Scaling Hydrogen for Heavy Industry with Hgen
Molly Yang is CEO and co-founder of Hgen, a company that develops clean hydrogen to decarbonize heavy industry. Specifically, they are working on alkaline electrolyzer technology to make it have higher efficiency and higher power density, which they claim will allow them to produce hydrogen with a smaller footprint and lower cost, using a modular, mass-manufacturable design.
Based in Los Angeles, Hgen has raised capital from Founders Fund, Fontinalis Partners, and Seven Seven Six among others. Prior to starting Hgen, Molly was on the Product team at Tesla, where she led initiatives across Tesla's industrial and residential energy products. Her co-founder and childhood friend, Colin Ho led actuation & power system for Starship and propulsion components for Crew Dragon at SpaceX.
In this episode, Molly and Cody talk all about Hgen's origin story, technology and market. Toward the end of the conversation, she offers her thoughts to other climate tech startup founders and climate tech investors about how to approach a market.
Episode recorded on July 11, 2024 (Published on Oct 10, 2024)
In this episode, we cover:
[3:13] Molly’s background at Tesla and her motivation for starting Hgen
[6:09] Exploring different solutions for hard-to-abate sectors
[8:30] Hgen’s focus on distributed hydrogen production through alkaline electrolysis
[9:24] Comparing alkaline vs. PEM electrolyzers
[14:16] The challenges and advantages of alkaline electrolyzers
[16:10] Targeting markets that use hydrogen today and displacing gray hydrogen
[22:10] Various use cases for hydrogen
[25:06] Hgen’s progress and business model
[27:49] Hgen is hiring!
[28:08] How different investors view hydrogen
[34:25] Molly's advice for entrepreneurs
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Cody Simms (00:00):
Today on MCJ's Startup Series, our guest is Molly Yang, CEO and Co-Founder at Hgen. Hgen is developing clean hydrogen to decarbonize heavy industry. Specifically, they're innovating on alkaline electrolyzer technology to make it have higher efficiency and operate in a higher pressure environment, which they claim will allow them to generate hydrogen in a smaller footprint and at lower cost with a modular mass-manufacturable design. Based in Los Angeles, Hgen has raised capital from Founders Fund and Fontanelles Partners among others. Prior to starting Hgen, Molly was a senior product manager at Tesla across Tesla's residential energy products, including Powerwall, Solar Panels, EV Home Charging, and Solar Roof. Her co-founder and childhood friend, Colin Ho led actuation and power systems for Starship at SpaceX. Molly and I talk all about Hgen's origin story, technology and market. And toward the end of the conversation, she offers her thoughts to other climate tech startup founders and climate tech investors about how to approach a market. I hope you enjoy the conversation, but before we start. I'm Cody Simms.
Yin Lu (01:15):
I'm Yin Lu.
Jason Jacobs (01:17):
And I'm Jason Jacobs. And welcome to My Climate Journey.
Yin Lu (01:23):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (01:28):
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. Molly, welcome to the show.
Molly Yang (01:43):
Thank you. Thank you for having me.
Cody Simms (01:45):
Well, I am excited to learn from you about the hydrogen space, and I love talking to another founder based in Los Angeles, which is where I live. Exciting to see a Tesla alum and a SpaceX alum come together in LA and building a deep tech company in the climate space. That's the dream story, right?
Molly Yang (02:04):
Yeah, my co-founder pulled me down to LA. I had previously been in the Bay Area, and LA has just been an incredible ecosystem for us. There's lots of incredible engineers here who are interested in redirecting their energy towards climate, and we've been able to bring together an incredible team and LA more broadly, it feels very exciting in this space.
Cody Simms (02:28):
For those of you listening who don't know a whole lot about LA or have only hung out in LA in the Venice, Santa Monica startup scene when it comes to climate tech and deep tech, there's a whole lot going on in the whole El Segundo and Hawthorne area, which is really a lot of the aerospace hub of LA. So if you're listening and you haven't visited, you should definitely come check out that part of Los Angeles. All right, enough local plug from me unless you have anything to add to that Molly?
Molly Yang (02:53):
Yeah, no, LA is very, I think, underrated within the broader tech scene, I think for just the excellence of hardware talent down here.
Cody Simms (03:04):
And so you were at Tesla up in the Bay Area. Maybe share a little bit about what you were working on at Tesla and what caused you to think about starting Hgen.
Molly Yang (03:13):
Yeah, so at Tesla I was an energy product lead and I was working across Tesla's industrial and residential energy products there. So that includes the grid batteries, commercial batteries, the supercharger network, the home and residential energy products. And it was just an incredible period in which these products were being scaled rapidly from pilot through to global field deployment scale and was able to really speed run through a lot of the engineering and operational learnings and challenges that comes with introducing and scaling new energy products. So it was just an incredible time, but by the time that I decided to leave Tesla, I had started to really feel that the set of things that I was working on and even more broadly beyond Tesla that were more mature, climate focused technologies like solar, wind, batteries, EVs and so on, had really hit an inflection point where it was really just a matter of expansion of these products.
(04:14):
They had found clear product market fit, they were growing pretty quickly and it was really just scaling and deployment, which is itself an incredible and fascinating set of challenges on its own. But I was really interested in thinking through how I could contribute to bringing about the next phase of decarbonization. So what are the set of technologies that like solar or EVs or batteries 10 years ago, are now the set of things that we need to bring in the next phase of decarbonization in industries and categories of significant emissions that we just don't have good solutions for today. So that was the genesis for how I came to this point. And that's when I reconnected with my old friend Colin. So Colin and I had actually grown up together in Arizona, so we actually went to the same middle school and high school there, and his mom was actually my Chinese school teacher.
(05:11):
So yeah, it was incredible and I really can't overemphasize how nice it is to be able to start a company with someone that you just completely trust and that you've known since they were a kid. There's just a lot of trust there. And so he, at the same time coincidentally, was just leaving SpaceX. He was a lead engineer at SpaceX, so he was in LA and he really was looking to redirect his engineering expertise and his energy into the climate space. And so for Colin earlier in his career well before SpaceX, he had actually had a chance to work in Antarctica doing field-testing for underwater robotics to help better anchor models for subglacial lakes and activities there. So he literally had had his glacier moment in Antarctica and he was looking to return to the climate space. And so that's how we got reconnected thematically as we coincidentally had left SpaceX and Tesla respectively at the same time.
Cody Simms (06:09):
And how did you land on, of all the different things you could go after in the industrial decarbonization space, a model for building distributed hydrogen?
Molly Yang (06:18):
Well, so we really had researched and evaluated and modeled a range of different solutions and technologies more broadly in hard-to-abate sectors. And I've listened to several of the prior podcasts that you've done with other founders who've said were approached. They've taken more broadly where they're really looking more broadly across the technology space. And it's true that it's really fascinating what you're able to rule out using just pen and paper before you've spent a single dollar on a techno economic basis, given the physics constraints of a technology, whether it's viable or not. So we really spent a lot of time going through that exercise and saw a really compelling opportunity in clean hydrogen for decarbonizing heavy industry and in particular within high efficiency alkaline and electrolysis.
Cody Simms (07:07):
Now I have to ask what things did you look at and rule out?
Molly Yang (07:09):
Oh boy, I don't want to be a hater.
Cody Simms (07:12):
There's no hate here, there's no hate here. It's just sharing and learning with everybody.
Molly Yang (07:16):
Well, I'll say some things that we had modeled and thought were actually quite compelling and interesting, and I think just given our skillsets didn't feel like was something that made sense for us to focus on. So one thing that I thought is actually quite exciting is enhanced geothermal and its ability to provide clean, firm power in certain regions of the world. But I think for us, given our backgrounds, we felt that there was a specific opportunity within electrolysis with our high pressure gas and fluids background and also modular energy products background that we would be able to better direct for scaling and building electrolyzers.
Cody Simms (07:52):
Can you throw out one more? Come on. You got one more in you of stuff you looked at. It sounds like you really did your homework.
Molly Yang (07:58):
Oh, it's been a bit. I'll have to look back at my notes.
Cody Simms (08:01):
All right, fine. We'll move on. You mentioned a high pressure gas and fluids background. Was that work you had done previously or was that what Colin had done previously?
Molly Yang (08:09):
That was Colin. Colin within SpaceX.
Cody Simms (08:11):
Oh sure. He's literally doing rocket engineering, so yeah, of course.
Molly Yang (08:16):
Exactly. Yeah, yeah, exactly. Yeah. So our electrolyzer operates at high pressure at 30 bar and that is a pressure level that, for Colin and a lot of the rest of our team that came from SpaceX, that's like low pressure. So that's a funny dynamic.
Cody Simms (08:30):
So describe your product.
Molly Yang (08:31):
Yeah, so at a high level, taking a step back to explain electrolyzers in general. So electrolyzers use electricity and water to make hydrogen, and this is compared to the conventional process of hydrogen production which uses natural gas. And so there are two primary commercializable technologies for electrolyzers today and that's alkaline and PEM. And so I guess speaking of the opportunity that we saw in this exploration, we noticed that somewhat as a legacy of the federal funding that had gone into PEM fuel cells over the years, the US has historically had a lot more activity in the PEM space and largely ignored the alkaline space. One of the challenges with PEM though is that it's quite an expensive technology and the materials that you need for it within this acidic environment that it needs to operate in are just inherently more expensive.
Cody Simms (09:24):
My super basic understanding of PEM is that the actual ions that are coming out of it is ion, that's the right word, are really, really small. And thus you need these very expensive membranes to ensure that you're properly capturing them in the right place. Is that remotely accurate?
Molly Yang (09:42):
Beyond membranes, it's in an acidic environment, you need titanium and from a catalyst perspective, you need iridium where I think it's 80% of the supply of that comes from a single comet site in South Africa. So it's a very challenging bill of materials in general within this acidic environment. And so when we're running the techno economics for how we're going to be able to get anywhere close to the dollar per kilogram clean hydrogen price that you need to compete. With conventional hydrogen, we just saw that we would need to hit a much lower electrolyzer CapEx than what that would be able to.
Cody Simms (10:22):
Okay. So that's a PEM electrolyzer. Why don't you just briefly describe what an alkaline electrolyzer looks like and the makeup of materials in it and the use cases where it's maybe better suited?
Molly Yang (10:35):
So alkaline electrolyzers in contrast to PEM use low cost abundant materials so that its CapEx is dollar per kilowatt cost has an inherently much lower cost floor. And now alkaline electrolyzers have existed for a long time and they've historically been lower efficiency and also had various other operational constraints and conditions. And so we saw that in order to hit the hydrogen costs that is necessary to compete with conventional hydrogen, we need a combination of both low cost electrolyzers and high efficiency. You really can't get away with just having one or the other. And now the design for alkaline really hasn't fundamentally changed in decades. The funding and startups have really not been focused on alkaline at all. So that's where we saw an opportunity to really redesign the alkaline electrolyzer and make it dramatically higher performance. And so we were able to do that with our electrolyzers.
(11:32):
So Hgen's electrolyzer has 20 times higher volumetric power density than a conventional alkaline electrolyzer. Its cells operated over twice the current density of conventional alkaline. Our cells are six times thinner than conventional alkaline cells. So just from a raw material usage and cost perspective it's a lot more efficient. So all of that on the cell stack side, which is the gas generation side, allows for a much more powerful and smaller footprint and lower cost system.
(12:07):
And then stepping out from the cell stack our system is a fully integrated module that includes cell stack and balance of plan. And this is really important because electrolyzer installations today look much more like petrochemical construction projects compared to solar, wind or battery installs. So they all require an EPC firm to come in and do a lot of custom design and a lot of onsite construction and electrolyzer vendors typically providing stacks and all of the rest of the system comes online around that in a sort of custom designed. And so in delivering a fully pre-assembled module that includes cell stack and balance of plants, we're able to avoid a lot of that extraneous cost that otherwise comes in.
Cody Simms (12:55):
Let me try to repeat what I think I heard you say. And going back to how you described PEM, which is these PEM electrolyzers have really been a lot of the focus of the R&D community for the last decade or so, particularly in the era of renewables, and yet they're more expensive from a materials perspective. And you've gone to this technology that's been around longer and is maybe more mature on the development side, but hasn't been as much of a focus of the R&D community because it seemed like maybe these PEM systems were going to outperform and you've said, "Hey, if we can tune this older technology and make it more efficient, it still has these lower cost overall basis of development," which if we're going to build lots of them out in distribution can give us economies of scale that maybe can allow us to solve problems that a more expensive PEM system can't solve out in the field.
Molly Yang (13:50):
Exactly. So ultimately alkaline can achieve the cost floor that you need in order to hit cost parity on the hydrogen side, but then it just becomes a matter of improving the performance of these systems. And we saw a very clear opportunity to do that because it really hadn't been visited on the startup funding R&D side, particularly in the US because it'd just been written off as a mature technology.
Cody Simms (14:16):
And is one over the other currently better at working with intermittent resources like renewables?
Molly Yang (14:22):
Yeah. So I think historically there was this notion that PEM is more compatible with intermittent power, and so that was one of the first things that we focused on was within alkaline, making sure that our system is compatible with intermittent power because the whole point that we're doing this is to produce clean hydrogen, so you're going to need to be powered by solar and wind. What we found was that a lot of the challenges that are historically prevented alkaline system from being able to operate in those scenarios were largely a legacy of the fact that alkaline systems were really never designed for that in the first place and they'd always been continuously operated and that in fact we could get around basically all of these challenges with just a very well-designed system that's intentionally designed for intermittent and variable power operation.
Yin Lu (15:09):
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.
(15:36):
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 (16:10):
Okay. So based on unlocking this innovation, or at least in theory unlocking this innovation at scale, where do you see this enabling you to attack markets that haven't been in the crosshairs of hydrogen previously?
Molly Yang (16:28):
Yeah, so I think one thing in terms of our approach is that we've been really focused initially on existing users of hydrogen today, existing uses of hydrogen today. So this is really in industrial applications across chemicals production, steel production, metals processing, glass production, semiconductors and things of that sort. A lot of these industrial customers actually don't have a direct dedicated pipeline of hydrogen, so they're actually getting their hydrogen liquefied and truck delivered via an air products or air-liquid network and that's very expensive. So I think there's actually this misconception that all hydrogen is basically around a dollar a kilogram and it's all just commodity prices. And in reality, hydrogen actually has a number of different price points and customer segments across the industrial space depending on how that hydrogen gets delivered to these industrial sites today. And we've primarily initially been focused on on-site deployment of electrolyzers that allow an industrial customer to essentially avoid this expensive delivery of hydrogen that they're otherwise essentially getting trucked in and brought into a storage tank.
Cody Simms (17:45):
Got it. So it's not necessarily about unlocking hydrogen into new use cases, it's about finding customers who already use hydrogen and are trucking it in or getting it brought in bulk, presumably, I'm guessing most of that is produced by gas. So it's what the industry would call blue hydrogen or gray hydrogen, probably most of it gray hydrogen today, meaning it's methane reformed hydrogen, I think. And so your idea is rather than them paying for this fossil fuel derived hydrogen that has to trucked to them, which also has logistics and transportation cost and emissions, they can think about displacing all of that with an on-site production through Hgen.
Molly Yang (18:27):
Yeah. Well as context for this, I think that the climate community in general I think largely under appreciates the market dynamics that govern all types of non-climate startups, which is that there's more of an assumption that if you build it, they will come and because this technology is necessary to decarbonize X percentage of emissions, that necessarily means that there's a market for it. For us, we want to be really clear-eyed about what it actually takes to scale a successful company, which is that you need to find customers all along the way through scaling to your end vision. And so we thought that the easiest entry point is really targeting, let's first decarbonize the existing use of hydrogen. There's over $100 billion a day spent on hydrogen today, and there's a unique feature of this market that we're luckily afforded, which is that there are actually many different customer segments within this large market using hydrogen at various price points.
(19:30):
And we are able to use that to our advantage to scale with that market through stepping stones through to targeting the largest uses of hydrogen today and then beyond into future uses of hydrogen where you can much more dramatically decarbonize steel production for example. So for us targeting this initial on-site deployment and displacing their existing gray hydrogen use is much more of a strategy for how we can scale manufacturing and the customer base and leverage all of that on our way up through to the end market and then beyond, as opposed to saying like, "Oh, that is the only thing we're ever going to do." That's what we think is necessary as you go through the scaling process through to all the applications and beyond.
Cody Simms (20:17):
It sounds like though, in order to displace an existing purchase pattern, so these are customers who are already using hydrogen as opposed to, "Hey, there's a use case that could exist if hydrogen existed at scale for them," makes sense. It means you absolutely have to come in at below cost of what they're doing today, either that or they are willing to pay some kind of green premium because they've signed up for some net-zero goal that they have to hit. But for the most part to really win at scale there, you just frankly just have to be lower cost. And if you can be lower and low emissions, that's fantastic. That's what this whole space needs, are startups that are aiming to do that.
Molly Yang (20:54):
Exactly. And that's something that as I mentioned in focusing on on-site deployments we're essentially displacing their current liquified deliveries or compressed deliveries. We're able to beat on price today because you're avoiding all this expensive liquefaction that needs to happen, you're avoiding all this truck delivery that needs to happen. So this really allows us to ignore all of these other potential factors that could get in the way of that and just start selling and scaling. And then as we're scaling and manufacturing and the technology, we're able to hit lower and lower price points that gets us into the subsequent markets and beyond.
Cody Simms (21:33):
There's a chemical property of hydrogen that we haven't talked about, which is that it can be delivered and used in gaseous or liquid form, and I believe the liquid form is super, super cold and requires a bunch of infrastructure to manage that. Are you focused on one or the other of those?
Molly Yang (21:48):
Well, because we are generating the hydrogen on-site, the whole point is that we can avoid this whole liquefaction process in order to make it into liquified hydrogen, and that's the only dense enough medium through which it can be delivered by air products to an industrial site.
Cody Simms (22:05):
Got it. So liquefaction exists as a transport mechanism essentially?
Molly Yang (22:09):
Yeah, exactly.
Cody Simms (22:10):
Yeah, makes sense. Which is great because that again helps you find that lower cost or parity cost product. You mentioned there are multiple use cases for hydrogen. When I think of the big, big reasons why anyone uses it, I think of three main things. There's heat, so essentially using it as an energy source to generate heat for industrial process. There's storage of which I actually put ammonia in that category of storing energy and then there's using it as a transport fuel. That's at least how my head has broken it down. Are those the right three ways to think about why people use hydrogen for some reason in their process?
Molly Yang (22:47):
So I would say hydrogen is primarily used as a feedstock in industrial processes today. So this is for ammonia production as fertilizer or in refineries and then a bunch of other industrial applications where there's various chemicals that also require it as a feedstock or metals processing, glass production where it's used as a reducing agent. So I would say that if you're looking at the uses of hydrogen today, it's primarily as an industrial process or feedstock application. And then that provides the jumping off point for where you could look at where it can be used in the future.
Cody Simms (23:26):
And are any of those different use cases that you mentioned, ones where you're starting to see initial commercial interest in your solution and they're saying, "Hey, yeah, we want to produce on site. That's our goal."
Molly Yang (23:36):
So many of these industrial applications as I mentioned, so for example, metals treatment or glass production or semiconductors, these are among many of the industrial applications where they are getting hydrogen trucked in and it's very expensive and it's just cheaper for them to produce that on site. Chemicals production depending on the specific chemical that is true as well. So we see strong interest in these industrial spaces where they see the ability to control both their supply and not potentially deal with the supply disruptions that we otherwise, but also more importantly are able to get to a lower cost system.
Cody Simms (24:18):
It would seem to me you would also want to target industries or companies in particular that also have or are starting to build large amounts of on site power generation. I would think in order to power your electrolyzer process, unless there's not a lot of electricity requirement, I don't know for your system.
Molly Yang (24:36):
So there's both companies that are building on near site power generation as well as sites that are procuring low carbon intensity or essentially clean electricity for their facility. And we're able to match the electrolyzer to the hours of that clean electricity production.
Cody Simms (24:57):
And anything you can share about where you all are from a demonstration plant or commercialization progress perspective?
Molly Yang (25:06):
So over the past couple years, we've essentially scaled our technology from what had been small bench top scale through to an industrial size unit that's now running at our facility here in Hawthorne. So this next phase is really about deploying this technology at a customer site and showing the power density, the performance of the system at an outside facility.
Cody Simms (25:31):
And from a business model perspective, are you essentially selling the hardware or are you needing to find financing to fund these as projects on site and then ultimately monetizing the output of the hydrogen from the plant?
Molly Yang (25:48):
Yeah, so our long-term goal is to sell the hydrogen, but as you referenced that requires essentially access to project finance such that you're able to deal with all the upfront costs of an installation and then ultimately sell the hydrogen output. So we very much recognize that as an early stage technology and that we're scaling to that point. We're going to initially start with selling electrolyzers where for these industrial customers, that is a lower cost solution to them than these really long liquid contracts, liquid hydrogen contracts, and they're essentially able to then procure the electrolyzer and we use that to essentially scale out our technology and eventually be able to then access the project finance markets that allows us to then build projects and sell off take.
Cody Simms (26:34):
And what does it take for them if they're going to install this electrolyzer on their facility, presumably they're going to need to find some new talent and whatnot to actually operate and run these systems. There's a skillset, workforce development angle presumably to a sale that you have to help them navigate too, I guess.
Molly Yang (26:53):
Well, so our system, because it's a modular preassembled unit, includes the cell stack and balance of plan. And what customers really want is for something to just be able to sit on site and essentially be as close to as a turnkey installation as possible. And for them to not necessarily have to deal with it beyond that and then being able to provide a turnkey solution that you then are plugging in essentially into their existing pipes and infrastructure, they don't actually need anything extensive for management of that electrolyzer.
Cody Simms (27:25):
Like as easy as installing a new HVAC system kind of thing, would be I guess the idea.
Molly Yang (27:31):
Exactly. I mean honestly I guess having done a lot of work in residential energy installs on the power wall side and solar side, honestly those are extremely complicated.
Cody Simms (27:44):
Way to bring it back to where we started. I guess Molly, is there anything else that we should make sure to hit on today?
Molly Yang (27:49):
Yeah, I mean I think ultimately our team is growing and we'd love for folks who are interested in the conversation that I've had today with you and who are interested in working with us to come check us out and come check out some of our opportunities because we'd love to have the chance to bring on some more folks onto the team.
Cody Simms (28:08):
I'm curious, I have an interesting market dynamic that I don't know how to process myself when it comes to the hydrogen space. And so the last question I want to ask you is... There's no right or wrong answer here. It's just helping me understand and make sense of this, which is when I talk to a number of generalist venture investors who don't have energy expertise per se, it's not an area they spend a lot of time in and I say, "Hey, I work in climate and the energy transition," one of the areas that they have spent time themselves building a thesis in for some reason is hydrogen, like multiple VCs who are just generalists Cedar Series A investors have spent time looking at the hydrogen space and they could talk my ear off on it.
(28:48):
It's really interesting. And yet when I talk to a number of climate investors and talk about hydrogen, I've come across quite a few skeptics in the climate space about hydrogen as a solution. And I don't know how to reconcile that in my own mind. And I'm just curious if you have a perspective on why that might be and any of the feedback you've gotten as you've talked to different investors and just helping all of us think about where hydrogen fits into the energy transition and what it looks like overall as a scalable solution for driving change.
Molly Yang (29:28):
Probably it's my experience that dynamic comes in part due to climate investors being really focused on future applications of hydrogen. And there are many of those that are talked about that I don't think make any sense and that they don't think make sense either.
Cody Simms (29:50):
Like what? No, you got to be specific. There're like what? Come on.
Molly Yang (29:54):
And so as a result of that dynamic, there's a skepticism against some of these applications that folks talk about, but that really aren't the right place to use hydrogen. And then I think in contrast, a lot of the generalist investors, at least that I've spoken to, are aware of the fact that hydrogen has this unique feature and quality, which is that it is already a large pre-existing market. There's already over $100 billion today spent on hydrogen and it also has this unique property, which is that there are many different customer segments and price points all along within that market that allow a startup to be able to find customers all along that chain and be able to scale all the way up. Whereas some other technologies feel much more R&D to them where they're not going to be able to get that traction or it's something that doesn't work until you've hit a very specific far off point.
(30:48):
In contrast, they're able to really see the fact that if you're just trying to find customers product market fit, that it has this large existing market of various willing paying customers today. So I think we're cursed by both the hype of hydrogen and we sort of also benefit from it. But ultimately I think it results in this dynamic where folks end up with really strong opinions. And in reality, the truth is that building a business is hard, building a climate technology is hard, scaling a startup is hard and there's really no easy path to do that in any climate technology and that hydrogen is going through that scaling process, but it has these unique market properties that allow that to be possible at various stages of a startup.
Cody Simms (31:33):
Super interesting perspective. So the takeaway there would be the climate tech investors are maybe looking for these very long-term solutions that hydrogen has the potential promise to deliver, like obviating the need to use kerosene for aviation or long haul trucking and not having to use diesel. But these things are quite a ways out. And so if you're trying to justify a venture investment on a seven to 10 year timescale, maybe that feels like a stretch. And as such, you maybe feel like a skeptic around hydrogen. And yet hydrogen today has many industrial use cases and most that hydrogen is produced using natural gas. If you can get to parody from a cost perspective using water and electricity to produce hydrogen as opposed to natural gas to produce hydrogen, you can deliver on a climate solution but do so in ways that are literally just swapping ingredients from existing processes. Is that what I'm hearing you say?
Molly Yang (32:30):
Yeah, exactly. Something that I think that climate investors ignore that I think within the software space and in Y Combinator and some of these other more traditional software or standard startup ecosystems is much more heavily emphasized is that ultimately it really comes down to finding product market fit, getting customers, getting traction all along. It's not just 15 years out, 20 years out. Can you hit a specific point, but it's getting that all along the way and does the team have the grit to make that happen all along the way? And that's a feature that gets really heavily emphasized in more traditional startup communities, whereas I think the climate space sometimes becomes so R&D focused that that gets more ignored. So I think that also contributes to that as well.
Cody Simms (33:20):
I love it. Can you find the smallest, most niche customer need you can find that you can deliver on now? And you know they're going to say yes 100% of the time you walk in the door and sell the crap out of that customer and then eventually expand from there, right? That's how you build your initial business.
Molly Yang (33:37):
Exactly. You're not going to get to manufacturing scale unless you have customers who are buying your product and you're building more quantities of your product. And in order to get that, you can't just wait for this lever that suddenly is a fire hose at one point. You need to build it on the way up.
Cody Simms (33:52):
Molly, we could keep going on this for a while, but I really appreciate it. This is great feedback and a good reminder for everybody that you got to build something people want. You got to build something people want right now, that they need to use right now, and then you can expand from there. Unless you are fortunate enough to have financial backers who you know have your back for multi-year time horizons, which most startups do not, the faster you can find a customer who wants to buy the thing you have, the better and you can grow and expand your vision from that ,right? That's what I'm hearing you say.
Molly Yang (34:25):
Yeah, exactly. And this is something that I want to say to all of your listeners who are thinking of getting into the climate space, thinking of doing a climate startup and who are interested in that. I think this is something that isn't emphasized enough is that you have to make something people want. You have to make something people are willing to pay for. That may mean that you need to start in a specific market segment and expand from there, but just like other industries and hardware and software and non-climate, other services companies, it's not that if you just build it, they will come. You really need to be able to scale through all of those customer segments on your way to market expansion.
Cody Simms (35:04):
Well, that is a great sentiment for us to end on. Molly, thanks for joining us today.
Molly Yang (35:09):
Thank you so much.
Jason Jacobs (35:10):
Thanks again for joining us on My Climate Journey podcast.
Cody Simms (35:14):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity.
Jason Jacobs (35:24):
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 at MCJPod.
Yin Lu (35:37):
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Cody Simms (35:46):
Thanks, and see you next episode.
