Startup Series: Arcadia
Kate Henningsen is Co-founder and Chief Operating Officer at Arcadia. Arcadia is a tech company empowering energy innovators and consumers to fight the climate crisis. Arcadia started as a way for consumers to gain access to premium renewable energy credits for their home energy consumption. They now claim to be the leading manager of community solar projects in the United States. They've expanded on that with the launch of the ARC platform in late 2021 and the acquisition of Urjanet in the spring of 2022, which together allow Arcadia to offer developer API access to data from over 10,000 utilities globally across electric, water, gas, and waste.
Kate has scaled the business to hundreds of global employees, significant revenue, and hundreds of millions of dollars in capital raised. We talk about how she's managed her own transition from startup to scale and the advice she often gives to women looking to work in climate tech. We're thrilled to be multiple time investors in Arcadia via our MCJ Collective Venture funds. To us, they represent one of the standout success stories in terms of being a high growth digital company that's driving real impact on decarbonization.
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Kate Henningsen
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*You can also reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded on May 31, 2023.
In this episode, we cover:
[01:55]: Kate's background
[05:08]: Arcadia's beginnings: Premium RECs (Renewable Energy Certificates)
[07:48]: Arcadia's billing relationship with customers
[09:41]: Arcadia's first core proposition: Matching everyone who wants it with clean energy
[10:55]: Becoming the largest manager of community solar projects in the US
[12:22]: Building relationships with utilities
[14:40]: The popularity of community solar projects
[16:46]: How the energy market has evolved in the last five years
[18:34]: Sign-up process for community solar
[23:00]: The savings benefits of community solar and its role in the market
[26:16]: Origins and overview of the ARC platform and role of EV manufacturers
[31:00]: Arcadia's acquisition of Urjanet
[34:01]: How Kate manages as COO of two large businesses
[36:47]: How to maneuver within the "monopoly system" of the energy market
[39:31]: The need for humility and adaptability while scaling
[41:12]: Kate's advice for women breaking into climate
[45:42]: Advice for founders navigating today's market environment
[49:33]: The future of Arcadia and how folks can get connected
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Cody Simms (00:00):
Today's guest on My Climate Journey's startup series is Kate Henningsen, co-founder and chief operating officer at Arcadia. Arcadia is a tech company empowering energy innovators and consumers to fight the climate crisis. Arcadia started as a way for consumers to gain access to premium renewable energy credits for their home energy consumption. And they now claim to be the leading manager of community solar projects in the United States. They've expanded on that with the launch of the ARC platform in late 2021 and the acquisition of Urjanet in the spring of 2022, which together allow Arcadia to offer developer API access to data from over 10,000 utilities globally across electric, water, gas, and waste.
(00:47):
Kate has scaled the business to hundreds of global employees, significant revenue, and hundreds of millions of dollars in capital raised. We talk about how she's managed her own transition from startup to scale and the advice she often gives to women looking to work in climate tech. We're thrilled to be multiple time investors in Arcadia via our MCJ Collective Venture funds. And to me, they represent one of the standout success stories in terms of being a high growth digital company that's driving real impact on decarbonization. But before we dive in...
(01:22):
I'm Cody Simms.
Yin Lu (01:24):
I'm Yin Lu.
Jason Jacobs (01:25):
And I'm Jason Jacobs. And welcome to My Climate Journey.
Yin Lu (01:31):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (01:37):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help. And with that, Kate, welcome to the show.
Kate Henningsen (01:52):
Hey, thanks so much for having me. Great to be here.
Cody Simms (01:54):
Kate, we have known Arcadia for so long. We had your co-founder Kiran on the show really early in the days of My Climate Journey, but we haven't gotten to know you super well and I'm really excited to hear more about your journey and to hear an update on Arcadia because so much has changed since Kiran was last on the pod. Let's start with your story. How did you get into this world of climate tech?
Kate Henningsen (02:21):
Well, it's a fun world to be in as all of your listeners know and it's certainly changed a ton since Arcadia started seven, eight years ago now. But my journey was I was a corporate litigator, so not in climate at all. We're talking back in 2015. So in the eras of clean tech, we're in the first starting bits of it. So I was a litigator who wanted to do something more impactful with my career and really we had just had our first child and knew that I wanted to leave a legacy. And so lawyers are good at regulations, so my wheel started to turn and I thought, "Where is an industry that I can make an impact that is big and juicy, but as someone who feels comfortable in statutes and law and policy can maybe bring something to a small fledgling idea and company?" And so energy comes to mind as meeting those criteria.
(03:08):
And so luckily, I'm based in Washington, DC and there's not that many people doing startups and thinking about these types of problems in Washington, DC especially back in 2015. So I actually cold emailed Kiran who had basically arcadia.com was all there was. I reached out to him and said, "I think a lawyer could be really helpful as you're thinking about new business models in a regulated industry." And he said, "I don't really need a lawyer. I need a director of business development. Come be the basically third employee at Arcadia and start this journey." And so that was the ship I jumped on and have just built it and grown it in an amazing experience over the last eight years.
Cody Simms (03:47):
Unbelievable. What was it about either of the story at the time or Kiran, or I presume you have this pretty amazing background, you probably had a few different things you could have done and you took this crazy leap of faith? What got you there?
Kate Henningsen (04:01):
I have an email from a friend who was a investment banker and I sort of wrote the idea of the business model. Back then we were selling premium RECs and green energy and he writes back and he says, "Well, this has no scale. This is an awful idea, Kate." I saved that email as sometimes in life it's not there until you build it, right? I think that's sort of the story of startups, is you go on the journey and you keep moving, you keep the vision, you keep this idea and this passion. I think we've been really fortunate to also be running in parallel with I think a real change that's happening in the world. I mean, it feels really different in 2023 and today than it did in 2015. It's just been really amazing to watch that.
(04:42):
We need to do it, right? The world is telling us we need to move faster and to make this impact. But it's been really amazing I think to start a company in this timeframe too and sort of ride the wave of what's been climate tech. But yes, I have framed the email from my friend that said, "You are stupid for doing this." And maybe that's motivation for people.
Cody Simms (05:00):
One and a half billion dollar valuation later, you're probably feeling pretty good about it.
Kate Henningsen (05:05):
He just called me a few dinners.
Cody Simms (05:06):
Yeah. In those early days, you mentioned premium RECs. Maybe unpack that for us a little bit. What I love about the Arcadia story is how much it has evolved in a relatively short amount of time, right? We're talking eight years here. But the original idea was what?
Kate Henningsen (05:21):
I like to say that the kernel and the vision of Arcadia has maintained and just how we've expressed is changed and pivoted a lot. But really I think the kernel and the vision and the deep belief that we hold is that it's a consumer that can really change this market. So obviously your listeners are familiar with energy, the frame in energy has been utility driven, right? I mean that has really been how we've built the system, how we've shaped this public good and made it safe and reliable. It has been through this construct of monopoly. And it's really an interesting market to enter because it's not like most markets, right? Most markets are competitive. They're winning the customer.
(05:55):
One of the things I love to tell people about the energy market is that there's not even the concept really of customer. You're a rate payer. You exist only to fund a system to make sustainable, reliable, safe power. And so Arcadia was really born with this idea of you can bring the customer to make innovation, to make climate impact faster than I think a traditional monopoly power system. And so originally that was, "Okay, let's just sell the customer clean energy." So our innovation back then was we're going to sell it in all 50 states. And so if listeners are deep in the energy markets, you know that in only some states can you choose your power. We were using technology to basically match people with greeny certified RECs and so they would get clean power, it was a premium product. And we scaled that to about 50,000 customers. So we were able to find enough customers who wanted to say they went green.
(06:47):
But pretty quickly, we started to evolve that into people want savings in green, they want other things but just green. And so that was really the idea and the kernel what a consumer can drive change faster than the utility system. And now we've kind of come full journey from direct to consumer premium product to we have this wonderful community solar product which is still direct to consumer, but it's a guaranteed savings to now is the ARC platform, which is really the idea that data can digitize and modernize the energy sector and other companies can basically build their own innovative products on top of us in a way that we think is the real unlock to climate innovation and new business models to accelerate the innovation we need to impact the earth.
Cody Simms (07:31):
Yeah. And I want to spend a ton of time on the ARC platform and how you've evolved that and the role that Arcadia plays now in between utilities and other innovators. It almost reminds me of what Twilio ended up building in the telecom space. Before we get there, just how you were able to get to that was because you got all these consumers to basically attach their billing relationships to their utilities with you, right? To me, that's like the key almost tack that Arcadia figured out was, "Hey, if we could flow building relationships through us, it unlocks a whole lot of stuff" because you had to build all these integrations via logins and via billing with the utility providers who maybe weren't all that set up technically to do that. So I presume there was a lot of technical handholding you had to do with these utilities along the way. Is that accurate?
Kate Henningsen (08:23):
Totally. We want to own the customer and sort of have the customer drive innovation. We have to have some relationship with them. And so Kiran pushed from a very early stage, it's the billing relationship. That's what people do with utilities energy, is they pay this bill once a month. So if we can sort of intercept that and get in between those, that's really the lane that can drive a lot of change in the wedge. But yes, utilities, there's a lot of them. And you have to integrate and make that connection. We're connected now with, fast-forward eight years, 10,000 utilities around the globe that basically allows us to process this connection for the customer. But that takes a lot of time to build obviously.
(09:02):
So we spent many years developing a business model, sort of in a regulated space what can we offer consumer, but then also building these technical connections at scale. I mean, I think that's really the innovation of Arcadia, is if you can get the customer can connect. And now we do residential customers, we do commercial customers. What's great about energy is everybody uses it. It's universal. And so we now have a whole spectrum that we're supporting. But if you can get them to connect and then get their utility data, that's really the spark that can open up new products for them, new insights, sort of the digitization we want to have in energy sector that other sectors have really benefited from the last 20 years.
Cody Simms (09:40):
So the core value prop for the consumer originally, and still is today very much a value prop of Arcadia as I understand it, and I'm a customer, is, "Hey, if you want to ensure that the power that you are essentially using for your home is green power, you're not going to be able to force your utility to go spin up a solar farm or force them to go spin up a wind farm or force them to not use natural gas during high peak times. But if you fund a wind project or fund a solar project, you can essentially claim that as a credit that offsets essentially what your utility is doing today. And if you let Arcadia pay your bill, we're going to go spend a little bit extra of what you pay us to go fund those projects and ensure that you have helped create more clean energy in the world." Am I thinking about that the right way?
Kate Henningsen (10:34):
Yes. So that is the first core proposition we went to with this, "Let's match everybody who wants to with clean energy." So people who can't... No one's putting a windmill on the roof. We know that two-thirds of the America can't even put solar on their roof. And so if you want to drive more green electrons on the grid, here's a way to basically add those electrons.
(10:55):
What's really cool is that in 2018 there was a huge push by the states actually to start this product called Community Solar, which combines I think some really good parts of that wind certificate with a lot more what's called additionality. So there's now 14 states, including California which is really exciting, that have passed a law that says, "We want to incentivize local solar to be built on the grid and then we need subscribers for it."
(11:24):
And so Arcadia has now taken what was a national wind REC product and evolved that into we're the largest acquirer and manager of these community solar arrays in 14 states. We've put about a gigawatt and half of solar on the grid. We have over 300,000 customers. And so we call that a perfect energy product because not only is it green, it's local, it's additional and it's guaranteed savings because the states want to basically incentivize third parties to build. And so we now have just an amazing consumer product that actually the Inflation Reduction Act is going to further incentivize the building of these five megawatt resiliency type projects on the local grid that then low moderate income people can get guaranteed savings, 10, 15% off your utility bill. And so that's been a really good evolution of our direct to consumer product that's really opening access to green electrons for people all over the country.
Cody Simms (12:22):
And how did you build these initial relationships with the utilities? I mean, we're going to talk all about the community solar side too, but just when you were getting, you and two other people had this crazy idea, "Hey, let's go take the relationship between the utility and the consumer." You went and talked to your first utility and said, "Hey, we want to do this." What did they say to you?
Kate Henningsen (12:41):
I get the question a lot of like, "How do you do this? How do you go from zero to big?" And in the moment, it's one day at a time. All these journeys are one day at a time. And so no one starts with 10,000, right? If you had to say, "Come build a platform for 10,000 utilities," you'd go home and go to bed or something like that. But the problem you're trying to solve is, "I have one customer who wants free energy, I need to connect their utility account. Let's spend a few days doing that." There's some things we could do by ourselves. So you write code to sort of read a utilities website, we had control over that. But there were some things we had to ask the utility to help us with. So some of the connections, you actually have a joke that it's like Deborah and the billing department, you have to call it every single utility. And that takes time, right? That takes a while for you to set up those relationships.
(13:29):
We got really good over time of knowing who to call, knowing what to ask, knowing how to add value to their platform. And so you just do a couple every week, every day. You don't set out to sort of build the whole platform. You start off with one small thing. I think we just got good over the years of making a repeatable model that we could do that at scale. And then learning. I think eight years of processing reading and utility bills if we have a stat that we probably have over a trillion data points. So we're collecting all the data on utility bill, we're processing over 3 million basically bills a month. And so you do the math over eight, 10 years. We also now have just gotten really good at adjusting and knowing and being able to build scalable technology that can respond to all those variations. I think that's really been an advantage for us to scale and to go fast as well.
Cody Simms (14:22):
Great. And so the original wind REC program, which still exists obviously, is one where when I'm paying Arcadia a small amount per month that's going to buy wind energy somewhere, I don't maybe know where, but it is ensuring that there's constant demand, essentially base load level demand for this wind energy. And then you added the community solar product on, which allows me to ensure that there's actually local electrons that are flowing into my local utility footprint that I'm helping to fund the build out of. That was to me where I heard they're leaping a little bit of a difference.
Kate Henningsen (14:56):
Yeah, exactly. So the evolution of the products is a wind program is national, you're sort of funding the wind wherever it is, but you are wanting to basically add a little extra to the developer to make it a juicier pie for them to want to develop. Community solar is great because we get great stories from customers, they drove past their farm, right? It's in their neighborhood. The state wants it to be in their neighborhood because this is a resiliency. Not only is it sort of green electrons, but it's a more resilient grid. And so that's the evolution of maybe a wind farm far away that's not tangible to now you can really have local power and connection with these green electrons. And we find people get excited about that. They really like that it's tangible. And power is complicated, right? Trying to explain to a consumer an electron and a kilowatt-hour, I mean those are very hard concepts, I think, for your average consumer who doesn't [inaudible 00:15:48].
Cody Simms (15:48):
It feels super abstract for most people.
Kate Henningsen (15:49):
We have done it for eight years and it is still a hard concept to get somebody to really connect with. And so the location I think of, "Oh, it's just down on Nash Street," that gets people I think more tangible excitement about this product. And so, "Oh, I get to support green and it's local" I think has just been such a winner for us in the last kind of four or five years.
Cody Simms (16:11):
From a regulatory perspective, building out community solar locally is quite different than contributing capital to a wind farm that either may already exist or is in development and you're just helping to support a project that already has permitting and is planning to go. What have you all learned as you've kind of had to move more into that regulatory world? I'm assuming not only is every state different, but every locale is different from a utility regulatory perspective.
Kate Henningsen (16:40):
Yes, you are 100% correct. I think my original bet that being a lawyer in an industry was spot on. The market's also evolved. We signed our first deal in April 2018. There's one developer, one state, one bank, and now you've just seen an explosion in the last five years where it's 14 states, it's over 250 developers, multiple banks are financing it. And so the market in its infancy was yes, every state is different, they have different signup requirements and different customer requirements, which means our technology had to be different. So that was a learned experience. And then I think we also invested really early on in a policy team, so a tech startup with a lawyer as a co-founder. And then really we hired our first policy person two years into Arcadia because we understood we wanted people to advocate for better programs. It's one of the things we're super proud of, is I think we've made the programs more consumer friendly, easier to sign up. Those kind of best in class consumer products, I think we've enshrine that.
(17:36):
Community solar industry back in 2018 was basically taking financing tips from the rooftop solar industry. So people were required to put down, their signing a 20-year contract, you had to have a 720 FICO score and there was a $1,200 cancellation policy, which obviously for a product that's supposed to be for renters or people who can't do rooftop, really constrains the market. And, "Well, we were innovative or crazy enough to figure out what the developer partner is. Let's drop the FICO score. Let's have a no cancellation fee and no contract." And so that innovation I think really started to open the market. So that's something that I'm super proud that we pushed for, is , "Let's make it just a normal consumer product, easy on, easy off." And that took a lot of policy handholding and getting people to understand why the business model was better. Because that's not really how community solar was thought of. It was really sort of rooftop extension and I think we had to change the market and regulator's understanding of what the product was.
Cody Simms (18:34):
When I go to sign up for community solar through Arcadia, am I literally looking at it as if it's the equivalent of adding X number of solar panels to my house? What is the consumer experience feel like to me? And then how does that money actually flow into the actual project and the tangible build out from a wattage hour perspective on the ground in that local farm.
Kate Henningsen (18:55):
It's an easy signup process. People aren't going to think about energy for that long, so you got to make it easy. So it's really most markets, it's, Give us your where do you live, who you are, and your account information and utility account information." And from that we signed you up. We signed up your whole usage. So your whole bill gets basically... You can't say offset because somebody is claiming the RECs, but you're using the green electrons. Your whole power bill is basically using the green electrons. And then you also get 10% savings from your utility bill.
(19:24):
And so your household is basically assigned... Let's say, to your point, there's a thousand panels in the field somewhere in New York, your household power is basically assigned, "Okay, you're going to have five of those panels." Whatever those panels generate, that's going to be sort of what you see as an offset on your bill. The savings will come from that too. And of course the customer can check and see how much their panels have produced over time, what their impact has been, their savings. And so we really do try to bring the good of rooftop without sort of the people who rent should be able to build clean energy in their communities. People who don't have FICO scores that are 720 should be able to contribute. And so I think we want to bring the best of the experience with also the ease and the equality and access that's important to us from an impact in a company standpoint.
Cody Simms (20:12):
And are you pre-selling demand and using that to incite new solar development projects or are you kind of pre-buying solar development projects and then backfilling it with demand or a little bit of all of the above?
Kate Henningsen (20:26):
A little bit of all of the above in eight years. But what's so cool is that the developers, hopefully all these terms for your audience are steeped and these concepts is not over their head, but the solar developers basically can't get financing until we give them a list of, "Here's your off take list and the 3,000 customers in the utility." And so there's really a direct one-to-one connection of, we're fortunate now that we have such a big pool of customers that the timing is pretty close, but basically we need to bring a list of customers to the developer and then the developer goes to the bank and says, "Okay, finance my project."
(20:57):
And so there's a super tight connection between the customer signing up and this project getting built. If there's no customer, the developer basically can't get the financing, can't get the great incentivized rate that the state has made and won't build the project. And so unlike wind RECs where the project might have already been built or it's not that much additional capital and the developer might have built it anyway, in community solar, there is a one-to-one link of the person signing up and making sure that megawatt gets built and those electrons start producing power.
Cody Simms (21:28):
Once a given local farm is up and operational, now you have new customers still signing up, is there kind of a prearranged amount of power that's been pre-purchased for them or are they kind of going on a wait list to go build the next farm?
Kate Henningsen (21:41):
Yeah, what's been really neat about this market is a lot of markets launched sort of pilot programs and then once we filled up the pilot program, we were able to then get additional megawatts. And so what's been so awesome about this journey is that I look back at some of our board decks or financial models from 2018 and the size that we thought the market was going to be versus where it is now is almost 10X. So the fact that consumers were signing up and taking the bait, I mean there are now more than a million people who signed up for community solar. That has grown the market as a flywheel, which, it goes back to where we started this conversation, which is consumers can drive innovation.
(22:19):
Utilities know how to make solar. There's utility-scale solar. People know how to put poles in the ground. Community solar though, as a consumer driven product where you have over a million people who signed up, has driven 5 gigawatts of construction that would've taken place, but for I think that consumer flywheel. And so, is it sufficient to solve the climate crisis? No, of course not. We need everything. But is it an example of where taking sort of digital acquisition, consumer dashboards, consumer experience pushed along new development and new renewables that wouldn't have probably gotten funded? 100%, yes. And so I think that's a real amazing story right there.
Cody Simms (23:00):
And for the most part, the value prop to consumers today is still the notion of, because you care about clean energy and climate, it's not necessarily a cost saving story for them today. Is that correct? And how do you see that evolving, I guess?
Kate Henningsen (23:15):
For community solar we can save them 10% off their power bill. And so actually there is a huge savings hook that we see. We're actually pretty excited that the Investment Reduction Act might add even more to that pie and because there's a lot of incentives, directed ads, sort of low moderate income folks to help with their power bills. And so savings is probably at least an equal lever I think of... Or maybe it makes it a no-brainer, like, "Sure. Great energy, great. Local, great. Oh, and savings? Fine." It really pushes the value proposition to be like, "Okay, yeah, why not do this?" This, I will say, does seem too good to be true. And it's been an interesting thing of when you have a product that does seem too good to be true, you have to convince customers that it's real. It's an actual thing.
Cody Simms (23:57):
Presumably utilities themselves much more slower moving than a high growth startup, but they'll start adding these types of programs in directly as well. How does Arcadia sort of play with that or not?
Kate Henningsen (24:11):
What we've seen historically is that community solar, and I think this was part of our wonderful policy team, has really been carved out as a independent power producers or non-utility. It's not going to be 100% of your generation in a state, but we think legislators have been excited about, "Okay, let's carve out a small bit of our overall load and incentivize sort of third parties to come in to create jobs, to use farmland, to provide savings." And so we actually do think it's going to always be a distinct sort of, not a whole market, but a distinct pie of the generation in the state.
Cody Simms (24:47):
So it's essentially a deregulation innovation zone to some extent?
Kate Henningsen (24:51):
Yes, exactly. I will say the coalitions that come together are not your normal red and blue coalitions. You have really cool farmers and deregulation and environmentalists who come together to say like, "This actually aligns with all of what we believe in." And so the coalitions have been really neat to see come together on this too.
Yin Lu (25:11):
Hey everyone, I'm Yin, a partner at MCJ Collective, here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast. We started in 2019 and have grown to thousands of members globally. Each week we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change.
(25:38):
Some awesome initiatives have come out of the community. A number of founding teams have met, several nonprofits have been established, and a bunch of hiring has been done. Many early stage investments have been made as well as ongoing events and programming like monthly Women in Climate meetups, idea jam sessions for early stage founders, Climate Book Club, art workshops and more. Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com and click on the members tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (26:13):
Interesting. Okay. And so then you've now built this footprint. At what point did you say, "Oh, we have enough scale," and we're going to get into the acquisition you all made and everything, but even before you did that you realized, "We have enough scale of relationships with utilities that there's like this move we can make where we move from just being direct to consumer to actually being this centralized platform for any company that wants to integrate with utilities." Talk to me about the evolution of the notion of the ARC platform
Kate Henningsen (26:41):
Looking sort of back over the course of Arcadia, there's some decisions that we push ourselves to make of like, we have a hunch or, "This product isn't working, let's try something else." The ARC platform was one where I think there was so much inbound that started in about 2019. I think that pushed us, the market actually pushed us in a way where I think direct to consumer, we had a poll that we changed.
Cody Simms (27:03):
What kind of inbound?
Kate Henningsen (27:04):
EV manufacturers really started calling us 2018, 2019. And their problem to solve is everybody knows what a gallon gas costs, right? I mean, elections swing on what a gallon gas costs, how much a penny it costs to fill up your tank. People who buy electric vehicles have very little knowledge of what a kilowatt-hour costs, how much it's going to cost to charge their vehicle, let alone optimizing any of that, changing rates, charging at the right times. Those are data problems, right? Our utility platform is both the consumption side, but it's also now we have all the rates. So we have 35,000 tariffs in our database.
Cody Simms (27:40):
It's like the old days of cell phone plans when they moved to charging you per whatever megabyte you were downloading on your plan and you were like, "I have no idea what it's going to be."
Kate Henningsen (27:49):
Totally. Right? And no one knows what a kilowatt-hour cost. And so I think where we really started to see innovation pulling us was in the electric vehicle manufacturers who wanted to build a better consumer app or they wanted to convince customers that, "Boy, even though your utility bill is going to double, [inaudible 00:28:07] cheaper in the long run for you to switch to an electric vehicle." And that's a lot of customer education you need to do for that. And so we started to get the pull there. And then I think in the last two years, the sectors are just growing of the number of people who want to sort of innovate around energy. And so now our biggest vertical that's growing is actually carbon accounting. So all these companies that want to measure their carbon footprint, they're realizing they have a lot of utility bills and they have a lot of information. So how do they get that easily and at scale? We're helping them solve those problems. So it's a huge spectrum of who wants energy data now.
Cody Simms (28:42):
So ARC's been out for about 18 months now, I think, right? You launched it in the fall of 2021. As I understand it, this was a huge project for you personally. We're very involved in obviously the creation of this thing. What have you learned since you launched? I guess maybe first just we've kind of danced around it, so maybe describe what is the ARC platform and then what have you learned?
Kate Henningsen (29:01):
All the technology we had... We've been talking about direct consumer products. I mean, so what we're doing on the customer side just to give the full story is we're getting people's utility data. So there's over 300 points of data on your utility bill. Who knew? But that's such a rich pull of what rate you're on, what your address is, how much you use a month. Then we also brought in tariff data. So all the rates. And so basically what we've built over 10,000 different utilities because each utility has a different connection point, it's not you just knock on one door, is a massive platform, a data platform that can give basically any user their consumption and their rate data. So it's basically energy data at scale, which is a really interesting thing for the energy sector because energy by design is really siloed.
(29:50):
So Georgia Power's only selling to Georgia customers. Maine Power's only selling to Maine customers. And so if you want to be in an innovative company like an EV manufacturer that wants to sell cars all over the world with a consumer app that serves those customers, you don't want to go knock on Central Maine Power's door and PG&E's door. At scale, it's really hard to build those sort of innovative consumer products unless you have a platform that basically, "Just knock on our door. We'll take all that complexity and we'll just give you what you need to make one experience, one product." And so that's the underlying essence of the platform, is energy data. And the pain point it solves is one connection point that innovators can go to not 10,000, which I can tell you takes hundreds of billions of dollars and years to build those types of connections.
Cody Simms (30:37):
And there's a consumer permissioning authentication layer in there somewhere where I'm approving, in my case, LADWP to share my data with so-and-so?
Kate Henningsen (30:46):
Yeah, exactly. You're giving us your utility credentials, which is a very similar signup flow to sort of people have used banking apps or FinTech apps. I mean, really the same idea of the consumer gives your utility credentials and away we go and it's pretty seamless from there on.
Cody Simms (31:00):
May 2022, you made an acquisition of basically the world's leading provider of utility data, Urjanet. What drove that? And tell us more.
Kate Henningsen (31:08):
I love that we've sort of talked about all of our direct to consumers. So we basically have built residential data. So to service community solar customers and wind REC customers, we needed sort of the residential guts of the energy system and the data. Urjanet had done it for commercial. And so the real big bang together was all of a sudden you're combining both of those things. And so it was frankly and something that once we started to say out loud, it was like, "Oh, we have to do this. This is a no-brainer." And so you're bringing together the residential and then the commercial. So then now it's global and then across all sectors of 10,000 utilities. And so it's really the whole pie, we think, of energy data. We focus on electricity because we were offering electricity based products. Urjanet brings with it gas, water, steam, an additional amount of sort of utility connections, which is also really interesting in carbon accounting where companies want to measure their whole footprint, not just electricity. And so it's really just broadening of the energy database we have.
Cody Simms (32:09):
I saw, I think, in the press release of the announcement it was 75,000 gigawatt hours of energy demand annually and $20 billion in yearly utility bills that are the combined sum of the two platforms now together.
Kate Henningsen (32:22):
I remember when we did the math one late night trying to sort of what's the big story, and it was a drop your jaw like, "Oh, we got something here. This is going to fun."
Cody Simms (32:31):
And so this now allows... We're giving the EV use-case or the carbon accounting use-case. How has that accelerated now that you have this additional footprint of data?
Kate Henningsen (32:40):
If you think about any sort of decarbonization, we can play in it. So we're seeing everything from large commercial customers who want to just pay their utility bill through us because that's just a use case of, "Oh, I have 10,000 retail stores." A lot of EVs are doing a lot of now commercial storage and solar proposals. So we had been historically doing residential solar proposals. So our ARC platform powers over 4 million residential solar proposals. Now we're doing nearly the same volume of commercial storage. And so again, this is not us building storage companies or residential solar companies. It's allowing those companies to get bigger, gain more steam, put out more proposals, make more door knocks. It's allowing EV manufacturer to hopefully get more sticky customers.
Cody Simms (33:25):
So it's accelerating basically the ability to achieve project finance as well as technology based integrations with an EV?
Kate Henningsen (33:35):
Exactly. Any company that's going to innovate in clean tech we hope need a connection to us basically. Where I get super excited is we're starting to see a lot more microgrids, DERs. These things that seemed, "Oh, eventually we'll get there in 10 years," we're not starting to see demand from a lot of these companies that are, I think, doing a lot of cutting edge microgrid and decentralized grid technology that will accelerate stability and we hope reliability of the grid of the future.
Cody Simms (34:01):
So as the COO, you're now operating these two pretty large, and from a go-to-market perspective, fairly distinct businesses of a residential community solar and REC buying platform that's marketing to consumers and this B2B platform service. How do you spend your time and how do you work across them?
Kate Henningsen (34:23):
We added hundreds of employees too. And so that was another great challenge to bring on. That is one of... I think the multi-year project that we have to do is really bring those processes and operating systems together. I think we're still in the midst of doing that and we're really excited. In '23, we're bringing the product guts together more. A big investment in '23 is for the customer we hope in about the next six to nine months, the experience feels the same. And that was a really dedicated investment point to say, "No matter where you're coming in, it's going to feel the same to you." And so putting some investment around the product integration. I can tell you we're doing a lot of stuff on the ops integration and making sure we have the process and workflows that all go together.
(35:07):
And so it's been a huge challenge. What's been great though is that the cultures are really similar. You don't know what the culture's going to be, but I think we have two companies that both want to impact the world through data. And so there was early times in integration where we looked around we're like, "You're the only people who thought so deeply about the billing cycle of LADWP." And that kinship moment I think has allowed a lot of excitement and energy to continue on to bring these two companies together.
Cody Simms (35:34):
Yeah. And I think worth making the point that, again, the ARC platform wouldn't exist if the consumer residential product hadn't been built out in the first place and established all those relationships. And so they're very complimentary to one another though they are very different businesses. And so there's the pro of the complimentaryness and then there's the challenge of just maintaining a culture of its one team doing a direct to consumer business and one team doing a B2B business. And that to me is a sign that you are a business at scale.
Kate Henningsen (36:01):
Yes, there's always challenges of I think wearing those two hats. What is great is that once you've jumped over the energy hurdle, I think most people don't work in energy. And so we've actually found a lot of our secret sauce is made when we bring energy and technology people together to make new products. And there's so much innovation that can happen because most technology people don't go to energy and most energy people don't go to technology. And so the business models I think have been an easier thing to put together than figuring out the right people to do the problems because they're actually been distinct worlds for so long. I think that's changing now. But it's really exciting that I think energy and technology are coming together in a way that they haven't historically been that close.
Cody Simms (36:47):
And as you have grown and scaled this, I'm curious to kind of double click on that sort of skillset point. What are you seeing in terms of how those two cultures are learning from each other and where do you see that gap continuing to shrink?
Kate Henningsen (37:02):
So the first thing I'll say, and I've said this before, is everybody should be in climate, everybody should meet energy. It's the proper generation. If you are a designer, an accountant, a marketer, no matter what skill you have, I hope that you apply it to climate. And so that's the first point, is don't get dissuaded just because you don't have experienced in energy.
(37:20):
The second point is I do think you need to be humble with energy in a way that many people... It doesn't behave like other markets. We have had a string of folks who are like, "Oh, I'll just build a funnel and it'll just work like this." It doesn't scale in the same way I think that other markets can scale. It has unique oddities that happen when you have a monopoly industry with 10,000 different providers around the world that I'm so excited that people are coming to climate. It's the thing we need to solve. We're going to have a learning experience of this whole new sector having to learn energy and how it behaves and what it needs and how you're actually solving the problems. And so I think there's a humility of you need to ask a lot of questions about energy because it's not like your normal market, but let's start asking those questions and come on board and learn the sector and apply your skills for sure.
Cody Simms (38:06):
And it feels like you all at Arcadia have done a good job of not trying to say, "Hey, we're going to come in and disrupt this whole thing. We're moving everything over to this curtain" or whatever the analogy is that I just butchered. You've instead approached it from a spirit of partnership of like, "Let's build this out to together." You could have taken the approach of like, "We're just going to hack all your users away and have them come over to Arcadia." But it doesn't feel like that's what you've done.
Kate Henningsen (38:28):
I appreciate that perspective. I think it goes back to I was a lawyer, Kiran was a policy person, and I think we understood that this was a different market from the beginning. I think that, I'll say the word humility or maybe it's curiosity again of, we understood or had appreciation for that this was a complex market and you had to sort of maneuver in it and accept that rather than just go against it. And so I do think that's been a lesson of how you play and how you build something.
(38:57):
And I also think it's maybe a reason why a lot of people didn't start Arcadia or haven't done this before is because maybe they thought it was a little bit boring and maybe they thought it was a little bit hard because it was new. But that is really where innovation is made, right? Taking on the problems that other people don't want to take on. That's value creation. But we've always actually been surprised that more people haven't done an energy data platform because there's platforms and SaaS businesses and data all over innovation. But I think there's something unique about energy that makes it a little more difficult. You have to dance with it a little bit differently.
Cody Simms (39:31):
What have you learned from a leadership perspective and going from startup mode to scale out mode?
Kate Henningsen (39:37):
We can continue the humble theme there. When you start a business, you are by definition a generalist. You are doing everything, you should do everything, you would need to know everything. And that's really I think where a lot of the experience of power comes in. You start to scale and you need to give away a lot of tasks. You need to hire people to do things. There's a great article I read, it's called Giving Away Your Legos. A funny concept. You have to read the article to understand, but it's the idea that it's really hard for people to climb this mountain where they do everything and then they have to put stuff down and they have to give it away and they have to scale and that success looks so much different on the other side of the mountain where you are enabling other people to do things, which means you have to be really thoughtful. Your communication style has to change. You have to be planned. You also have to accept that you're not going to make every decision or know everything anymore. And that is what scale is.
(40:33):
It is a hard journey. I mean, watching the last eight years when people have come on and when people have left, it's hard to make that reinvention over and over again and to want to keep growing with a company and knowing that there's going to be discomfort. One of my favorite concepts is if you love growth, you have to accept discomfort. And just learning that along the way and just saying, "Okay, we're going to ride together." Something new means it's going to be hard and weird and awkward. And then you're going to get over it and then you're going to have something other that's hard and weird and awkward and you're getting over it. I think that's been a really fundamental journey of this experience for me that I'll just treasure that that learning has come.
Cody Simms (41:11):
And Kate, you said this at the beginning of the interview when you first joined Arcadia, I think you said you were a relatively new mom. You wanted to go into working in climate because I don't know if having a kid sort of impacted your future horizon view of the world, but you've talked a lot about how it's so important for people to break into working on climate, everyone should work in climate. For you as a woman now running a large company in the space, what is your advice for other women looking to break into climate?
Kate Henningsen (41:42):
I love that question because I think climate is such a Venn diagram of an area where you can make impact. Not that men don't want to make impact too, but I often talk to women and moms particularly who say, "I got to do something. I got to leave this world a better place." And so I feel so fortunate that climate is a Venn diagram of you get to make impact. It's also the biggest economic opportunity of our generation. McKinsey's estimating that $100 trillion is going to go into decarbonizing the world in the next 25 years. That is a lot of growth, that's a lot of money, that's a lot of skill retrofitting.
(42:17):
And so to be a woman who gets to both see the opportunity and do good I just think is such an amazing gift and opportunity that we should all take part of this. And so I love talking to them about leadership and when they call me, and I think that's the advice I give is, "Don't think of this as charity." This is both getting to make an impact and hopefully getting to grow new skill sets that are going to be valuable, maybe make some money and equity in a startup that's going to be valuable and what a blessing it is to combine those two things.
Cody Simms (42:44):
And you talked about how you first approached Kiran and said, "Hey, do you need a lawyer?" And he said, "No, I need someone to run business developments." What advice do you have for people on how to leverage the skills that they have when looking to also transition into a new industry potentially?
Kate Henningsen (42:59):
Everybody has a wedge. Everybody has something that's unique and interesting about them. You should not think of the things you can't do, but really emphasize the thing that you can do. And so Kiran said, "I don't need a lawyer, but I need a director of business development." I still wrote him a memo about how law could really change the business and how that in itself could grow new businesses, new revenue in a regulated industry. I didn't shy away from the fact that I didn't have energy experience, but what I had was something unique. And so I think anytime you're applying for a job or thinking of changing careers, no one does everything. No one can be everything. No one can do everything. No one can have every experience. Talk to yourself and say, "What am I uniquely good at? What's the wedge I have?" And then go for it.
(43:42):
One of the things, I'm just interviewing people leaving climate energy in general, sell yourself, right? Every question, everything is an opportunity to say, "This is how I can help you." Don't wait for someone to ask you that. Write the memo, make the phone call. Make your passion come through so that is so obvious to the person, "Oh, this person obviously wants to work here. Oh my gosh, they taught me something new." I mean, I walk away from interviews, it's the people who teach me something. Not that like, "Oh yeah, you have great experience. I know everything you've done." It's like the wow moments you want to tell somebody. And that should come from experiences that aren't every day. And so think of the skills you have to wow somebody with new knowledge and how that can fit into a problem they want to solve.
Cody Simms (44:25):
Well, great advice. I'm presuming you've probably given dozens, maybe hundreds, I don't know, of people their first jobs in climate. So you certainly have some patterns you've seen in the last few years.
Kate Henningsen (44:37):
The community is great. I will say what is so cool about climate, we've talked about growth and all the nerdy energy problems, we all want each other to win in a way that I think is pretty genuine. We're building a community in a way that we need us all to win. And so let's all get in this together. Let's be great alumnis for each other. Let's be clients and business partners and let's all grow the innovation we need. And so it's another plug for the industry in general.
Cody Simms (45:04):
I love that sentiment and couldn't agree more that it's, "A rising tides floats all boats" mentality in the climate tech space right now, which is great. Even companies that compete with each other don't really feel like they compete with each other because we're all working to build big businesses and win. But also winter is coming kind of thing in terms of the analogy and there's a bigger problem moving on the horizon that we're all working toward.
Kate Henningsen (45:25):
I call it give a shitism, right? We all have basic give a shitism that I appreciate that you would shake anybody's hand on the street because you understand that they too are motivated by something that's greater than just equity or money, that there's a story they want to tell with their life and their time that just makes it a good industry.
Cody Simms (45:41):
All right, one last topic, which is how you all have capitalized the business. You're a software company. You're helping to create steel in the ground through community solar and whatnot, but you are a software business, you're a data business. You raised a bundle of money in 2022, I think over $300 million in a couple combined financings. You also are in this market where clearly public market valuations have been crashing and whatnot. How are you all managing that as a private company dealing with the changing market environment today? And what advice do you have for other founders who are navigating that also?
Kate Henningsen (46:16):
The market has changed 100%. We were fortunate. We raised in May and November, so into the winter time of the public markets, but still I think a pretty good appetite for climate tech. I do think that investors recognize that decarbonization is a macro trend that's not driven by interest rates or stock shrinkages or things like that, that there's an understanding that we are in a moment that's broader than just a time, and that this is a decades long macroeconomic trend. And so for entrepreneurs out there, tell that story, tell why you fit into a decades long trend, not, "Here are my current metrics." Or don't sell yourself as a tech business. Really sell it as yourself for the market, for the change that is coming.
(47:02):
I do think that that has been persuasive to investors. I also think there's a lot of people who are now interested in climate tech. So I have my, not proven, but back of napkin theory that the PG&E fires in 2018 set something off in the venture world where people have raised dedicated funds for climate, there are great infographics out there where you can find all the funds that are thinking about climate. And so there's capital out there. There's an understanding that this is a decades long trend, and if you put together a good business plan, I do think that there's a genuine wave that you can ride still in climate tech that's a little bit outside the noise of the public markets and some of the downturns.
Cody Simms (47:40):
Yeah, I mean, obviously we're multi-time investors in Arcadia. And in general, I think our belief is we're in a world right now where because of the urgency to get to net-zero that a lot of corporates face and whatnot, and that the world faces, there is a trend busting movement that is going to have to happen over the next decade where technology is going to get adopted that maybe wouldn't have been adopted 15 years ago just because there's an imperative to decarbonize.
Kate Henningsen (48:06):
Yes. And I'll just say anecdotally from our experience, we don't think it's because, "Oh, government regulation's going to pass." I mean, I do genuinely anecdotally... And the size of Arcadia doesn't reflect this. There has been a change in commercial sentiment where companies are doing things not because the EU tells them or the SEC might tell, and they're not cutting back. I would say that's an interesting point. We haven't seen any cutback from these types of conversations because of the macroeconomic climate. So at least what we're exposed to is companies are not saying, "Oh, this was a luxury or nice to have when the market was good." We are seeing a continuation of the conversations from a customer level of, "These are the problems we have to solve. We are going to do our carbon accounting. We are building new products. We are going to innovate in energy." So those conversations have not been vented at all, which hopefully helps your investor story that the market is there, it is alive, it is not a luxury good in any way. And those should help the business fundamentals as you sell the investor story too.
Cody Simms (49:01):
One, it feels like just the very existence of even your original consumer business is a sign that there's very changed consumer sentiment and desire to see decarbonized products be alive in the world.
Kate Henningsen (49:13):
Totally. I mean, I mentioned this before. I mean, the community solar market is 10X what we thought it was going to be. There will be millions of people subscribing to a green energy product in most states in the country. I mean, that is a level of education and interest and desire that I just don't think we had 10 years ago that now we're just really seeing come to life, which is great.
Cody Simms (49:33):
Well, Kate, what is next for Acadia?
Kate Henningsen (49:35):
Oh, next for Acadia. We love scaling our business. We think there's a long way to go. What I like to say is billions of people pay utility bills. So until we have them all, we're only a little way through our journey. So we have a long way to go to consumer growth and just keeping scale and building great products that help other companies innovate and solve the climate crisis.
Cody Simms (49:55):
And for folks who are listening who are motivated by what you're sharing, where do you need help right now? Whether it's employees, whether it's partnerships, whether it's capital, what are the priorities for you in the near term?
Kate Henningsen (50:04):
Because everybody uses energy, I think anybody can be customer of Arcadia. And so I ask people to reflect on, "Are you in the apartment business? Let's get your folks solar who live with..." How can we solve problems around energy for you because it really is a universal that we should be able to get your renters community solar? We should be able to help your building install the right EV chargers because they put data in there. I mean, I do think asking people to reflect on their footprint, their innovation, and know that there's really a solution that we can provide is where I like to start.
Cody Simms (50:37):
Kate, I'm so grateful for you to come on today. Thanks for sharing your story, and congrats on the incredible company you're building.
Kate Henningsen (50:44):
It was great to be here.
Jason Jacobs (50:45):
Thanks again for joining us on the My Climate Journey Podcast.
Cody Simms (50:50):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity.
Jason Jacobs (50:59):
If you'd like to learn more About MCJ Collective, visit us at mcjcollective.com. And if you have a guest suggestion, let us know that via Twitter, @mcjpod.
Yin Lu (51:12):
For weekly climate op-eds, jobs, community events, and investment announcements from our MCJ Venture funds, be sure to subscribe to our newsletter on our website.
Cody Simms (51:21):
Thanks and see you next episode.
