Startup Series: Boston Metal
Today's guest is Tadeau Carneiro, Chairman & CEO of Boston Metal.
This episode was part of the SOSV Climate Tech Summit. The SOSV Climate Tech Summit aims to convene the climate tech startup ecosystem of founders, investors, technologists, corporates, policymakers, and media to discuss the extreme challenges ahead. This year, the summit was held virtually on October 20th & 21st.
Spun-out of MIT in 2012, Boston Metal has invented a coal-free, emissions-free, modular method of industrial steel production based on the use of electricity. The company's molten oxide electrolysis (MOE) provides the metals industry with a greener solution for producing several metals and alloys from a wide variety of feedstocks. Earlier this year, Boston Metal raised $50 million in a Series B led by Piva Capital and Fidelity Investments. Tadeu joined the company in 2017 as its CEO, bringing with him more than 40 years of metal industry leadership and technology experience.
In this episode, Tadeau walks me through Boston Metal, the company's founding, and capital raise to date. We also discuss why steel is hard to decarbonize and why it poses a climate threat. Lastly, Tadeau weighs in on the importance of mission alignment for investors and advice for future entrepreneurs.
Enjoy the show!
You can find me on twitter @jjacobs22 or @mcjpod and email at info@myclimatejourney.co, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded October 8th, 2021
In Today's episode, we cover:
Overview of Boston Metal and how the company was founded
How metal is traditionally manufactured and why it poses a climate threat
Whether it's possible to decarbonize steel and what makes steel particularly difficult to decarbonize
Capital raise and business milestones to date
Boston Metal's ideal customer, how involved customers are before revenue is generated, and the value proposition to customers as it relates to climate
What motivates customers to seek Boston Metal out
The importance of mission alignment for investors
Advice Tadeau has for aspiring entrepreneurs and innovators in the climate space
Links to topics discussed in this episode:
The SOSV Climate Tech Summit: https://sosvclimatetech.com/
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Jason Jacobs: Hey everyone, Jason here. I am the My climate journey show host. Before we get going, I wanted to take a minute and tell you about the My Climate Journey, or MCJ as we call it, membership option. Membership came to be because there were a bunch of people that were listening to the show that weren't just looking for education, but they were longing for a peer group as well. So we set up a slat community for those people, that's now mushroomed into more than 1300 members. There is an application to become a member, it's not an exclusive thing. There's four criteria we screen for, determination to tackle the problem of climate change, ambition to work on the most impactful solution areas. Optimism that we can make a dent, and we're not wasting our time for trying, and a collaborative spirit. Beyond that, the more diversity the better.
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Hello everyone this is Jason Jacobs and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests, to better understand and make sense of the formidable problem of climate change, and try to figure out how people like you and I can help.
Today's guest is Tadeu Carneiro, chairman and CEO of Boston Metal. This discussion is part of the SOSV climate tech summit from a few weeks ago. It's shorter than our typical MCJ episode but it's an important discussion with an impactful company, in an important sector for decarbonization, so we wanted to air it anyways. Now steel production is one of the most carbon intensive industries in the world, representing close to 9% of global CO2 emissions.
Boston Metal spun out of MIT in 2012, and has invented a coal free, emissions free, modular method of industrial steel production, based on the use of electricity. We have a great discussion in this episode about why decarbonizing steel is so important. What some of the obstacles are that makes it challenging, Boston Metal's unique approach. Their starting point, traction date, key goals and objectives over the next 12 to 24 months and their long vision. We also talk about the obstacles standing in the way of them and others decarbonizing the steel industry and what could be changed outside of the scope of their control to unlock faster progress. Tadeu welcome to the show.
Tadeu Carneiro: Thank you very much, thank you to the organization for inviting us for this chat, and thank you for your introduction. And for emphasizing the importance of decarbonizing steel to what is the major goal for our so- society, which is to move from the carbon era to a new, to a new era where eliminate CO2 emissions. So that's our mission, to commercialize a process that we are developing to manufacturing steel without any CO2 emissions.
Jason Jacobs: And what is the origin story for the company? How did Boston Metal come about?
Tadeu Carneiro: It's the process is a platform technology. So it came with this idea of using electricity to manufacture metals in a sustainable way. And we at one point in the life of the company, we picked the bet of steel, it's a pretty obvious one because it's the one that it's the most significant [inaudible 00:04:29] in order to use this technology. Which is to pass electricity to a mixture of oxides and- and get the least stable one to be split apart. And so, by design, we make the iron oxide from the iron ore to be the least stable as you pass electricity in the cell, you break the bonds apart. So you get the iron for your steel, and you emit oxygen as a byproduct. So you can do that with other oxides as well, so it's, and that's how the company started, by looking at different ways to manufacture metals in a more, you know, sustainable way, cleaner way.
Jason Jacobs: And can you talk a bit about how metals like steel are manufactured, the traditional way and also maybe just a bit on the scope of the problem as it relates to climate and emissions?
Tadeu Carneiro: Sure, sure, so steel is manufactured the same way for millennia now, so the iron age is 1200 BC, as you know. And so you get iron ore, you mix with cooking coal in a furnace and you, you know you burn by blowing oxygen, and some form of oxygen on [inaudible 00:05:49] and then the carbon will somehow reduce the iron oxide in the iron ore, and you get your [inaudible 00:05:57], so this process is, I mean steel is one of the most important engineering materials in the world, and will continue to be. So, this way of manufacturing steel is used in 70% of all the steel manufacturing in the world. Only 30% of steel is manufactured, coming from remelting scrap. So 1.4, 1.5 billion tons of steel manufactured this way by mixing iron ore with cooking coal. And- and that results in 9% of all the CO2 emitted on earth today. So it's a big chunk.
So as- as if- if we want to decarbonize and move on to less CO2 emissions, that's one of the most important industrial components to solve. And again it's not just 9% of all the industrial CO2 emitted; it's 9% of all CO2 emissions. So it's a very large amount, and that's why it is very relevant.
Jason Jacobs: I feel like one of the justifications for things like offsets existing is because of certain sectors that are big sources of emissions that are hard to decarbonize, that will take decades, even in the best-case scenarios. And steel is one that gets brought up frequently. How do you respond to that? Will it take decades to decarbonize, even in the best case? And what is it about decarbonizing steel that makes it so challenging?
Tadeu Carneiro: Well, it is arguably the most difficult sector to decarbonize. You know it is very hard. The incumbent method is being developed for. You know, years and years and hundreds and hundreds of years. So it's a very efficient way, you always have very cheap raw materials in order to do that in an efficient way to get your steel manufactured. To eliminate carbon to the equation, you have a few options right? So that's want makes it very difficult. Electrons, so electricity is one of the options, so it is the most effective one as we see it. And probably the only one that can solve the whole problem of almost two billion tons of steel per year, you know it’s being catalyzed by all the investment that's being done in- in generating green electricity as well. So you obviously need to have green electricity; otherwise, it defeats the purpose. But with all the investments in wind and solar and sustainable ways to get electricity, greener electricity, that makes you think of being possible to use electricity as the reducing agent to transform iron ore into steel. But it's very difficult to do that because it's, you know, being a tough technology. It's not something that you can iterate very, very simply. So, we are at the stage of getting our pilot plant developed in a way that we will, on a smaller scale but semi industrial scale, get to manufacture steel continuously from iron ore, using our technology before the end of next year. So that's where we are today.
Jason Jacobs: Unh, and I know the company's been around for a while, and you've raised quite a bit of capital. Can you just set the stage for the audience in terms of where you're at today from a business milestone standpoint? How much capital you've raised, and also the sources of that capital and feel free to talk about the individual firms. But I'm most interested in was it equity, was it debt, was it non dilutive capital and just how you think about fundraising for this type of deep tech startup in general.
Tadeu Carneiro: Yeah no very interesting. The company was formed in- in 2012 and it physically started to operate in 2013. The first four years, five years of the company was just going from the coffee cup size laboratory to a semi industrial model. And that was done to test different metallic systems, not just steel. So that was the first phase, and then during that phase we used to out of grants, you know Government grants. But it was a very small setup, so we were six or seven employees. So in 2017 we went for series A, and late last year, early this year we closed series B. So we, you know and in total we raised so far closed to 100 million dollars and series B [crosstalk 00:11:31].
Jason Jacobs: And still pre-revenue correct?
Tadeu Carneiro: it's still pre-revenue, that's correct yes, yes.
Jason Jacobs: Unh wow [crosstalk 00:11:37] that's amazing. that's such a big challenge of these D tech companies in general because this technology needs to exist. And the sector has to get decarbonized.
Tadeu Carneiro: [crosstalk 00:11:45].
Jason Jacobs: But gosh that sounds like a lot of risk.
Tadeu Carneiro: That's exactly right, you know and this is an interesting how the thing evolved. In 2018, , you know due to the background I went to visit the steel companies and it was a totally different scenario at that point compared to what it is today. It seemed to be too early for them to go on with that. The steel industry as you know it's sort of a very conservative industry. You know some think it's the most conservative and they were skeptical our technology and at that point to leave the process. So we thenshift gears and we found BEV Breakthrough Energy Adventures, who really liked the idea because they were you know they- they- they came as an entity to really look for those who could take care of big chunks of CO2 emission. And so they- they led series A BEV with also the participation of prelude ventures, on that [inaudible 00:12:58] was funded from the west coast.
The engine built at the MIT and also OGCI, oil and gas carbon initiative, which is a consortium of the 13 largest oil and gas companies. So that was the composition of series A. We were oversubscribed, compared to what we needed at that point. And then when came series B, late last year and early this year, we were able to get the confirmation of this four, in initial shareholders that they came- they came strong, again for series B. And we added six other shareholders. And the six were PEVA, which is the [inaudible 00:13:50] money, and also another consortia from North American EIP supplying electricity IP.
And then we go out, also at the private side of fidelity, to join, who doesn't need any introduction. And then, two of the four largest iron ore suppliers in the world, so Valley from Brazil and BHP from Australia. And BMW at the end of the chain. So we end up with a syndicate of investors, 10 giants who really want this to happen, and are backing us to get to the final- the final journey.
So the next milestone for us, as as I briefly mentioned before is to get our pilot plant here in Massachusetts, running continuously to produce steel, on a- on a semi industrial basis with real life iron ore. And, and then from that point on, we will build the first industrial sale. We are already selecting sites to do that. We expect to be able to commission an industrial sale, the first one in 2024 and then, by mid decade we should have then the first demonstration steel plant, with some, you know got the necessary partners to build the first demonstrative plant by mid-decade. So fairly aggressive timetable. But we really excited and we believe that it's very doable.
Jason Jacobs: So I have a three-part question. One is, who do you envision the ultimate customers are for the Boston Metal offering? , two, how much involvement do those customers have in the early phases in the years leading up to you being revenue generating? And then three, what's the value proposition to them, and how much, if at all do you talk about climate?
Tadeu Carneiro: Yeah, well sure, very- very good. So herethe thing. So the final customer will be steel manufacturers. So this technology can be plugged into the integrated news, so today they have molten steel coming from a furnace that's called a basic oxygen furnace. So they would produce a pig iron in a blast furnace, transports to this BOF furnace and get their liquid steel. Our sales would replace all this equipment that is carbon intensive and emitting lots of CO2 and then we would give you an even better liquid steel to go into the [inaudible 00:16:47] that exists today to a caster, into the rolling mill roll.
So you have that possibility. You can also get our sales manufacturing the liquid steel plugged into mini mills that recycle scrap and then have our liquid steel being added complementing the charge of the EAF furnaces in their process. That's also possible, but then there is another one that can disrupt it- disrupt the industry as well. Which is the following, if you have the iron ore suppliers have electricity at the mine, you can bring the sales to the mine and they can ship a metallic, instead of shipping iron ore. So that's also another way that the process can go. So to take care of who would be the customers here. We don't see ourselves as steel manufacturers, or plant builders. So the business model will be one based on licensing the technology and getting ourselves associated with- with partners that- that can make the technology being implemented very efficiently and- and quickly.
So but- but [crosstalk 00:18:06].
Jason Jacobs: And- and these are primarily the partners who, um, who are making steel the traditional way already?
Tadeu Carneiro: It's- they are very interested now. So their interest just formed amazingly in this four years. I mean there's this since one year now they are very interested in all of them of [inaudible 00:18:24] are following what we are doing very close. So we are, talking to all of them. And we [crosstalk 00:18:30].
Jason Jacobs: [crosstalk 00:18:30] why do you think they're becoming interested now? What’s motivating them?
Tadeu Carneiro: [crosstalk 00:18:34] oh there's the pressure on them is amazing to solve the problem of CO2 emissions. I mean you've seen the most important ones the largest one of steel manufacturers in the world they already making the pledges to- to become carbon neutral by 2050. And they need the roadmap and they need a very effective technology to make them accomplish that. And we believe that our technology is the technology that we [inaudible 00:19:09] prevail in or- or at least we will be the dominant one. I mean there are several other ways to think of the problem, one [inaudible 00:19:19] we exist. But ours will I believe be the most effective and the most competitive one, once we become commercial. So they are very, very interested.
There is an- there is an aspect of our technology that I would like to emphasize, that caught the attention of- of lots of them. Or- or all of them, which is the following, the [inaudible 00:19:42] that you have, those- those impurities that you have in the iron ore at the mine. They are oxides like, simple oxides like alumina, silica, calcium, magnesia that are part of the electrolyte in the cell. So therefore, you don't need to process the iron ore in order to add them to our cell, first of all. Because everything is going to be molten, and what is impurity in the iron ore is actually part of the electrolyte in our cells. So you don't need to have very rich iron ores in order to get your steel the way you need when you go in a direct reduction way for example, with using natural gas or hydrogen as a possibility as well. So this is what makes our technology very competitive and- and everybody interested to see when we ware going to be commercializing this. we have a world conspiracy in our favor to get this, to be successful as soon as possible.
Jason Jacobs: How important is mission alignment when it comes to investors and said another way, is there a role for greedy capitalists in decarbonizing these hard to decarbonize these sectors like steel or- or do you really need to be doing it more because it's the right thing to do for society?
Tadeu Carneiro: Well it- it- as- as I- as I mentioned to you briefly, telling a little bit of our history. It is started with the latter, I mean we have to find those who believe that something had to be done because it's- it was the right thing to do. But now it's becoming clearer that at least in our case this is very competitive, if we had electricity according to our calculations, and- and our targets, if we have electricity priced below $30 per megawatt hour, we can be competitive with the incumbent today without a carbon tax. So- so this is very appealing and very important in order to make this happen.
Jason Jacobs: Tadeu, what do you worry about the most if Boston Metal fails, in hindsight what do you think the reason could be?
Tadeu Carneiro: Well if it's- if it- if all of a sudden society abandons the idea that CO2 is important and- and therefore I that's, you know that's not gonna happen. It is important, I don't need to convince anybody here as you as you made clear in your introduction. We have to find the solution to solve, to abate CO2 emissions from steel manufacturing. Tthere is an amazing demand for green steel, and we can see that and we've been approached by, you know the end users. They- they all want to have green steel in their solutions, and therefore the pressure is on us to deliver the technology, commercially and I don't see a problem you know getting to the end of the journey.
It is obviously a company that has an energy based component so whether we are going to take five years, or four years, or six years, that's what is the variable here in order to get, the process all the risk and- and scaled up. But we already proved the concept on the lab scale. So it's a question of system engineering to get to the end of the journey.
Jason Jacobs: Tadeau we have time for one last question and that's just for anyone in the audience who is trying to find their spot in- as maybe an entrepreneur, or an operating executive or in some type of functional role in startup, but wants to work in climate. What advice do you have for them as they try to sort through the- the right place for them?
Tadeu Carneiro: I mean we already had this environment mapped out very well. There is a tendency to go after those problems that represent a big chunk in CO2 emissions. So the idea here is to be able to show how your piece in the puzzle impacts, in a big way, the whole puzzle. You know sometimes it's not easy to see that big impact. So my suggestion is that you understand the problem you are trying to solve and explain how solving that problem will impact the whole puzzle. So that’s the way to go.
In our case it's it's easier to show the problem, I mean it's- you can calculate very easily you know the amount of CO2 that's coming out of the two billion tons of steel that is manufactured every year. I mean some- some other ideas may be more difficult to show, the impact that they have in the whole picture. But- but that's the key thing is, is to- is to emphasize and show how important it is.
Jason Jacobs: Great well I wish we had two extra, three x the time we've had today, but super interesting discussion, important work that you're doing at Boston Metal and I wish you and the whole team every success.
Tadeu Carneiro: Thank you so much, thank you for inviting us to participate and looking forward to participating again to show our progress, thank you.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at Myclimatejourney.co. Note that is CO, not .com. Someday we'll get the .com, but right now, .co. You can also find me on Twitter @jjacobs22 where I would encourage you to share your feedback on the episode, or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on Itunes. The lawyers made me say that, thank you.
