Ep. 244 - Kathy Hannun, Co-founder of Dandelion Energy, Alphabet Google X Spin Out & Geothermal Home Energy Company on Trends in Clean Energy
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On this week's episode of Inside Outside Innovation, we sit down with Kathy Hannun, co-founder of Dandelion Energy, a Google X spin out and largest geothermal home energy company. Kathleen and I talk about the trends in the clean energy space and her experiences of launching a successful startup out of Alphabet's Google X Lab. Let's get started.
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Interview Transcript with Kathy Hannun, Co-founder of Dandelion Energy
Brian Ardinger: Welcome to another episode of Inside Outside Innovation. I'm your host Brian Ardinger and as always, we have another amazing guest. Today with me is Kathy Hannun. She is the co-founder of Dandelion, a Google X spin-out and the largest geothermal home energy company. Welcome.
Kathy Hannun: Thanks so much for having me.
Brian Ardinger: Kathy, I'm excited to have you on. As a lot of our listeners know, we try to bring on the people that can give us insight into new trends and new perspectives on innovation, but also people who can bring us insights and perspectives on the process of innovation. And I thought you could do a great job of both. So, what is Dandelion?
Kathy Hannun: So, Dandelion is a home geothermal company. What that means is we take a homeowner's furnace or boiler out of their home. And we replace it with a geothermal heating and cooling system. So, this is a heat pump that goes where the furnace or boiler used to be, connected to what are called ground loops, which are plastic pipes buried under the homeowner's yard.
And these ground loops are exchanging heat with the yard. So, in the winter they're drawing heat into the house, that's then processed through the heat pump to boost the temperature. And then in the summer, the whole thing works in reverse. We're actually taking heat out of the house, much like an air conditioner does and putting it into the ground.
Brian Ardinger: One of the interesting things about this company, you've just raised a $30 million funding round with Breakthrough Energy Ventures. And you're taking what used to be very much a niche luxury and trying to bring it into the mainstream technology. So how did Dandelion get started? How did it come to be?
Kathy Hannun: You're exactly right. Dandelion is really trying to take what has traditionally been a very expensive niche product, geothermal heating and cooling and making it mainstream. So, to be clear, like we did not invent geothermal heating and cooling. This has existed for decades. It's very popular in Sweden, but what we're trying to do is just make it really common. You know, much more common in this country.
And the way we got started was I was actually working as a rap evaluator at Google's X Lab. So, this is the part of Google that comes up with like the self-driving car balloon internet, or, you know, a lot of the futuristic moonshot technologies. And I was looking for a great opportunity to do something impactful in energy. Specifically, I wanted to find an opportunity to really grow clean energy and heating and cooling buildings really stood out to me because unlike a lot of other consumer energy sectors like cars or even electricity, there really isn't nearly as much activity in trying to figure out how to make buildings that use more clean energy. Right?
When we looked at the different solutions that you could bring to the problem heat pumps stood out so clearly. Like here's this technology that already exists. It's proven to work. It's like geothermal heat pumps are the most efficient possible way to heat and cool your home. So of course, then the next question is, well, if they're so good, why is no one using them? Right. And that was because they were too expensive.
And so, as we studied what made them expensive, we realized a lot of the reasons they were super expensive weren't fundamental reasons. They were all just either a function of the way the industry was set up or the technologies that were being used at that time. And we thought, you know, we could really make a difference here.
Brian Ardinger: So, what do you see as the path to mass adoption compared to other cleantech types of technologies like solar out there?
Kathy Hannun: I think what we'll see with heat pumps is going to be very similar to what we've seen with solar over the past 15 to 20 years. We're just in the early innings with heat pumps and solar as well, along the way. But I think in the same way that, you know, maybe 15 years ago, solar was a very niche technology where either the very wealthy or the very committed, like hobbyist could get it.
But for the typical homeowner, it wasn't something they have necessarily heard of or would know anyone who had. And then today you literally cannot go to a neighborhood and not see solar on somebody's house. I think, I think that is what is going to happen over the next decade with heat pumps.
Brian Ardinger: So, from a business perspective, how are you seeing the geothermal space playing out? What makes it different? What makes it exciting? And, and what are some of the challenges that you're seeing?
Kathy Hannun: I think one of the things that certainly differentiates geothermal is you have to put those ground loops under the yard. So, one of the big obstacles we identified at the very beginning was that there isn't really like drilling equipment that's purpose built for the suburban home, right? There's like no other thing you have to do in a suburban yard that involves drilling hundreds of feet into the earth. And so that was one of the first problems that we really explored at X. And then we've continued to develop as an independent startup.
We've created a set of drilling equipment, that's purpose-built for this exact industry. So, you know, we thought about what would your drilling equipment look like if it was designed to install ground loops in suburban yards? So, we wanted to make sure it could fit in small yards. We wanted to make sure it was very clean because homeowners don't like a lot of disturbances in their yard. We wanted to make sure it was cost effective so we could offer a good price to customers.
So that's been one sort of major pillar of what we've been doing, but there have been others as well. We had to look into really mainstreaming the heat pump and creating a product that was scalable. We had to look into how do we provide the right financing tools to customers like the solar industry has done, so that you don't have to pay for everything upfront, but you can actually pay over time as you're saving money.
Brian Ardinger: So, let's go back to the Google X experience. A lot of corporate accelerators out there, they oftentimes take on that Horizon One or Horizon Two types of innovations, you know, things that are closer to the core or slightly adjacent to the core. Google X is known for taking, like you said, moonshots. Can you talk a little bit about the Google X experience? What's it like, how do you go about evaluating ideas and launching something like Dandelion?
Kathy Hannun: Yeah, it was an incredible opportunity to get to work there, especially just because it's so rare to have the license to think of ideas that are so different than what's been done. And at such a large scale as Alphabet is willing to tackle.
And I think a lot of what I really loved about Alphabet overall, including X is that the culture is very bottoms up. So, there's like a lot of the employees drive initiatives. That then get, you know, the successful ones get adopted by the company overall, like Gmail is a successful example of this famously.
The process was, you know, we have a lot of freedom that those of us who are on the team looking for these new ideas. Our only criteria were we needed to be looking for technology businesses. So, there are a lot of big problems in the world that are truly big problems and solving them would make a huge difference, but they're not technology problems, they're policy problems or economic problems, or, you know, any sort of thing.
But Alphabet was very committed to, you know, we're a technology company, we want to do technology problems. So that was one thing. The other was we had to look for opportunities that were of a big enough scale. So, the business needed to be able to grow, to be a massive business, just to make it worth the while of investing all the resources that Alphabet was willing to invest and to make it meaningful to Alphabet if it were successful.
And then we were asked to look for problems that would truly make the world a better place, which sounds so, maybe Pollyanna and it's very subjective. Right. And no one was pretending it wasn't, but I think there truly was an authentic desire to really try to do something useful for humanity, you know? So, what a privilege to get, to try to work on problems that could be huge and impactful to the world and to have the freedom to really look in whatever domain we thought would get us there.
And I would say like one advantage of focusing on clean energy is that it's very easy to make the case that it's useful and that it would make a big difference if you figured it out.
Brian Ardinger: So, did you go through the process of finding your own ideas? Was the idea of that hire smart, intelligent folks and have them experiment and pick things that they want to work on and then iterate through that. And then hopefully one or two would get to a point where it could spin out as a business or walk me through that process.
Kathy Hannun: The Rapid Evaluators, so the team I was on, we had freedom to either, some people on the team were PhD chemists, or like very senior software engineers, you know, lots of different backgrounds. So, we could either come up with ideas ourselves or look outward, right? Like just survey the landscape of what was going on in the world and bring sort of those ideas in house. It was our responsibility to construct sort of the case, right? Like what is given a technology or an idea that we found. Build the case. Like why should X be interested in this?
And then we would pitch essentially that case or that idea to the management team of X. So. This included X's leader, Astro Teller, but also its head of finance and it's head of operations and it's head of product. And then if we made a strong enough compelling enough case, we would be, we would get a certain amount of funding to pursue the initial stages of the idea.
And it was almost at that time a process that mimicked the process of funding, a startup, right? Like the first pitch. It was mostly about the idea and like the promise of the idea and the funding amount wasn't super large. It was just enough to sort of prove out, de-risk the initial phases. And then once we had done that, we would come back to that same group, report back on our progress, and then ask for additional funding.
But the burden of proof would be higher. Right. It ratchets up every time, sort of in relation to the amount of funding we were asking for. Right. And that was the process. I should say that it might have evolved. Right. I haven't been there since 2017. So that was the process circa 2017, but I'm sure it's evolved a little bit since then.
Brian Ardinger: Well, the idea of iterative bets based on evidence, like you said, it came from the startup world, but it seems to apply to, corporates should be looking at that as an option as well, because I think oftentimes, they take the approach, well, here's your $10 million R & D budget. Come back and tell me in a year, if it worked. Versus much more of an iterative approach to taking ideas that you don't know if they're going to work and moving them through a particular process. When an idea like Dandelion came to be, you pitched your initial thesis and that. At what point, does it spin out into a startup?
Kathy Hannun: So, at one of those check-ins, it was clear to all of us, right. It was clear to me as the leader of that project. It was clear to the management of X. There was a lot going for Dandelion in the sense that it looked like there was a big market, it looked like it could be a big impact. And it was certainly a technology idea.
However, despite that, it wasn't necessarily the best fit for Alphabet. You know, like what we do is install heating and cooling systems in homeowners’ yards starting in the Northeast of the US. There's really almost nothing in common to what we do as a business, to what Alphabet tends to do. And it just wasn't a very good fit as an Alphabet company.
And so rather than force fit it, I pitched the idea that we could spin it out and have it be a standalone startup. And I think I was able to do that with this idea because it's not the type of idea that requires a huge amount of capital upfront before you can commercialize.
So, for example, the self-driving car does, right. It really requires like a decade and billions of dollars and you really have to invest to create a car that can drive itself. For geothermal heating and cooling, we did not. We could just be a startup. Commercialize, learn from our customers iterate quickly, and then use those proof points to raise more money and sort of fuel our growth.
And I think that that was a better structure for us because it really forced us to focus on the right things sooner. So, we all agreed this would be a good path for Dandelion. And then it was just a matter of figuring out how do you spin a startup out of X? So, we all worked together on that project for a few months, but then we were successful, and it officially spun out in the spring of 2017.
Brian Ardinger: And so now you're going concern, you raise additional capital, what's next in Dandelion's path, and what are you looking forward to?
Kathy Hannun: I'm really looking forward to expanding our geographical footprint. So, we started the company in New York. And we've been primarily a New York company in our early years. We recently last year expanded into Connecticut and we'll continue that expansion and accelerate it this year. I'm also really looking forward to continuing our R & D and our technology development, when it comes to heat pump products.
Our heat pump is much less expensive than what was available before. And it has made geothermal accessible to so many homeowners that could have never gotten it before Dandelion, which is like very rewarding and something that I really love about the opportunity to do Dandelion.
But I think there's a lot more work to do, right? We're still in the very early phases of the technology and there's more product development we have in store that will make different types of heat pumps that are a good fit for different types of homes that we can't serve today.
And another example is the solar industry has done a great job of investing in finance products. So, there's PPAs and leases and loans, and like just lots of choice for the customer. None of that existed in geothermal. We do have a loan today that we offer that about half of our customers take advantage of, but we think there's a lot of opportunity to extend the products that we offer to include some of those other ones that might make this financially feasible for customers that can't do it today. So, there's still so much to do. Like we're really in the very earliest days.
Brian Ardinger: And are you looking at different markets? Like right now you're in residential. Are you're looking at smaller commercial types of opportunities or...?
Kathy Hannun: Today we're not. Today we're very focused on residential. What I will say though is that until now we've been very much focused solely on going into existing homes and replacing furnaces and boilers with heat pumps. One of our investors in this last round and in prior rounds is Lennar. One of the largest home builders in the US.
So, we're really excited to partner with them and extend this technology into new construction, because why put a furnace into a new home to begin with, especially as, especially as we see like all of these cities banning natural gas, you know, like there's just so much momentum. Pushing the building sector away from fossil fuels, so I think it will serve builders well to just have electrified homes to begin with.
Brian Ardinger: And then the last question is what other trends or things are you excited about politically or otherwise that you see the opportunity come to fruition of what you originally saw with Dandelion and where it's going to go?
Kathy Hannun: Well, I would say that I never expected in 2017, the change would happen so quickly. So, like, I did think electrification would be a trend. I did think that clean energy would be a trend, but like I would have never imagined there would be this much momentum so quickly, which is really exciting. So just the fact that we're seeing this recognition, that natural gas really isn't a clean fuel.
I'm like we can't keep installing it. If we're going to meet any of our emissions targets and sort of a greater willingness of policy makers and just citizens to put the policies in place that will transform our economy to clean energy.
I think there's a greater awareness that clean energy will create jobs. It's not going to be terrible for the economy. Like we are creating a lot of jobs. There's just a lot like that, that gives me a lot of confidence that this trend has already gained enough momentum that there's no stopping it, you know. So that's very exciting because of course that's exactly what we're doing and what we're trying to help make happen.
For More Information
Brian Ardinger: Well, definitely exciting times ahead. If people want to find out more about yourself or more about Dandelion, what's the best place to reach out to, or look at?
Brian Ardinger: Awesome. Well, Kathy, thank you for being on Inside Outside Innovation. Looking forward to seeing what's next in the future and appreciate you sharing your insights.
Kathy Hannun: Thanks so much again for having me.
Brian Ardinger: That's it for another episode of Inside Outside Innovation. If you want to learn more about our team, our content, our services, check out InsideOutside.io or follow us on Twitter @theIOpodcast or @Ardinger. Until next time, go out and innovate.
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