There's a ton of responsibility with raising over a couple million dollars, but let alone $700 million.
Crazy becoming, you know, the youngest self-made billionaire, becoming the youngest public company CEO, but you got to spend all your time and just be totally relentless on focusing on the only outcome of this is going to be a win.
I know hindsight is 2020, but looking back on the journey building your company today, is there anything that you would have done differently?
Man, a lot of stuff. You dropped out of Carnegie Mellon. I want to kind of get your thoughts on going to college in today's world as a new founder.
I don't think college is for everyone.
In today's world, if you had to start over to get into the tech industry, what city are you going to?
I remember being in Pittsburgh. We would go make a job offer to someone that lived in Detroit and they'd be like, I have no interest in moving to Pittsburgh, Pennsylvania. Like, that's not a city I want to be in.
You talk to someone about Austin and they're like, 'Oh, this is great.'
If you could go back and just give the younger version of you one piece of advice, so what would it be?
What's going on everyone and welcome back to the School of Hard Knocks podcast. I'm James and I'm here with Jack and Josh and we have an incredible guest for you all today. But before we get into things, I have a question for you. Have you heard of Kylie Jenner? Well, our guest today dethroned her in 2020 to become the youngest self-made billionaire in the entire world after dropping out of college, starting a company, and taking it public in 2020. Hyliion is the name of the company, started as electric trucking, and has now gotten into another billion-dollar opportunity. So, we're going to be diving into it today and what it takes to become a self-made billionaire. But Thomas, it's great to be here with you today, my friend.
Thanks for having me and yeah, excited to share a little bit about this journey. It's been a roller coaster to say the least. Learned a ton through this and hopefully I can share some of that.
Absolutely. So, I want to start things off. We'll get into the backstory, but let's go right into 2020 right now. You take the company public. What was that feeling like and what ultimately led up to that decision? Because we were talking about this earlier is there is a big risk with entrepreneurs taking on lots of capital, ringing that bell on the NASDAQ. What led to that decision and what was that feeling like going public?
Yeah. So let's start with painting the stage a little. Right in the middle of COVID, the public markets had shut down, nobody was raising capital, nobody was going public. And so we were looking at like, man, is this the right time? Do we just raise a private round and stay in that market or should we go public? It was a time of the SPAC, right? You probably remember that where a lot of companies started de-SPACing. We were one of the very first to do that. So we did our whole roadshow virtually, so kind of crazy. Didn't meet any of the investors in person. It was all done through Zoom calls and talking to them over the phone. And we raised 700 million just through that transaction alone. And then being what was I about 28 years old at that time, getting to go to the New York Stock Exchange, go, you know, you're going up to that platform where the bell is and you get to sign your name on the wall of the New York Stock Exchange and then you go out onto the platform and for the next 10 seconds you are opening the world's markets.
Was it scary raising that much money? Because there's a ton of responsibility with raising over, you know, a couple million dollars but let alone $700 million. Was it scary taking on that much capital?
Yeah, I think every stage of this journey it's scary, right? I mean, the second that you decide I'm going to take someone else's money and start using that to try to go grow your vision, you're taking on an inherent risk. And you're now committed to, okay, I got to go make this successful. Obviously, the magnitude of capital we've raised is substantial and that comes with a big commitment of like, all right, we got to go make this successful. But you know, it was also coupled with this, you know, we were in a great space at a great time. We were actually oversubscribed. We could have raised more than 700 million through that transaction. But as I'm sure we're going to talk about today, markets also changed. We went public as an electric vehicle company. Now we are completely out of that space because it's been decimated over the last few years.
So you mastered the art of pivoting.
We did a very bold pivot. Yes. So we raised all that capital as we were going to go electrify semi-trucks. That was the vision, the goal. And there were a handful of other companies in that space doing something similar and we saw that they were going bankrupt. They couldn't raise additional capital. It was an extremely tough industry to be in. We were also very fortunate that about a year or two prior, we had acquired a division of GE Aerospace which had invented a new way of making electricity. Or as we'll talk about, it's actually a 200-year-old tech that's been modernized and brought forward. And so we decided, all right, well, why don't we actually go all in on power generation? We saw tons of momentum building in data centers, in commercial buildings needing more power. You've got rolling brownouts through California. You've got Ireland saying if you're a data center coming in, you cannot hook into the grid. There's not enough power available. So, you need to bring your own power. So, we did that pivot into a totally different industry, but one that I think saved the company.
So, take me back. You started this company when you were in college. Where did you get the idea for Hyliion? And how did you get the courage to start a startup in your dorm room?
So the idea came from there was a class taught by Professor Claudia where it was focused on what ideas can you come up with that can have both a positive business case but also can be good for the environment. And so prior to that I had this idea of like, well why are passenger cars electric but semi-trucks are not? And so I decided, all right, well why don't I use that as my class project and talk about electrifying commercial vehicles. Prior to that, I had gone through a couple other startups. One was focused on sales, the other was focused on concussion research. So, I already had the startup bug, the itch. And so, used it as, you know, this class project. And as I was diving into it, it was like, man, this actually really seems like a good business model.
And then from there went to business plan competition. So this was one of the unique ways of kind of founding a company which I would strongly encourage to your listeners is we didn't start out the gate by going and raising a seed round of funding. What we did is we actually went to competitions like the Rice Business Plan Competition, MassChallenge, the Department of Energy, and we raised a bunch of non-dilutive, non-equity-driven capital and that's what we used to found the company and then from there we went and raised a seed round. So that actually significantly reduced the amount of dilution we took on the front end.
I have to ask you, and the reason why is because you came from a family of entrepreneurs. Both mom and dad were entrepreneurs.
Now you were going to Carnegie Mellon, one of the most prestigious schools in the country for MBA, correct? Or was this grad school or was it actually engineering?
Yeah. So I did undergrad engineering and grad school engineering.
But you dropped out of Carnegie Mellon.
What was the conversation like with your parents? And I asked because this is a fellow college dropout right here. When he dropped out though, you know, I would say both of our families are a bit more traditional. Military families went to school, kind of did it that way. He got blacklisted from the family, mom, dad, everybody.
Horrible. Wouldn't the relationship have gone to zero?
So, were your parents in support of you ultimately dropping out of school or was there a little bit of like backlash? Nah, finish. Get it just to have it or kind of what was that conversation like in your household?
So, there was definitely a push to finish, right? But then when we talked about it, it was like, 'All right, we're getting traction.' Like I didn't just drop out just with that idea on the back of a napkin, right? I'd already gone to some of the business plan competitions, was raising capital, and then it kind of became one of these things of like, okay, well, if you're really going to commit to Hyliion, you got to go all in, right? You can't be doing classes or going to classes and then doing this startup on the side if you're going to start raising capital and really trying to go all in. I firmly believe in starting companies while you're in college or try it because it's like you have this perfect safety net around you, right? If you start a company and it fails, okay, you're still going to graduate with your degree and you're going to go work somewhere, right? It's a perfect time to start a company.
I look at this in two ways because, you know, I feel it was honestly a blessing being that we were going to the University of Texas that, you know, you do have that safety net that you can kind of go a couple years without making any money, starting to kind of get that traction so that way you have it set up to where you're making money by the time you get out. You don't have to go and get a job. But I feel like, and want to know your thoughts on this, do you think a lot of people use that safety net as, oh, I just have to have until the time I'm out to kind of have it figured out? Do you think that especially for new founders, should they put the pressure on themselves to not have school as a safety net or do you kind of like the idea of going to school to meet the people? I want to kind of get your thoughts on going to college in today's world as a new founder without having a ton of money raised and a lot of revenue already showing right now.
Yep. So, a couple of different thoughts. One is I don't think college is for everyone. I struggle with the concept of you go to college and you get a ton of debt and then you graduate and you're maybe going into a job that you could have gotten if you hadn't gone to college, right? I mean, not every job needs someone to go to college. Now granted for me, college was an amazing experience. I learned a ton. Made everlasting relationships, people who mentored me. I'm even now on the board of trustees of Carnegie Mellon. So like from that perspective, I'm a big believer in go to college, but I do think there's an element of not everyone needs to. Now, if you are in college and you think you want to start a company, that's you're never going to have like a better time to go do it because of that safety net we were talking about. So I think if you want to try starting something and you do have the fortune of being able to go to college, try that. But that's not to say like, oh, I want to start a company, so I need to go to college to do that, right? If you can start something coming out of high school, like a lot of this is just about just start trying it, start learning about it.
Yeah. One of the things that I love is that before you took on outside capital is you tested the product by going to competitions and actually validating the product. How important do you feel like that is for new entrepreneurs to actually validate their product before actually going on to bring on outside capital?
I think it's huge. So, to walk you through the Rice Business Plan Competition, it's a 3-day event and you and your team, you go there and you pitch your idea to an audience of 20, 30 people who are all like investors or they've started their own company. They're judges for this competition. So, over those three days, you're ultimately pitching to hundreds and hundreds of people. And after each session, they're grilling you with questions and they're giving you feedback about your business model. So after each one of these, we'd be like, 'Oh man, we hadn't thought of this.' Like we hadn't thought about how was service going to be done or we hadn't thought about the amount of capital that we would need to raise over this period of time. So getting those questions and how investors are looking at your business plan allows you to kind of navigate, okay, well what is the best way to start this?
And with that, so you validated the business model, you validated the product. At what point did you realize, look, you know, I have initial capital, but I actually need to bring on additional capital for the company to grow?
Yeah. So, it became one of these things of we kind of in the beginning we lived by each business plan competition. So, we would go to it, we would win some capital. Like the first one, I think we won about 70 grand. The next one we won 100 grand. The next one was tens of thousands. So, after each one, we would say, okay, well, what can we go do with this capital? And is it going to be enough to go win the next competition, right? Ultimately when we got through that phase of things, then it became, well, we've proven enough to go raise our seed round of funding, which we had a large seed round in that 2015-2016 time frame. It was a large round. Rounds become much, much bigger as time goes on. But we raised about $3.5 million. And we did it on a convertible note, which that's another thing for entrepreneurs to be aware of is you don't necessarily have to sign up for equity dilution right out of the gate. You can set up these structures like a SAFE or convertible note where you're saying, 'Hey, I'm going to raise some capital, but it's not going to convert into equity until down the road.' So, if I'm successful with this capital, you're going to get a little bit less equity versus if I'm unsuccessful, you're going to own a larger chunk of the company. So, you're kind of given that give and take with the investor.
Everyone knows that startups are a roller coaster. You're working 12-hour plus days. You're having to put fires out left and right. For most people that want to start a startup, what were some of those early challenges that you had to face in the beginning of this whole company?
Yeah. So, it first comes down to you need people around you to help you with it, right? For my journey, it couldn't be a one-man band, right? You need engineers, you need people doing sales, you need marketing, like you need a team around you. And in the beginning, I mean, it was really recruiting friends and people out of college to, hey, come do a summer internship with us or come try this out. And in the beginning, I mean, you are putting in crazy, crazy hours. Not that not now, but it was like, you know, you're pulling all-nighters to then go to that business plan competition the next day.
And I mean, we had stories, I'll share one with you of like, you know, we started this out of my dorm room at Carnegie Mellon. And then since we were building a hardware product, we needed a space to actually produce the thing in. And so we rented this like few hundred, only a couple hundred square feet out of this big factory where they used to build locomotives. The place was a mess, right? There was no heat, no AC, the ground was dirt. And we're in there working at like 2:00 a.m. And we didn't know this at the time. We knew it afterwards. There was a homeless guy living in the rafters above us, in the attic area. And it was 2 a.m. And the guy just like started screaming and going crazy. And I mean, we're all downstairs like, 'What the heck is going on?' Right? But you know, I share that story just from like, you know, we didn't start with like, oh well, we got 5 million in the bank, let's go get a beautiful office and great place to work. No, it was very much like, let's take the money we got, let's be scrappy with it and see what we can go accomplish.
Now, what I need to know is, right, raising $700 million, you look back and there were so many conversations that had to be had to be able to get to this point, right? You're in an extremely capital intensive business with how expensive this stuff is that you're ultimately having to produce and make. But in those earlier days, right, a great friend of ours, his name is Carl Grant. He's one of the top VC life science guys in Austin. And I was asking him about, you know, hey, your best advice is somebody trying to find investors. And he said, and maybe you agree, maybe you don't, but investors don't invest in ideas. They invest in people and they invest in businesses, right? Those proven entrepreneurs that have already built that first successful company. Maybe they've exited it. They're building that second one. They've got the credibility or the businesses that are already making money, right? The banks only give money to people that don't need the money anymore, right? Kind of similar to investors, right? In your earlier days, how did you kind of sell yourself to these investors and convince them to kind of buy into the heart and mind and the vision that you ultimately casted? What was it that enabled you to kind of get some of those massive first checks and start to raise millions of dollars early on as the college dropout? This is that first big business that you're building. How did you win those investors over?
Yeah. So, two ways. One was we found people at these business plan competitions, which was a huge win, right? People that were in the audience that would come up to us afterwards saying, 'I love what you're doing. This seems like a smart business model. You're having success at this company.'
Are these people, are they like venture capitalists? Are they actively investing in a lot of tech companies or are they in your industry at all?
Yeah, all the above. And so we had, you know, a family office that invested in us coming out of that. We had one of the big private equity firms in Boston invest in us after that. One of their side funds did as well as we made a relationship with a strategic investor, so a company in the industry who didn't invest out of the gate but they kept tracking us and then they eventually said, yeah, I want to invest in that company in a future round. So making those type of relationships is extremely valuable. The other way though, which is I think the best way, it's a tough thing, you need to work on making connections, but having mentors that can connect you with VC funds. So I was very fortunate, had a mentor who used to be a partner at Austin Ventures here in Austin and he was able to connect me with investors that he had done deals with in the past and then they ultimately invested in the company. So to that point, if you can get a warm referral, that's who VCs are going to look at, right? Like if you just go to a VC's website and you send them an email saying, 'Hey, I got the next great idea.' Chances are they're not going to really take it serious. But if their friend who they've done deals with before and they've had success with before emails them and says, 'Hey, I think you should look at this company.' That's...
It's all relationship based essentially. Yeah. James, you mentioned what Carl Grant was saying about they invest in people. A cool story that I love is that the former CTO of OpenAI, her name is Mira Murati, she raised like a billion dollars straight off of just she had no company. She's just like I'm getting ready to build something in the AI space. Because she was the CTO of OpenAI. She raised an insane amount of capital just based off that. And going back to the people thing, you had mentioned early on you were like, let's hire summer interns and friends and things like that. How do you view hiring, like especially in a startup environment? Like what are you looking for? If I'm a startup founder and I'm looking, I need to assemble a team to help me take this thing to the next level. I know you said like don't necessarily look at corporate because they're not going to thrive in the start. Who are you hiring? How do you go about hiring? I just want to hear your philosophy on that.
So, you need to look at who do you need in the seat for the next 12 to 18 months. So, this is something that took me a long time to learn is depending on what stage the company is. You might say, 'Hey, I want let's say a head of marketing.' Well, the head of marketing you need at a 10-person company versus a 100-person company versus a thousand-person company is totally different, right? And you need to make sure you're finding the person that's right for the stage you're in now. If you find the person that's right for three years from now, chances are they're going to struggle with that small environment having to, you know, they're probably the ones having to post on social media, which is something that they've maybe not ever done in their career because they've been at a higher level. So, that's something where you need to be comfortable with the fact that your team is going to evolve. And it doesn't mean that they maybe aren't going to be part of the company long term. It just means that they might need to take a smaller role as the company becomes bigger and bigger. And so that's something where you got to look at, well, what do I need right now and does the person have the grit and ability to roll up their sleeves to do the work that's needed at that stage of the company and be comfortable with the fact that maybe that person won't be in that same seat in 18 months.
Something that I love is what you just said is that the people that take me from zero to 100,000, from 100,000 to a million may not be the same people all along that journey. And there's another thing that I love is that people may know my name, they may know the company's name but they don't know your story and they don't know a lot of people probably don't know that this wasn't your first venture that you started either. You started a couple ventures before this. What were some of those lessons that you learned from the previous ventures that allowed you to build the company that you have today?
The first venture was in sales, which was awesome. Like if there's one skill that an entrepreneur needs, it's sales, right? And so, I was selling everything from it was promotional products. So, it was like branded mugs and lanyards and t-shirts and those sort of things and grew it to doing, you know, close to half a million a year and I was doing that out of my dorm room as well, right? So that taught me sales which has been valuable all throughout my career. The next one was a wild journey. We were doing concussion research and we were testing athletic helmets seeing how they performed. Started publishing our data and one of the helmet manufacturers actually came after me and said if you keep publishing your data we're going to sue you for defamation.
So that happened right at the same time when I got accepted into the business plan for Hyliion at Rice. And I was like, 'Okay, either I go down this concussion path and I'm probably going to spend the next 5 years in a courtroom trying to defend research and data or I can go down this path of building electric semis.' So that was what caused the move over to Hyliion. But you know, each journey you're learning and you take those skills and whatever you learn and you bring it into the next one. And so I think it's go back to like Mr. Beast's quote if he's like, 'Oh, if I had to start another YouTube channel, like I could get a million followers instantly.' Kind of a deal, right? It's because you're able to take what you learn through that journey and then apply it to the next thing you're doing.
In today's world, if you had to start over to get into the tech industry, what city are you going to? Because we're in Austin right now. I was just in a coffee shop with someone recently that I guess had built a successful tech company and he said he's moving back to San Francisco because he said that's kind of where it's heading back to, like that's like where the heart is and it always will be. What are your kind of thoughts on tech today and like what city you think that a young tech founder should be in today's world?
I still love Austin. I do think so Austin has, you can recruit people who have been in startups before and then the other thing is you can get people to move to Austin. So, I remember being in Pittsburgh. We would go make a job offer to someone that lived in Detroit and they'd be like, I have no interest in moving to Pittsburgh, Pennsylvania. Like, that's not a city I want to be in.
You talk to someone about Austin and they're like, 'Oh, this is great.' Now, just don't bring them on a day like today where it's 100-something degrees outside, but...
Take them paddle boarding, you know?
Exactly. Right. And so, you know, the ability to attract talent to move to Austin is great. I think California still struggles with like there's a lot of people who would not want to move to California.
In terms of like money raising though, do you think San Francisco is probably where the heart is still or is that in Austin as well?
I think nothing compares to Sand Hill Road out in California. That is, you know, the place where venture capitalists are at and will invest money. With that, there's been a ton of growth on the VC side in Austin and the money's here to raise.
Is that money coming in from California or just all over?
All over. I think you have New York coming here as well, Boston coming here as well. I'll give you another story of we were raising our Series A round of financing in Pittsburgh once again and an investor flew in. We had the meeting and he was like, you know, I like the company, but I don't want to have to come to Pittsburgh every quarter for board meetings. Like I don't have any other companies here, right? They want to invest in an ecosystem where they come in, they see five of the companies they've invested in and they fly back home. And so you need to be in a city where that's happening, where there's that thriving ecosystem of startups.
That's so interesting. It's like they're not just concerned about coming to meet your company. Like they want, they're that effective that it's like I have five, six, seven ventures that are out here. That's crazy.
