get back to you sometime next week. Awesome, man. Well, we’ll do that. [Alexander Olesen]: We’ll share some updates. And yeah, we’d love to have you involved at any level. So appreciate your time. And yeah, I’d love to, if I remember down in Charleston, yeah, be good to meet up. And if you’re in DC, let us know. [Michael Houck]: Yeah, man. I’m going back to Cape Town in early January. So if you’re going to be around, maybe see you there. [Alexander Olesen]: I would love that. Nick’s family’s all gone. I will be there. [Nick Kumleben]: My parents retired back there after a long time in London. So I’ll be in town. We’ll get together. Yeah, man. [Michael Houck]: We got to go hit up Tolley or go out to Friendship or something, get some wine. I’d love that. [Nick Kumleben]: I split my time between Cape Town and Hermannus. So if you want some beach time, you’re welcome to come out and see us. [Michael Houck]: Dude, would love to. Hermannus is amazing. OK, we’ll do it. We’ll talk, but I’ll follow up with you guys next week. [UNKNOWN_SPEAKER]: Thanks for the time. Thanks Michael. Take care, bye.