445: The Untold Challenges of Rapid Growth with Thomas Healy

This is really the future of power gen. So, when you pull up to that Walmart, when you pull up to a data center, when you pull up to an airport, all these places have these power modules, these Carnot power modules sitting outside, and that's how they get their electricity.

Doing great. Thanks for having me here, and looking forward to sharing a little bit more with you about what our startup journey has been.

Yeah. We're a company focused on power generation. So, we've actually invented a new form of power plant. We call it our Carnot power module, and envision it where it's really a box, just like an air conditioning system that sits outside of a Walmart, a Home Depot, and provides cool air for the whole building. This is a box that sits outside of that facility, and provides all the electricity it needs. And so, it's this model of remove your dependency from buying electricity from the grid, and move to make your own power, make your own electrons, and do it all right on site. And, you know, we'll go into this throughout today's discussion, but that's obviously a hot topic, right? Data centers, the military, even just these commercial buildings, all need more power.

Yeah. So, I'm a 20-ish year old college student at Carnegie Mellon University doing everything I could from double majoring in mechanical engineering and engineering public policy, minoring in business, playing football, student senate, everything I could possibly be doing in college. And I had the startup itch. I actually founded a couple of companies while I was in undergrad. Loved it. Absolute enjoyment, and knew that that's what I wanted to do in my career. And when I was in grad school, I had this wild and crazy idea of what if we went and electrified the commercial vehicle space. So, at that time, Teslas were known, but not everywhere, right? And I had this idea of well, why are passenger cars moving to electric, but then the semi truck world, these big 18-wheelers hadn't moved to electric yet? Did a deep dive the last time an electric semi truck at the time had been made, it was using lead-acid batteries. Obviously, there'd been a huge breakthrough in lithium-ion, all that stuff. So, it was like, all right, let's go do it.

You know, founded it, went to business plan competitions, raised quarter of a million dollars there, free money, no strings attached, and that created the snowball, and we were growing this company, growing it, growing it. 2020 hits, we go public. Perfect timing, amazing opportunity. We raised about 700 million, so we'll talk about all that, but fast forward a couple of years later, and that industry changed a lot. Electric semi trucks weren't what it used to be. The tailwinds, let's say, had gone away. The regulatory push was diminishing, and we made the bold, yet, you know, very happy decision in hindsight, you know, we're very pleased with the decision to shift out of that industry and go all into power generation. And it just so happened that, you know, during that time, we had acquired a division and technology out of GE Aerospace, which was this Carnot power plant, Carnot power module that we're now commercializing today. So, we'll get into a lot of the details in that, but that's the quick journey. It's been 10 years of running Hyliion from college dorm room to now, you know, a public company listed with the New York Stock Exchange American.

Exactly.

Yeah, it's I would say it's exciting. That's the way I look at it, at least. I guess if we focus on the fear side of it, then we probably wouldn't make much progress. But no, the exciting side, so if you think about the grid, we think it's a pretty outdated model, right? It's this model of you've got these big power plants that then make electricity and push it out to all the end destinations, and you've got billions and billions and billions of dollars of infrastructure built out, transmission lines, and we're at this point where it kind of needs an overhaul, right? Over 60% of the infrastructure in the US, those transmission lines are outdated, they're past their end of life expectancy. And so, we looked at it as this model of let's just make power on site. Now, the reason that that hasn't been done before is there was never really a good enough solution or technology to really enable on-site power generation. And we believe we have that unlocked, that new solution that, kind of going back to the lead-in, just like you have an AC unit at your facility, why not also have a box there making the electricity you need?

Yeah. I would say it's one of these things you keep making progress at it, right? And so, I'll actually start with a story of the very first time I pitched Hyliion. We didn't win anything. We didn't even come close to winning anything. It was at the Carnegie Mellon business plan competition, and it was, you know, however many startups there were, right? And the top three won money, and we're the prize winners. We didn't place the top three. I don't even know where we placed, but you know, we got feedback of hey, this business model doesn't make sense, you need to refine it, blah blah blah. Well, the reality is we took all that feedback, and we did refine the business model. We made changes. We made changes to how we pitched it. A lot of times, you know, it's just about the way you're presenting it. Maybe the person on the other end isn't able to follow the story and really understand where you're going with it. And so, we took all those changes, and then two months later, we went and actually competed in a much, much bigger business plan competition called the Rice Business Plan Competition, hosted by Rice University. They're taking startups from all around the globe, bringing them together, and it's just the top of the top startups. And we placed third overall in that. So, in two months, we went from not even being able to win or even place in our local competition to placing third on the national front. And so, it's just an example of you need to take the feedback and constantly be iterating. It's also good feedback of don't take no as the end-all, be-all answer, right? Maybe you just need to head a different path. And then that momentum builds on itself. So, for us, it was go raise quarter of a million through these business plan competitions, and there were multiple of them, like MassChallenge, and then the Department of Energy business plan pitch we competed in. And then that allowed us, you know, enough momentum to go raise a seed round of funding. Then the seed gave us enough time and momentum to raise an A, and so on and so on. And so, out of the gate, if I had said, hey, we should go become a New York listed company and go public, and you know, I would have had no credibility to do that. But you show the progress that you're able to make over time, and that's what enables you to keep taking those next steps. Now, another thing for your viewers is every few steps forward, you're going to take some steps back as well. This isn't just a constant up into the right story. It's make progress, you'll do some failures, you'll make some progress, you're going to fail some, you make some progress. But at the end of the day, when you look at it, overall, your trajectory is positive.

Yeah, I think resources-wise, we found MassChallenge to be very helpful. We found the Rice Business Plan Competition to be helpful. Then also, the investors that we brought in were very helpful, right? And I was very fortunate that the people that were around the table weren't just money in, and you know, never talk to me again, and just go do it, right? They were, hey, let's bounce ideas off each other.

Exactly. Yeah, we absolutely did bring in strategics. A strategic even led one of our financing rounds and so that gave us credibility in the industry, but I would say the thing that was probably one of the most impactful was having a strong mentor and someone who had been there and done that before, right? As a first-time founder going through these sort of things, right? Like I'd started other companies in the past, but I'd never raised millions, let alone hundreds of millions of dollars and having a mentor there that, you know, I was very fortunate that it was someone that had seen this stuff before, had been down this journey and I could call, you know, late on a weekday and bounce ideas off of them and get their feedback was invaluable. And so that's one of the things I highly encourage anyone going down the startup journey, go find a mentor, right? And go find someone that has seen some of the things before that you're going to encounter because they're not all unique to you, right? While you're in this journey, you're going to feel like I must be the first person that's having to deal with this. No, every founder has been through having credit cards maxed out and, you know, feeling like the whole thing could fall apart in a couple of days or truly being days away from not having money to pay payroll and we've all been there, or at least I've been there and people I've talked to have been there and so you're not the first person on this journey and, you know, it's very helpful to have a mentor that can guide you on that.

Absolutely. Yeah, and then it's a question of how do you find those individuals? I was fortunate enough that it was someone that was already in my network that I was able to lean on, but I also found that the investors that we brought in can be strong mentors. Now, sometimes, you know, it's you want to present to your investors more of the polished plan of what you're thinking of doing, not always the best to bring them through the sausage making and so having someone that's not, you know, not necessarily tied to having their capital in the deal is also good, but what I found was these competitions, these areas where you can go pitch your idea. Like let's take Rice University. They pull in hundreds of people that have industry experience, have been down this journey before and they're all there because they want to give back, they want to help the next generation. And so that's an awesome place to be able to find mentors.