Designing Smart Heat Pumps That Work for Every Room with Quilt
Paul Lambert is the Co-founder and CEO of Quilt, a company designing smart ductless heat pumps for residential heating and cooling with intelligent room-by-room controls. Quilt was founded in 2022 and launched in the San Francisco Bay Area in spring 2024. Since then, they have achieved hundreds of deployments and are preparing to expand to their next market in Southern California. Earlier this year, they announced a $33 million Series A financing round co-led by Energy Impact Partners and Galvanize Climate Solutions, following a $9 million seed round in 2023 co-led by Lowercarbon Capital and Gradient Ventures. MCJ is proud to have invested in both rounds through our venture funds.
Before founding Quilt, Paul led sustainability efforts at Area 120, Google’s in-house incubator for product ideas developed during employees’ 20% time. He previously held product roles at Google and Twitter and began his career by founding, running, and exiting a startup called LearnDot.
In this conversation, we wanted to understand Paul’s product mindset—how Quilt works, the assumptions he’s validated along the way, and how he’s approached the challenges of building the business.
Episode recorded on Dec 17, 2024 (Published on Jan 23, 2025)
*Due to the recent fires, Quilt will now launch in Los Angeles in the Spring of 2025.
In this episode, we cover:
[2:01] The origin of the name Quilt
[3:32] An overview of Quilt’s product stack
[5:37] Quilt’s installation process
[8:24] An overview of mini splits
[10:56] How Paul and his co-founder decided on ductless mini splits
[17:09] Paul’s path from design spec to prototype
[18:47] The company’s progress to date
[21:38] Consumer sentiment about heat pumps
[23:51] Seasonal changes that drive consumers to purchase Quilt
[27:16] Paul’s biggest learnings in building the company
[32:16] Design considerations in Quilt’s product
[34:59] Workforce development and other inertia challenges
[40:51] What’s next for Quilt
[45:52] Where Quilt is hiring, plus its newly launched merch store
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Cody Simms (00:00):
Today on Inevitable, our guest is Paul Lambert, co-founder and CEO at Quilt.
(00:06):
Quilt designs smart ductless heat pump for residential heating and cooling that offers intelligent room-by-room controls. Quilt was founded in 2022 and launched in the San Francisco Bay Area in the spring of 2024. Today, they have hundreds of deployments and are expanding imminently to their next market in Southern California. They announced a $33 million Series A round of financing earlier this year, co-led by Energy Impact Partners and Galvanize Climate Solutions, building on an earlier $9 million seed round in 2023, co-led by Lowercarbon Capital and Gradient Ventures. And MCJ is happy to be an investor in each of these rounds via our venture funds as well.
(00:51):
Prior to founding Quilt, Paul ran sustainability efforts at Area 120, which is Google's in-house incubator in which employees work on 20% time product ideas. Prior to that, Paul held product roles at Google and Twitter, and he started his career by founding, running, and exiting a startup called LearnDot.
(01:13):
Given Paul's product background, I wanted to spend time in this conversation getting into his product brain and understanding how Quilt works, what assumptions he's had to validate along the way, and how he's approached the problems he's faced as he's built the business. But before we start, from MCJ, I'm Cody Simms and this is Inevitable.
(01:37):
Climate change is inevitable. It's already here, but so are the solutions shaping our future. Join us every week to learn from experts and entrepreneurs about the transition of energy and industry.
(01:57):
Paul, welcome to the show.
Paul Lambert (01:59):
Thanks, Cody. I'm very excited to be here.
Cody Simms (02:01):
All right. So first question, where did the name Quilt come from?
Paul Lambert (02:05):
The original name of the company was actually Abri, which is a French name for shelter. I'm French Canadian and I think I was being inspired by Nest a little bit, but I knew it wasn't permanent. And we actually knew we were building a consumer brand and I have a lot of strong feelings about naming, including that it should be something that is short, that you can see on a billboard while you're driving by or on the radio. You hear it and you know how to spell it. I generally think nouns are better than any other type of words because you can visualize it so it syncs your brain better.
(02:29):
But I didn't actually have the name Quilt. And we actually worked with a naming agency early on, so we're spending money on naming agency when we were on a pre-seed, really great guy named Jay who's in the East Bay, and we landed on Quilt. And when we found it and it just started to pull back all the layers, it was just so obviously it.
(02:45):
So it's a noun. What is a quilt? It keeps you comfortable. It keeps you warm. More importantly, it's a bunch of small pieces that all work together to keep you warm, which is what our system does.
Cody Simms (02:54):
Ooh. Okay, I see where you're going there.
Paul Lambert (02:57):
Can I tell you? There's even more layers than that. So quilt is also, it's kind of homey and kind of more feminine than it is macho. We were looking at the other brands in space like Tesla that had this macho vibe, so it was differentiated from that. But then the biggest idea of all is that in many cultures of the world, quilts have been made by often the grandmothers of the family to pass on to newborns and kids.
Cody Simms (03:17):
Yeah, I think of it as a family heirloom kind of word.
Paul Lambert (03:19):
Exactly. And the whole point of this company is to pass on a better world to future generations. That is literally the point of the company. I have a quilt that was made by my great grandma. And so it just encapsulates this idea of long-term thinking and trying to pass on a better world.
Cody Simms (03:32):
Super cool. I'm glad I asked the question. That's great. Let's maybe dive in straight into the product-y stuff. That's where I tend to nerd out a little bit. You mentioned a quilt is this patchwork of different components that come together, and I think interestingly the way your product works, and if you go to your website it's right and front and center, you have these four main components of the Quilt product stack today. Can you just describe each of those and how they work in concert together?
Paul Lambert (04:01):
So we have four. Well, it's actually more like three physical products. There's an indoor unit that goes inside whatever room it is you want to condition in your house. There is an outdoor unit that obviously goes outside. And then there's something called the Dial, which is our smart thermostat. So really it's a complete HVAC system or HVAC system. If you were to compare it with a central AC, you would have also an indoor and an outdoor component if it was an AC, but then you'd probably also have a smart thermostat like a Nest or an Ecobee or something like that. So we're that entire ecosystem but in a deeply integrated product, which of course allows us to do a lot of unique stuff because we can integrate those products pretty deeply.
Cody Simms (04:38):
And these units, are they all actually physically connected to each other, or is there anything that's virtualization in terms of how they engage?
Paul Lambert (04:46):
The indoor unit and the outdoor unit are physically connected via refrigerant, piping, and power. The way heat pump works is, right, it moves energy between two spaces. So we're moving it from the indoors to the outdoors or vice versa via a refrigerant fluid. That's a physical transfer. The Dial speaks to the rest of the system through Bluetooth or Wi-Fi or also thread on it, but it's all wireless so there's no hard-wire. But when you zoom out a level to the Quilt's level, and we have multiple of these within a home, they network again through soft networking like IP networking. There's no physical connection between the different outdoor units, but they do all network and map the home and work together via the internet.
Cody Simms (05:22):
The macro system, kind of like a Sonos, but it would be like the Sonos if the Sonos was in the amp wired to speakers.
Paul Lambert (05:28):
Exactly.
Cody Simms (05:29):
In terms of a little mini system.
Paul Lambert (05:33):
Exactly. So you think of a system, a physical system in each room, and then the rooms are connected via wireless networking.
Cody Simms (05:37):
And in terms of this, sort of the indoor outdoor connection, you mentioned that it's actually a physical piping. So are you needing, when you're installing Quilts, are you drilling into walls and running piping between walls, et cetera, particularly if you're trying to get to the far inside of a house. What does that look like?
Paul Lambert (05:55):
Yes, what you said. And there is some construction involved, installation involved. Usually what you're doing is you're installing on an exterior wall, so the other side of the wall is the outdoors and you punch straight out the back. And then there's a conduit that kind of looks like a gutter, like a drain gutter, and everything gets packaged into there. But we also paint it after and make it look pretty nice. Sometimes people want their units installed or they need to be installed on interior walls, in which case it is a little more complicated. We end up running it through the wall and then fixing the drywall afterwards, though that's fairly rare. Most of our installations take between one and three days all in just so people have an order of magnitude in their head. It is far less from replacing your ducting. Ducting is like open heart surgery on a house.
Cody Simms (06:36):
I have done a full ducted heat pump, entire attic renovation at my house, and it was a major project.
Paul Lambert (06:44):
Including the ducting or just the air handler?
Cody Simms (06:46):
I did the ducting. I did the insulation. I did the attic ceiling.
Paul Lambert (06:48):
Wow.
Cody Simms (06:49):
I did the heat pump.
Paul Lambert (06:50):
And that's the actual like-for-like, doing the whole thing. Yeah, it's a big project.
Cody Simms (06:53):
The challenge there was I didn't love the look of the normal white ductless heat pumps, the non-Quilt version of these boxes that would be all over our house. And yet our duct work was old and it wasn't really right size for a new heat pump that I wanted to put into our home, and our insulation was terrible and our home was really drafty. And so the installer basically said, "Well, if you want to do a ducted system, you need new insulation. And so if you are going to put new insulation in, well, ideally you put insulation over the duct work. And so you can't really stepwise this project. You just have to do it all at once." And maybe I got sold a bill of goods, I don't know, but it was a major attic renovation.
Paul Lambert (07:39):
Yeah, that sounds about right to me. And actually, ducting losses is very real. It's 30% on average, 30% off the top in terms of your energy usage. So yours is almost certainly less if it's new duct with insulation, so you can feel good about that.
Cody Simms (07:51):
The one challenge is I still do have one room that gets hotter than all the other rooms, and it's super annoying that I did spend a good chunk of change on a renovation and I don't have room by room control, which if Quilt were around when I would've done that renovation, which it was not, then yeah, that value prop is quite nice. I've costed it out and it's probably comparable, including the ducting work I did if you factored in re-insulating the house and doing all the ceiling work, which was part of the project plan that I took on.
Paul Lambert (08:18):
You could still put us in that one room.
Cody Simms (08:19):
That's true.
Paul Lambert (08:20):
One of the nice things about Quilt or any ductless system is you can progressively adopt it.
Cody Simms (08:24):
Yeah, interesting. And so given that I have a little bit of experience doing this kind of home reno thing, but I don't have a ductless system, some of the words that you hear thrown around, I want to level set on a few of them because people may not quite understand it. Can you define the word mini split and what that is and what that means?
Paul Lambert (08:42):
So there are two parts to a heat pump, one that absorbs the energy and another one that releases the energy. And that could be in a single box and those are called unitary systems. Think of a window unit, that's a unitary system, or something that the hotel radiator thing that pops to the outdoors. The most common type, the AC, or like a refrigerator is a unitary system. The most common AC in the US, it's used with a central ducting, is a split system because there's a interior air handler that does the cooling side and then there's the outdoor unit. Sometimes people call it compressor or the condenser, and that is the other side of it. So it's split between those two things.
Cody Simms (09:15):
That's, just to be clear, that's air conditioning language. Furnace is different language.
Paul Lambert (09:18):
Yes, this is air.
Cody Simms (09:19):
In a conventional system, a non-heat pump system.
Paul Lambert (09:22):
Right. I'm talking about air conditioners because air conditioners are heat pumps from a technical perspective. They're half broken heat pumps is what I like to call them. AC is just a, yeah, it's a half broken heat pump. It's a pump that only works in one direction. So a mini split is taking that same idea but shrinking the whole thing, which is mini. So instead of it being a big air handler that goes in where your furnace is, it's a smaller thing that can just go up on your wall. Sometimes they go up in the ceiling and they have a fan in there and they have a coil. They have all the components just shrunken so that they're sized to cool just the room versus the entire home. So that's where the name mini splits come from. It applies to air conditioners. And then when air conditioners grew their second leg and realized that they could heat instead of just cool as well, that name just stuck.
Cody Simms (10:03):
Got it. And it doesn't have to be the traditionally ugly white box head thing. I have a ducted mini split in my home. So the actual mini split portion is up in my attic somewhere, and that's basically routing air around the house. Is that the right way to think about it?
Paul Lambert (10:18):
Sometimes we're called short ducts. So you have the air handlers hidden in the attic and then there's the really short duct just to the room. And that's actually a way that you can get the benefits of the room by room control of a mini split with the aesthetics of a central ducted system.
Cody Simms (10:31):
Thanks. Good level setting. And then in a conventional house, you have your air conditioner and your furnace, which are totally different systems. They may share the same duct work, maybe, maybe not, but they're actually different physical setups, one obviously typically using natural gas and heating the house and the other using electricity and only cooling the house, and you're having to flip between the two depending on time of year.
Paul Lambert (10:55):
Correct.
Cody Simms (10:56):
We talked a little bit about how you named the product. Let's dive into how you came up with the product. So the story I've heard you tell before is you were on parental leave and you were thinking through what your next project would be and you went down the rabbit hole of heat pumps. How did you decide a ductless mini split system was the thing that needed a glow-up, so to speak?
Paul Lambert (11:19):
I was on that leave thinking what was next, and then I actually saw a tweet back when it was called Twitter from someone who said, "Heat pumps are the climate solution you've never heard of." And then granted this was two and a half years ago, so it was pretty much true at the time. And I was like, "What are heat pumps?" So I started reading about them. And as it happened, I was in the market because I had an office that was uncomfortable in my backyard. I had a space heater and so-and-so. The idea of something I could install more permanently, it was really attractive.
(11:44):
And so I came across these mini splits. And I just had the same experience that a lot of other people have had, both around how to buy one and just being hard for someone to sell me one. But just to focus on the product side, which is your question, i I t just struck me that these things are really unique in that they can be put in every room of the home where you can't do that with a furnace because you wouldn't put a fire in every room of your house. I've said this before, but it's obvious to say. But what that does is it enables a distributed architecture as opposed to a central architecture. And this is a pattern I've seen we've seen in technology over and over and over again.
Cody Simms (12:15):
A very Google-y recognition of you.
Paul Lambert (12:17):
Yes. Yes, it is. Or very computer science-y recognition, but often you can take a centralized system and make it more distributed and you gain a lot of benefit from that. And I think it occurred to me that that could happen here and you would be able to do things that you just couldn't do before. And that was a key premise to be able to create this product that wasn't just better for environmental reasons, but it was just an upgrade to people's lives, because I fundamentally believe that's what you need to create. And there needed to be something that was going to enable that value creation.
(12:48):
And so I don't actually remember what the moment was where I was like, "Okay. Well, we can get better efficiency and better comfort with this room-by-room control." I think it's self-evident, but I did know we could network them and that they didn't have a lot of this I would say cutting edge. I don't even know it's called cutting edge, but just good quality consumer experience technology built into it. And I knew for a fact we could do that. And if you did it all, it would be a pretty great experience.
Cody Simms (13:10):
I can tell you any 2000s era hotel room I've stayed in or Airbnb that has a legacy system, these ugly white rectangular boxes, I don't know what the buttons on the remote control actually mean. There's literally these diagrams on there that I don't even know what button to push based on what I want it to do. It's crazy.
Paul Lambert (13:30):
I still don't.
Cody Simms (13:32):
You looked at the product set. You said, "Hey, there's an opportunity to do something and we can improve by doing room-by-room networked controls." What did the actual product design process look like? You and Bill and the team as you were getting going, how did you start drawing this thing out?
Paul Lambert (13:48):
A key part of the vision was that it had to be good-looking and that we had to capture the imagination of folks to not just say, "Hey, we're going to make a better looking base," but I actually wanted to show it to people. And so the first thing I was going to do to recruit seed investors, pre-seed investors as well as the team, was work with some industrial designers. Although I'd never done that before in my life, I just assumed they were the right people to come up with some concept renderings that we thought were physically viable, but really get people excited when they saw that. I've had this experience in software and when I was in Google and stuff, if you can put a compelling vision in front of people, it'll rally, folks.
(14:22):
So I actually wrote a doc, a product definition doc that was intended to be essentially specs for an industrial design request where I was going to give this to these firms and say, "Hey, can you respond with some concepts here?" But to do it, I outlined why the product need to exist, who the customer would be, what problems we need to solve, how success would be evaluated, just everything I would expect in a good quality product doc because that's just what I've been doing for the last eight years of my life. And that inadvertently became the fundamental recruiting tool and pitch deck.
(14:52):
So shared that doc with Matt and Bill and some other folks. If someone was interested to join the team, shared that doc with them. If anyone was interested in investing, it also became our first pitch deck. I never had a pitch deck for the pre-seed. It was just that doc. And particularly with Bill and Matt, I'll start with Matt.
Cody Simms (15:08):
Maybe name your co-founders and backgrounds and all that.
Paul Lambert (15:10):
Oh, sure. So my two co-founders here are Matt Knoll, Matthew Knoll, and Bill Kee.
(15:15):
I'll start with Matt. So he's our CTO, chief technical officer, and I had met him through Google briefly in that he had been the co-lead of actually the largest investment Area 120 ever made, which was a robotics, a kid's robot project that was actually very cool. And then he had moved on to X. It's not called Google X anymore, but X, to lead hardware. He was a hardware lead for an ocean sustainability, Moonshot, which is cool, which was basically robots underwater to make salmon farming more sustainable called Tidal. And as I was sketching out this product vision, obviously I needed a really good hardware experienced technical founder. I'd never done hardware in my life and I knew if I was an investor looking at the founding team here and evaluating what their skillsets would be, and it was me as a solo founder, that was not going to fly.
(15:59):
And so I was like, "Who's the best hardware leader I know?" And as it turns out, Matt was open to new opportunities, had done entrepreneurial work before and was interested in startups, and was my neighbor. So not my exact next door neighbor, but a few blocks down, close enough that we could go for walks in a park together. And this was actually how it all came about. I presented the doc, asked him for his feedback, he was advising, and then it all kind of came together.
(16:22):
And then with Bill, he was going to be an angel investor in that pre-seed round, but he had pitched me when I was at Area 120 basically a vision to have Google create a vertical search around home electrification, including heat pumps. He had just gone through his home electrification journey where he had a ducted furnace system at his San Francisco house that was really old. It was breaking. And to put in a central heat pump, he'd have to redo all his ducting, and it was this really tall, old Victorian home, which is going to be a total nightmare to redo the ducting.
(16:48):
So he did all mini splits. He had put seven mini splits of his house, seven Mitsubishis. So he knew it intimately. He knew the pros and the cons. And he was really excited to invest, but he was also looking for his next thing. And we were just batting ideas around and he was just such a great thought partner that I just remember I was on the phone with him, I was like, "How about you don't invest and you just join the founding team?" And he was like, "Let me think on it." And then a few days later, he was in.
Cody Simms (17:09):
Where did you go from there? You decided to start taking this design spec and turning it into a prototype? What was the path?
Paul Lambert (17:17):
I knew that I was going to need some funding for this. I was not in the position to build a hardware startup of my own dime, and so I was backing out in terms of what would I want to see if I was a seed stage investor to want to invest in a company. There was a few things. We did do that rendering projects with the industrial designers. We were able to show that these products could exist and could be pretty appealing. And then we did user research as well. We did both problem side research. You just talked to homeowners. What did you... Different parts of the funnel. You talk to people who are interested in buying HVAC, talk to people who just did, people who just have many splits, and just understand the landscape, what the problems are, how they went through the purchase experience.
Cody Simms (17:52):
Mostly just word of mouth through friends and family and stuff like that at the beginning?
Paul Lambert (17:55):
No, let me back up. Using that initial vision doc and honestly my personal network, we did a pre-seed round that I think we ended up raising $600,000. With that money, we spent the money on... We spent 60K of it on an actual user research, market research firm where they actually recruited participants, did interviews, all that stuff.
Cody Simms (18:15):
Got it.
Paul Lambert (18:15):
We also bought the quilt.com domain on a payment plan, which seemed like a crazy idea at the time because it's very expensive, but I'm really glad we did it. We paid the industrial designers to do the concepts. We weren't paying ourselves at all yet. It was just these kinds of service providers. That was over the summer. And then right in September of that year, 2022, we kicked off the seed round having shown that there was market demand, there was a real pain to solve, that we had a product that was pretty compelling compared to the status quo today, and that we had a pretty good founding team. At least I thought we had a pretty good founding team. And MCJ of course invested at that time, so I wasn't the only one who thought that fortunately.
Cody Simms (18:47):
We agreed with you and continued to invest in your Series A that you announced earlier this year as well. From a funding perspective, you guys have done quite well for yourselves at least so far. And from a product perspective, you've also, you're live, you're driving installations in I think the Bay Area of San Francisco. Maybe talk a bit about where the company is today, and then I want to really dig into what you've learned along the way.
Paul Lambert (19:13):
Where we are today is we are rapidly accelerating installations. We are rolling out metro by metro. I really do want to get Quilt on everybody's hands right away. A big, big part of what makes our experience special is not just the product. It's the way that we sell it and install it and the operations around it. That is just a physical thing that you got to build city by city. And so we are launching in Los Angeles next month, coming very soon, last week of January. Super excited about that. And then we're planning to do a bunch more cities in 2025. So moving into 2025, that's really we're shifting from a product development early-stage company to really a growth company. We need to grow into that opportunity ahead of us given that we have a product and a business model that is working. So yeah, that's what we're doing.
Cody Simms (19:57):
Are you able to say roughly how many units are out in the wild today, give or take?
Paul Lambert (20:03):
It's a couple of hundred, off the top of my head. It's rapidly accelerating. Every week, we have a KPIs meeting, performance indicators, and we have that running total. The constraint to our growth is the supply side of labor. So there's two components to supply, really. It's the hardware and then also the labor, and then of course the demand of the customers.
(20:35):
We've gone from having our very first fully paid install that wasn't a beta, it wasn't anything, just completely normal, it was October 1st. So that's, again, when we're speaking now, it's about 10 weeks ago. We had one crew. Then two weeks after that, we had two crews. And a few weeks after that, we had three crews and we have four crews and as well as some subcontractor installers that we trust to do great work. So we're rapidly growing up that supply side.
Cody Simms (20:56):
So right now the learnings, it sounds like, are really about scaling operations, scaling installations, scaling workforce development. How do you do that quickly? Let's come back to that because what I want to understand is from a product perspective, from a consumer sentiment perspective, what have you learned so far? You've installed a few hundred of these. So you've got a little bit of an early adopter user base to begin with. Bay Area, a few hundred, probably a lot of people that are in and around your network, though I know you guys have done a lot more marketing than that. But what have you learned in terms of what drives purchases? Is there a primary purchase motivator that gets people to click the checkout button on the Quilt website?
Paul Lambert (21:38):
It depends what part of the funnel you're talking about too, as to what people need, what information and when.
(22:22):
What is driving our top of funnel really well is I think it's the obvious thing. So there are people who genuinely care about the aesthetics, and we're unique in that world. The other one that is fairly big is the room-by-room control. So our most common comparison point is a central system, is someone who's looking usually at a central heat pump.
(22:40):
Yeah, our biggest selling features there are the room-by-room control, and often people have moments of their life that really make this acute. So the classic one is a new baby because it reshuffles the house and all of a sudden there's an occupant in a room that was probably not an important room before that is now more important than anything else ever in that house. And if that temperature isn't perfect, new parents will get pretty anxious about that. So often, those life moments will do that, or just renovations. Someone bought a new house and they're investing into refurbishing it. So things like that have been really good for us.
Cody Simms (23:08):
Are you seeing a lot of intent on, "Hey, I have this one or two rooms in my house and I'm going to start with this"? Or are you seeing a lot of people saying, "I'm trying to redo the HVAC throughout my whole home"?
Paul Lambert (23:17):
It's about two-thirds whole home and one-third call it point solution where usually it's just one. So it's like in your case, it's one room. It's one room that's your problem room or it's the office or it's the whatever. We have a couple twos, but usually it's either one room or the whole house.
Cody Simms (23:31):
In terms of what ultimately is driving someone to even think about this in the... I mean, you talked about how they think about you relative to a central system or something else, but if you're thinking heat pump or Quilt in the first place, is it air conditioner? Is it heat? Is it energy savings? Is it getting off fossil fuels? Is there something that is bringing people to you in the first place?
Paul Lambert (23:51):
So of course, very seasonal. We're talking about literally seasons. So there's a lot more cooling conversation obviously in the summer, just to say it, but what we find is that in the summer, a lot of people buying older houses that don't have AC and are looking for it first time, AC is one of the first things people buy once they have some disposable income. And so this is at a global trend, AC has been a very steady, dependable growing thing for decades and probably will be for decades as the GDP and welfare of the world continues to grow, but even at an individual level or a family level. And so that drives people into the shopping experience anyways, and then we show up and we can comparison shop there.
(24:28):
Where we show up really well in that scenario is that we have the leading efficiency from anything. So from a CO2 score, we set the record for a two-zone heat pump. In all categories, we're extremely high. So that's often what people would be looking at when they're comparing, or in some cases they actually don't need to do the whole house. Maybe they have a couple rooms they're really trying to solve on the cooling side. And then that's often a nice, almost like Trojan horse into the heating side. It's like if you're buying Quilt and you're getting all this cooling, do you want to get some rebates and reclaim your closet space and just rip out your furnace at the same time? It's actually been surprising on how much people are excited about the space reclaiming, that there's not a closet filled with a furnace anymore. They can use it for storage or whatever.
Cody Simms (25:06):
If you think about the painkiller versus vitamin analogy, the painkiller is sadly the world is getting warmer. I need AC in this part of the world that I didn't used to need it in, or I'm buying a house and I grew up with AC and I really don't want to live without it. Oh, and then the co-benefit is you can rip out your fossil fuel powered furnace that is responsible for these issues in the first place. But for you guys to figure out the marketing angle of that and the story, because it's not just that. It's like, oh, well if you need to replace your furnace because your furnace just burned out, people need to be able to find you for that use case too.
Paul Lambert (25:41):
Yep.
Cody Simms (25:41):
It's an interesting needle to thread for you guys.
Paul Lambert (25:43):
Totally. And it does change a lot by the season. Sometimes people talk about climate adaptation solutions or mitigation solutions. In the summer, we're an adaptation solution. In the winter, we're a mitigation solution, which which was the year. But one of the interesting channels there is people do make a lot of these purchases when something starts to break and they're calling existing HVAC contractors right now. But we're not operating like a regular maintenance. We're not out there repairing furnaces. So that is actually a new channel that we're looking at working through partnerships so that we can start to get into that flow.
Yin Lu (26:14):
Hey, everyone. I'm Yin, a partner at MCJ, here to take a quick minute to tell you about the MCJ Collective membership. Globally, startups are rewriting industries to be cleaner, more profitable, and more secure. And at MCJ, we recognize that a rapidly changing business landscape requires a workforce that can adapt.
(26:33):
MCJ Collective is a vetted member network for tech and industry leaders who are building, working for, or advising on solutions that can address the transition of energy and industry. MCJ Collective connects members with one another, with MCJ's portfolio, and our broader network. We do this through a powerful member hub, timely introductions, curated events, and a unique talent matchmaking system, and opportunities to learn from peers and podcast guests. We started in 2019 and have grown to thousands of members globally. If you want to learn more, head over to mcj.vc and click the membership tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (27:16):
What surprised you the most so far? What has been the biggest learning as you've been building the company? Start with the consumer behavior side, the thing that surprised you the most about what drove consumer interest, and then we can talk about what else has surprised you about running this business.
Paul Lambert (27:29):
This is maybe a little bit of a coy answer, but it's true that we've had to pivot a lot less than I expected. I think I used to be a subscriber to the your first product idea is always totally wrong and you're going to change your business a bunch of times, and it's still early days, we may still change a bunch of times. But so far if you were to go back and look at that doc that I talked about, that was the very first thing, it's pretty similar to what's out there today. So that's been surprising to me actually that it's worked that well.
(27:54):
There was a decision that we made early on that I completely credit Matt to, which was that we weren't going to try to build this all ourselves here. We weren't going to build a factory. We weren't going to own the entire manufacturing stack. There are people around the world who are very, very good at building mini splits and ACs, heat pumps, and very few of them are in the US. And if we could partner with an established manufacturer and just work with them to help maybe get them entrance to the US market, but also we can benefit from their decades of experience, we get to market a lot faster and a lot more affordably. And that totally panned out too.
(28:28):
So I really learned from my experience that how much key supplier partners are really a huge part of a success in the hardware industry, at least consumer electronics hardware. I think if I was building a car, it might be different.
(29:35):
And what would you say are the biggest things you validated in the product that were a huge unlock? You're like, "Oh, if we can get over this hump, if we can prove that either it works technically or it works operationally, this is going to unlock a huge amount of runway or pathway for us."
(29:54):
The first thing was that we could reach the form factor that we intended, which was this very short, vertically short system. So ours is 7.8 inches. The shortest on the market that we could find was 12 inches.
Cody Simms (30:04):
The inside unit, the head unit inside back?
Paul Lambert (30:06):
The inside unit, how vertically tall it is. And it's because you're running up against physics, meaning that there's a heat exchanger, which what that is, it exchanges heat between the air and some refrigerant fluids. There's a bunch of coils in a plane. And it's bent, but just think of it as a plane, almost like as a box. It's a rectangle. You want to maximize the surface area of that rectangle to get the most energy exchange. If you shorten the vertical dimension, the long bottom, you're losing a lot. Every time you shorten it, you're losing the long dimension. If you shorten, make it more like a square, it's better because you're not losing as much every time you shorten that direction.
(30:41):
So all the incentives are to make it more squarish, but we wanted to make it long and skinny because it looks nice. And then also so it could fit well in above windows and above doors and all these really unique places in the home where people would want to put these, but nothing fit yet. And so we had to do a lot of iteration. This wasn't one massive breakthrough. It was just a whole bunch of iteration and testing. But once it became clear that we were able to achieve our energy transfer targets with that form factor, that's a pretty big unlock.
Cody Simms (31:12):
Was this sub-eight inch design constraint some arbitrary thing? The CEO came in and said, "We must get it below eight inches," and then everyone's figuring out how to do it? Why that particular size?
Paul Lambert (31:24):
Somewhat, yes. It was in centimeters, not inches, actually. It was 100 centimeters. But less about being my arbitrary decision, it was Mike & Maaike who is our industrial design partners, they're incredible. And why do we pay them? Because they're really good at lots of things, but they have a very, very good intuition for what is going to speak well with the architecture of the home, what is going to be aesthetically pleasing, what is going to feel integrated, and they set those dimensions. It's really a ratio of the lengths to the height. They were my backstop on that. They're like, "No, we can't get taller. It's going to ruin it." It's like talking to an architect. They care a lot about the pitch of the roof, "And maybe, well, I could go five degrees less," that's not going to work for them. So Mike & Maaike were the backstop on the height there.
Cody Simms (32:06):
Getting that particular dimension right was a huge unlock for you because now you can be in design mags and you can look at the picture and just say, "Wow, this thing looks cool. This thing looks beautiful."
Paul Lambert (32:16):
The place most people want to put mini splits if they will just arbitrarily pick them in their house is usually above a window because it's already an exterior wall. It is framed by the window. It's a little bit out of the way. It's a really, really nice place to put it. Most houses have 12 to 10 inches of gaps between the window and the ceiling, which means that the most valuable spot or the most desirable spot in the entire home in most American homes, there wasn't a single product on the market that would even fit there. And now we're the only product that fits there. So we can walk into a home and say, "Okay, we'll put it here and we'll put it here," and the next contractor is going to walk in and they can't offer it. And that customer, that's where they want it. So it's a really strong differentiator for us.
Cody Simms (32:52):
Let's go the opposite direction. What is still left to validate? What is something that you guys are pushing a rock up a hill on right now?
Paul Lambert (32:59):
I might get in trouble for saying this, but I'm going to do it anyways. The occupancy detection is really, really, really tricky because-
Cody Simms (33:06):
This is the sensor that knows if you're in the room or not so it can-
Paul Lambert (33:10):
Yeah.
Cody Simms (33:10):
... adjust the airflow accordingly.
Paul Lambert (33:11):
Because you want to ramp down empty rooms. And there's actually been a lot of stuff we've been able to do that's more like heuristics with scheduling and things like that that you can get actually a lot of those benefits. But the reality is that it's just a very hard technical problem and you want it to work very dependably. So it is the closest thing to true R&D that we are doing where we feel like if we solve this, we'll be advancing the industry, like the state of the art, how to do the level of occupancy detection.
(33:39):
Because for most of the history of occupancy detection, people have been using passive infrared sensors that are really motion detectors, and we don't want to stop heating a room when someone's in their bed at night and not moving. So we need a much higher quality of occupancy detection. And also our unit, because it is operating, it itself is moving. So as opposed to having something static on the wall, which is a much easier problem to solve, you are basically trying to... It just makes the whole thing much more dynamic because you're on a system that has a fan going and so the whole thing is oscillating.
Cody Simms (34:08):
And it's a much harder problem than just the are you home or not problem, right?
Paul Lambert (34:12):
Yes.
Cody Simms (34:12):
Which is what most smart thermostats have to solve.
Paul Lambert (34:15):
And we can solve for that too. We're able to still do a fair bit of this, but the dream of the real occupancy detection is it's a tough one.
Cody Simms (34:22):
Interesting. And are you finding that the product is underperforming in that use case right now, or is it one that it's just once it works well, it will delight people in a way they don't quite appreciate and understand?
Paul Lambert (34:36):
Yeah, thankfully not in that it is not detracting. We are very, very happy with how the product has been received so far and the performance. We just believe that there's yet more headroom to unlock and that honestly, if we can solve it, that is again going to become an even bigger differentiator in mode for us because we know it's a really hard problem. And so it's more headroom than it is a real threat to the product today.
Cody Simms (34:59):
Let's talk operational. You mentioned right now, even though we just talked about a couple technology things you've either overcome or are working on, you said really the focus right now is operational scale and how do you drive installs in significant volume? How do you build up new geographies? How do you get a workforce trained both to do installation and then I presume also to do maintenance as required because you are the vertical maintenance provider of these systems too, I believe?
Paul Lambert (35:27):
Mm-hmm.
Cody Simms (35:27):
What are you trying to figure out right now in that regard? Just from an operations perspective overall, what are the big things you're trying to figure out?
Paul Lambert (35:35):
It is workforce development, meaning how do we hire at increasingly quick-scale installation talent, HVAC talent, electrical talent that is a cut above. We care a lot about our brand and our customer experience. A lot is actually downplaying it. We're truly obsessive about these things. And the people that show up to your house and the way they treat your home, that is the most powerful brand experience you'll ever have with Quilt. You're entrusting us to your most valuable asset and we're in there in your physical space, in your very personal space. So we are looking for the one percentile or less of the best installers, not just at the trade but also in customer experience. And we've been kind of subscale till now. We don't need to hire 10,000 of them. We need to hire 10. And so we've been able to find some really great folks, but we will at some point run into that. And we actually already are at some point sometimes running into this.
(36:24):
It's also a very seasonal thing on the labor side where peak of the summer it's really hard to hire HVAC installers because they're all busy installing ACs, but in the colder seasons, it's easier but that doesn't always line up with us. And then the other part of it, which is the same thing but even harder, is on the partner side because the partners have their own brand and their own way of doing things, but we're pretty opinionated and we care a lot about the customer experience. So in order to reach faster scale and to get more Quilt into more people's homes, we need to have both levers available where we build our in-house force and we can also have that subcontracted installer force. But getting both of those to a point where you can scale them rapidly at a really high quality, they both have their challenges. We're able to unlock these and I think they're trending pretty well, but that is some of the stuff we're working on.
Cody Simms (37:05):
Are there any vertically integrated consumer home service companies that you think do a great job at a nationwide scale? Or is there any company that you think, "Oh wow, if we can be the HVAC version of what this company does," anybody that you guys have modeled after internally?
Paul Lambert (37:21):
I don't know about in-home services. That doesn't dissuade me. That actually tells me I think that there's a lot of opportunity here, but there are a lot of very successful vertically integrated companies. I think Tesla is a pretty famous example-
Cody Simms (37:31):
Sure.
Paul Lambert (37:31):
... that is very vertically integrated.
Cody Simms (37:33):
Sunrun would maybe be the one you could point to where there's a nationwide installer base. I don't know.
Paul Lambert (37:39):
No, absolutely on the installer side, the reason I didn't go there was that, well, they don't have the hardware component that we do. They're not producing their own panels, or maybe they are but their panels are mostly commodity and they're differentiating on software and services and installation and pricing and financing, things like that. So on the consumer side, there aren't that many consumer things. There's a lot of complex services attached to them. Apple's a very vertically integrated company as well, but you're not generally doing a whole bunch of services with them.
Cody Simms (38:02):
Where is inertia hard? If you just take a standard consumer, never heard of Quilt, their furnace is burning up, they need to swap it out, or they realize they want to add air conditioning because it's hot in their home in the summer and they didn't have it, where's consumer inertia hard or industry inertia? I guess we can go either direction with it.
Paul Lambert (38:22):
The urgent use case is a common one, and we're not really operating there yet. But it is one that I think a lot about because all good intentions aside, if someone is without heat, they're going to need a solution. And if there's a furnace on the back of the truck or in the warehouse, it can get installed tomorrow. Even if they were interested and had been primed about heat pumps as a solution, they're going to want to solve that problem. As I said, mentioned before, the maintenance journey is a pretty important one in terms of actually selling new equipment. It's just bring your car in, you end up buying a bunch of new stuff. It's a pretty common thing.
(38:52):
And Quilt personally is not, or not personally, Quilt as a company, we are not yet operating really in that world, which is just a huge opportunity for us. I'm confident we can find good partnership models that will work for everybody, but right now, that's not something we're playing in. So I think the biggest part of the inertia on the consumer side is just this idea that central systems are the pinnacle and central is luxury. And we've been told in the US for a while that central systems are great, and it turns out that we actually know that they're not. Whenever I speak to an audience, I always ask who has a room in their home that is hard to control, that gets too hot or too cold? 90% of the audience always puts their hand up. And so we all know that central systems aren't perfect, but yet they've grown up with them. That's where they see everywhere. It's this idea of moving to a distributed system and having mini splits in every room, that is a thing that people need to get over.
Cody Simms (39:40):
You're right. Maybe you're thinking, "Oh, I've lived in apartments when I was younger and single or whatever and I had window units, and now I can have a central air." And it sounds like it's this luxury thing, which we're all programmed to assume that you move into, eventually someday you move into a big house and you have a central air system, and that's just the American dream growth path.
Paul Lambert (40:01):
Exactly.
Cody Simms (40:01):
Funny how narratives find their way into so much of what we are trying to solve for here.
Paul Lambert (40:07):
This is why marketing is an entire discipline. It's very important. It's like stories matter.
Cody Simms (40:12):
I've heard you say on the emissions side, by the way, from a stories perspective, something I heard you say once that really stuck with me is that there are only really two places that the average person buys fossil fuels, and one is your car and the other is heating your home.
Paul Lambert (40:29):
Correct. And that realization was a huge, huge, huge thing for me too. And I don't know if it came before I saw the heat pump tweet or after, but it takes this nearly intractably feeling large problem of climate change or even the energy transition broadly and thinking how that re-invents the entire economy. It makes it very tractable feeling. It's like, okay, there's two problems. Let's solve those two problems and we'll deal with a big chunk of the problem.
Cody Simms (40:51):
What's next for Quilt?
Paul Lambert (40:52):
What's next for Quilt? Well, I already mentioned that we're going to be getting to a bunch more cities and scaling to try to bring our system to as many people as we can.
Cody Simms (40:59):
Can you name any of them for listeners who might be wanting to think about an upgrade in their own home soon? You named Los Angeles. "Los Angeles soon," you said?
Paul Lambert (41:06):
Yeah, Los Angeles is very soon.
Cody Simms (41:07):
Okay.
Paul Lambert (41:07):
You're in LA. We're coming to you soon. We not publicly announced, but I can tell you some cities that are near the top of the list.
Cody Simms (41:21):
Okay, go for it.
Paul Lambert (41:22):
Okay, so there's a bunch. New York is our number one by reservation volume. Seattle is also very high up there and has a lot of nice properties. We go to Boston also has a lot of really nice properties. Denver, Atlanta, and then those are maybe the very top of list, also Portland, Oregon, also in that northwest thing. We have a utility partner in Portland that's excited to work with us. Those are all cities that are near the top of list. There's also Houston. We have a fair bit of backlog. Obviously that's more cooling.
Cody Simms (41:48):
Some of those would be cities I would think of have a lot less of a single-family home sort of style residential market, which I guess would be a whole another new set of things for you to go validate and unlock how to do.
Paul Lambert (42:00):
Yeah. We're not doing high rises in Manhattan for sure when I say New York, but the kind of brownstones could work. In San Francisco, we're doing a lot of Victorians that I have. Rojas is effectively not standalone single family homes.
Cody Simms (42:11):
Okay. So beyond geo nuts to crack, where do you see Quilt going? You've built this very elegant HVAC solution today. You're building a muscle of how to bring great service into a home and change out a very core component of a home operating system. What do you think the future holds?
Paul Lambert (42:34):
We really believe that the home is ground zero for a lot of people's personal aspirations. Also, their family aspirations because homes are obviously this multi-generational thing for many people. And it becomes a place where people can, as they create their home, realize their own aspirations to have a healthy, happy, sustainable future for their family. And there are many systems that contribute to the health and comfort of a home. HVAC is one of them. Water is another one. And those are the two fossil fuel consumers in any major volume. So we really want to help people get off fossil fuels in the home. It's a roadmap right there.
(43:14):
The other major gas consumers is, and they're not even major, they're pretty small compared to water and HVAC, is cooking and sometimes a dryer, but those are both pretty small. Also, when you think about that way to be comfortable and healthy and sustainable in the home, of course you get into how you're dealing with all the management of the air and also the energy. Sometimes, I think about it is there are core jobs to be done of the home. The jobs to be done framework is very popular when in product thinking, and it's like a product has a job to be done. So when people buy a house, that's a product. What are they hiring that job to do?
(43:45):
And it's a very expensive product. So there's a lot of jobs it does, and they've been doing these jobs for a long time. A home provides you shelter from the elements, keeps you warm or cool. It helps you cook your food. It helps give you a place of identity. And a lot of these things have systems that were built to deliver the value proposition. So like the HVAC system or the water system or the security system and things like that.
(44:04):
Some of these have been touched by smart home stuff, but many of them haven't, especially in these deep core systems like HVAC and water. They're basically mid-20th century systems today. And there's been all this innovation in the world for the last few decades that isn't incorporated. The most successful smart home device of all time, I think, is an Nest thermostat. And as great as an Nest thermostat is, it's still ultimately a fairly thin layer of control over a whole stack of old tech. And so we believe that by reinventing these core systems one by one, we can just deliver a ton of value into the home that is both differentiated but also really uplevels what the lived home experience should mean in the 21st century. And all integrates to be able to provide that type of aspirational experience for a home and their family.
Cody Simms (44:49):
So I'm hearing a long-term vision of being some kind of integrated home appliance services electrification company.
Paul Lambert (44:59):
That's right. We should probably refine that a few times before we put it in the pitch deck.
Cody Simms (45:03):
You could put the marketing turn on that. Hire those marketing consultants again.
Paul Lambert (45:07):
You go back to it, I think for many people, their home is their most valuable and most important asset or where you spend the most time, and it's too bad that isn't actually a trusted service or brand that you can go to entrust it with whatever you need to have done. And the fact that we have people who are installing it, we're installing Quilt and we've had a few people come to us and say, "Hey, I'd love to hire you for all our home work, home services," of course we can't do that today, but the fact that people are asking for it is an indication of where we'd like to go.
Cody Simms (45:32):
Though clearly in the near term, just being a fantastic HVAC provider is going to keep your hands full for a while, I'm guessing.
Paul Lambert (45:40):
Oh, absolutely. We also have one form factor of our first HVAC product. There's a long, long, long road ahead of us.
Cody Simms (45:47):
Paul, this has been awesome. What else should we have talked about that we didn't go into?
Paul Lambert (45:52):
Thank you for asking. Let's see. So I would say that we were launching in LA next month, so if you're in the Los Angeles, come reach out to us. We're always hiring. I'd be remiss to not mention that. Come check out our jobs page because we're growing quickly.
(46:05):
Another thing that's fun, I don't know if this will come out before the holidays, probably not, but we launched a merch store which people have always really liked the Quilt swag, if I may say so. I don't design it. I just get to work near the people who do. But if you want some heat pump swag, you can go to quilt.com/merch. Part of our strategy is to uplevel the entire category, so this is why we do this stuff. It's not just for fun. It's because we think that, well, it's to bring fun into it, but also we want to elevate the category and investing in fashion and merch helps with that.
(46:31):
The other thing I'll mention is just that we were talking about this long-term vision. I do think that when we look back on we as humans, because you and I won't be around 500 to 1,000 years from now on this period of time, it's going to be defined by the energy transition. And I know I'm preaching to the choir here, especially with your audience, but it's just we're all doing this because we want to be part of that story and make it happen faster and have an outcome that we all hope is the way we want to go.
Cody Simms (46:53):
I love that sentiment, obviously. I'm also struck by what you said just before that, which was you're trying to uplevel the whole category. You think about it, and there are a few things in your home that you interact with all the time, things that are front and center to your experience in your home, your light switches, your thermostats, and probably your TV remote control, to be honest.
Paul Lambert (47:17):
And your kitchen appliances, right? You're opening the fridge...
Cody Simms (47:19):
And your kitchen appliances, yeah. And these are the things that in theory if they're done well can give you real pleasure just because they are tactile experiences that you are navigating constantly. And I have one light switch in a bathroom where the screw under the panel I know is stripped and broken, and every time I push it, pushes in a little bit. Every time I push it, I'm like, "Ugh." God, it drives me crazy. These little things in our home help us define if we are feeling positive, if we're feeling anxious, if we're feeling like we're neglecting something, if we're feeling like we've really made a great investment in something. And I say all that because what I think is interesting about your system, and particularly you talked about that occupancy sensors in the room and some of the stuff that you're really working on trying to get right, if you guys are able to really nail those experiences, you build a unique product that no one else has experienced before.
Paul Lambert (48:10):
Yeah, I hope so. That's the vision. One of our observations was that if you want to create brand and this strong user experience angle, it has to be something you interact with every day. So a lot of home electrification products that are out there today, including solar and battery, they're really more infrastructure. They live outside of the home. You don't have that daily driver experience versus HVAC, you do. People touch their thermostat on average two to three times a day every single day. So yeah, it's exactly what you're saying.
Cody Simms (48:37):
Well, hopefully you are able to continue to build something people love and you help people realize that they love it to where they do want to wear a heat pump shirt or whatever and go out and evangelize. That's cool. I think it's awesome. You guys are trying to uplevel the brand that way.
Paul Lambert (48:50):
Thank you. Thanks, Cody.
Cody Simms (48:51):
Paul, thanks for the conversation. Congrats on all that you're building. We're super excited at MCJ to be supporters of what you're doing, and glad we finally had this chat today.
Paul Lambert (49:00):
Yeah, thank you for having me on. I am too. And I may have mentioned to you this before, but early on in my journey, MCJ back when it was called MCJ, was like my go-to podcast to just get educated on the industry. So it's really cool to be able to see the full circle.
Cody Simms (49:12):
It's cool to have you. Thanks, Paul.
Paul Lambert (49:14):
Thanks.
Cody Simms (49:15):
Inevitable is an MCJ podcast. At MCJ, we back founders driving the transition of energy and industry, and solving the inevitable impacts of climate change. If you'd like to learn more about MCJ, visit us at mcj.vc and subscribe to our weekly newsletter at newsletter.mcj.vc. Thanks, and see you next episode.
