Startup Series: Therma
Today's guest is Manik Suri, CEO and Founder of Therma.
The cold chain is a massive part of modern society that doesn't get much attention. It stores a huge amount of goods, allowing us to keep food fresh, medicines effective, and current internet infrastructure. Yes, even data centers are part of the cold chain.
Therma is turning commercial and industrial refrigeration systems into virtual power plants and helping to reduce emissions across three vectors: food waste, energy, and refrigerant gases. Manik took a lean startup approach to Therma with a thesis that he could monitor refrigeration to help companies avoid spoilage. That idea led him to uncover related customer problems such as controlling temperature, optimizing power consumption, and detecting potential equipment failures that could lead to leaks. Collectively these problems add up to nearly 10% of global emissions. As refrigeration and cooling spread across a warming world, this footprint is expected to grow. The story of unchecked cooling is one of the self-reinforcing negative feedback loops where warmer weather requires more cooling, which uses more power and leaks more refrigerant, causing warmer weather… on repeat.
In this episode, Cody Simms chatted with Manik to hear the details of our collective refrigeration and cold chain problem, how his solution at Therma came to be, and what's next for this side of the cooling world.
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Episode recorded on November 21, 2022.
In this episode, we cover:
[2:19] An overview of the cold chain
[5:10] Regulations and rules from a temperature management standpoint
[8:09] Major sources of waste and inefficiency in the cooling sector and cold chain
[10:02] Role of refrigerant leaks during a machine's lifespan and end-of-life
[14:49] An overview of the cold chain emissions footprint
[18:07] Origins of Therma and the company's solution
[23:12] Manik's journey and how he landed in refrigeration
[27:36] Therma's hardware, software, and analytical platform
[31:00] The company's subscription model and how it came to be during the pandemic
[33:16] How Therma predicts manufacturing timeframes and balances risk
[35:06] The company's early adopters at a national level and plans to scale
[38:13] Job opportunities
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Jason Jacobs (00:01):
Hello everyone, this is Jason Jacobs.
Cody Simms (00:04):
And I'm Cody Simms.
Jason Jacobs (00:05):
And welcome to My Climate Journey. This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (00:15):
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.
Jason Jacobs (00:26):
We appreciate you tuning in, sharing this episode, and if you feel like it, leaving us a review to help more people find out about us so they can figure out where they fit in addressing the problem of climate change.
Cody Simms (00:40):
Today's guest is Manik Suri, CEO and co-founder of Therma. Therma's turning commercial and industrial refrigeration systems, also known as the cold chain, into virtual power plants. And in doing so, is helping to reduce emissions across three vectors, food waste, energy, and refrigerant gases. The cold chain is a massive factor in modern society that frankly doesn't get much attention. It stores over $3 trillion worth of goods, and it's what allows us to keep food fresh, keep medicines effective, and have a modern internet infrastructure. Yes, even data centers are part of the cold chain.
(01:12):
Manik's taken a lean startup approach to Therma that I enjoyed learning about. He started with a thesis that he could monitor refrigeration to help companies avoid spoilage, and that's led him to uncover related customer problems such as controlling temperature, optimizing power consumption, and even detecting potential equipment failure that might lead to refrigeration leaks.
(01:31):
Collectively, these problems add up to nearly 10% of global emissions, and as refrigeration and cooling spreads across a warmer world, this footprint's only growing. The story of unchecked cooling is one of self-reinforcing negative feedback loops where warmer weather requires more cooling, which uses more power and leaks more refrigerant, which causes warmer weather. Repeat, repeat, repeat. Therma's stepping in to reverse these trends and I enjoy chatting with Manik to hear the details of these problems, how his solution at Therma came to be and what's next. I hope you do as well. Manik, welcome to the show.
Manik Suri (02:03):
Great to be here, Cody. Thanks for having me.
Cody Simms (02:05):
I don't know that we've spent a whole lot of time on the show talking about the cold chain, talking about refrigerants, and I want to start there. We're going to go into your journey, we're going to go into all of that, but I want to start by just setting the table here. What is the cold chain?
Manik Suri (02:19):
A lot of people ask me that. My mom was asking me that recently. She was visiting around Thanksgiving, and I get it a lot from people who are thinking about joining the company. The cold chain is this ubiquitous and underappreciated infrastructure layer that consists of all of the refrigeration that provides food and pharmaceuticals to the billions around the world who depend on it, but it's overlooked because it's been around for 100 years. And the cold chain is the technical term for this supply chain, from production down to consumption.
Cody Simms (02:50):
Do you have a sense of scale of the value of goods that have to be moved in a cold environment or stored in a cold environment? I started talking to a couple of founders who work in cold chain, including learning about Therma. And now every time I drive down the road, I see a big Thermal King truck or things that I had never even really noticed before, previously. It's helped me realize how ubiquitous it is, and obviously it is because anything that is perishable obviously needs to be stored in a way that it won't perish.
Manik Suri (03:17):
It's true. And at the same time, it's one of those things where, if you haven't thought about professionally, it's rare that people have actually given it much thought personally. A couple of stats that are interesting, around $3 trillion in goods move through and are stored in the cold chain every year. So just huge, huge economic value. We're talking about food, fruits and vegetables, proteins, dairy, and of course pharmaceuticals.
Cody Simms (03:42):
Don't forget frozen pizzas, of course. You got to stay with the important stuff here.
Manik Suri (03:46):
I feel like you're checking out my freezer at home here. The last couple of years, people started to pay attention to the cold chain on the pharmaceutical side because when COVID was starting to take off, these new mRNA-based vaccines came out that were highly temperature sensitive and required a huge amount of infrastructure. And so the cold chain has always been around, but on the pharmaceutical side, vaccines, drugs, plasma, blood, tissue samples, all require cooling.
(04:13):
And then data, another pillar of the modern economy. Data is actually stored in refrigerated boxes. Data centers are basically large refrigerated boxes. So I think of it as kind of the bedrock for three of the most important aspects of human society, food, pharma, and data. They're hard to think of goods that are more important than those three.
(04:31):
Refrigeration makes them all possible and it's necessary from the beginning all the way down to the end of the supply chain, from where it's made to where it goes into our bodies. So that's the cold chain. Roughly 90 million commercial fridges and freezers in the world, and 1.4 billion residential. A lot of these objects are out there.
Cody Simms (04:49):
This is probably an answer to which there's no single question, but how does industry today know if something has failed along the way? When I buy a frozen chicken at the grocery store, I just basically assume it's been frozen the whole time, though I'm just trusting. How does the industrial system know that?
Manik Suri (05:10):
It's basically a set of verification and protocols and practices, some of which are agreed to by business and by industry, and some of which are required by government and regulatory bodies. So we've got a whole bunch of rules and regs around this stuff in pretty much every industrial economy because human lives and wellbeing depend on it. If you had vaccines go out of temp or food go out of temp in the journey, you could really hurt people or cause huge, huge amounts of pain and suffering. So there's a lot of regulation around the cold chain from a temperature management standpoint, formally speaking.
(05:46):
But when it comes down to it, most people and most businesses and operators aren't using a lot of sophisticated technology. It's a lot of clipboards and logbooks and some manual data loggers. We've got just a huge amount of trust and verification happening with human activity, checking stuff to make sure. And if you have something go out of zone or out of band, that's called an excursion, those have to be tracked and reported, and generally they lead to either incident reports or in some cases throw outs. But just a ton of this stuff happens. Lots of excursions, lots of loss and waste all the way up and down the supply chain. That's one of the big problems with the cold chain.
Cody Simms (06:22):
And you mentioned that most operators aren't spending a lot of time tracking this. Is this because they don't have the tools to do it or they're just busy?
Manik Suri (06:30):
I think it's a bit of both. The technology that makes managing cold chain automated and makes it seamless hasn't been around for very long. Until recently, you couldn't get real-time data out of the inside of fridges and freezers reliably and continuously without people checking it physically. And if you're reduced to having to check stuff multiple times a day in every location all year round and all of your locations, that's just really painful and very labor intensive, and most businesses don't have the wherewithal or the resources to do it. So you end up with spot checks and some combination of audits and manual process, but that's changing. A lot of new technology's coming out and businesses are starting to embrace automation and real-time tracking, and we're trying to be part of that.
Cody Simms (07:23):
And I'm going to guess when it comes to the cold chain, there are a couple of first, second, third-order effects. First-order effect is stuff can't spoil, you've got to keep it cold the whole time. You mentioned the regulations, et cetera. I assume the second-order effect is takes a lot of energy to keep all this stuff really cold.
(07:37):
And so what are the sources of energy coming in to manage this? Are we using clean energy? Are we optimizing energy usage? Are we turning refrigeration on and off at the right times? All of that, which I'm guessing the answer at all that is, it's like most people's homes where you just set it on a certain number and then you leave it alone and you're not actually optimizing anything. And then the third piece I think is almost the silent killer with the cold chain, which is refrigerants themselves, which are huge greenhouse gas emitters. Am I kind of thinking about the problem the right way?
Manik Suri (08:09):
I think that's spot on. You nailed it. There are three big sources of waste and inefficiency, all of which are bad for business and, ironically, all of which are causing heating or global warming, as well. So the cooling sector and cold chain has waste around spoilage product getting spoiled and lost. There's waste because of the energy consumed and the way it's used. These are assets that are run dumb. They're not being turned on and off dynamically and optimized. And these pieces of equipment use these really ultra warming chemicals called refrigerants, which leak and cause huge amounts of warming when they leak.
(08:46):
So all three of those waste money and cost businesses ROI and all three of those cause warming. And cold chain, in case I didn't say this earlier, Cody, the cold chain is growing rapidly. It's a huge growth sector because a lot of the world still doesn't have that much refrigeration per capita. So most of the developing economies are actually putting a ton of refrigeration in. And so the sector's growing at like 15% a year and in some places 40% or 50% a year, which is just a massive amount of growth. Ironically, as cooling is growing, it's causing more warming, which requires more cooling. So there's this negative feedback loop as the planet gets warmer.
Cody Simms (09:23):
Obviously, it's a huge factor as air conditioning is coming online in developing countries. But even in California, I saw I think a recent report from the California Air Resources Board that said that refrigerants are 4% to 5% of greenhouse gases in California and the fastest growing source of GHGs in California. What is causing that? In my mind, leaks would happen presumably when a system gets end-of-lifed, if you're not properly disposing of these refrigerants properly. Are there leaks that happen over just the general course of business, as well, that these companies aren't able to monitor or pay attention to?
Manik Suri (10:02):
There are. There's a lot of refrigerant leak at end-of-life, during disposal and replacement of these units, but there's actually quite a bit of leakage that can happen during the life cycle, particularly in refrigeration systems that are assembled in the field, cold storage warehouses, distribution centers, supermarkets, grocery, convenience stores. You've got a lot of leakage happening because these are field assembled, welded and jointed. The way parts are mechanical and the way in which they're assembled, you just end up having areas where leakage happens.
(10:34):
The Washington Post had a piece a couple of years ago, they did an investigative undercover survey of supermarkets in the US looking at refrigerant leaks, and they had auditors go in and sample the leakage rates, and they found that the leakage rates were around 50%, 55% in large big-box multinational chains in the US. So just a huge amount of leakage. These are not small companies and we tolerate a lot of leakage.
(11:01):
The EPA has pretty high bars for what's allowed. You can have between 20% and 35% leakage a year, of refrigerants, and that's permissible by the law. Now, that's changing. The Biden administration is passing new regulations that go into effect in the next decade and beyond that it's going to put a ceiling on how much refrigerant leakage is permitted. But right now, the US is pretty lax, as are many other countries outside of the EU.
Cody Simms (11:26):
That's super crazy to hear, frankly, given the amount of attention that's been put on methane, which I think is what we tend to talk about beyond CO2 in terms of a heavy greenhouse gas. But my understanding is these refrigerants, or hydrofluorocarbons, HFCs, are similar to methane in that they are extremely more potent in heat trapping than CO2. Short-lived, meaning after a few decades they dissipate, but in the short amount of time that they are in the atmosphere, they're extremely damaging, which is a similar profile to methane and they're also entirely manmade. Is that correct? Am I understanding the background correctly?
Manik Suri (12:02):
You are. It's a fascinating history and kind of a window into human ingenuity and the nature of business and politics, but refrigerants have evolved over the last century. When I was growing up in the '90s, there was all this talk about the ozone layer getting depleted and skin cancer and what's going to happen to the poles. The generation of refrigerants that were permitted at that time were ozone depleting. And so the countries of the world came together in the Montreal Protocol in 1998 and banned the use of ozone-depleting refrigerants.
(12:35):
But what they allowed was this next generation of refrigerants, which don't eat the ozone layer, but they're ultra high global warming potential. They're ultra high GWP, so they're 1,000 to 11,000 times more warming than CO2. Those have been legal and have been widespread in their adoption, and they've become cheaper and cheaper. And as a result, businesses have changed refrigeration systems to use them. Unfortunately, they have this really devastating short-term effect, which 20, 30 years is actually critical for what's going on with our planet right now. So even though they're short-lived, they're causing huge amounts of warming, and that's why you've got KARB and other groups.
(13:16):
When I was thinking about climate, Project Drawdown had an annual reporting of solutions to global warming, and they had 80 solutions ranked and solution number one out of 80 was refrigerant management. And I was like, "What, how can that be the most powerful way to reduce global warming?" And it's because they cause so much warming with so few compounds. So yeah, those are starting to get attention. And some regions in the world, like the EU, have been a little bit more forward thinking in terms of banning or regulating HFCs. But generally speaking, most of the world still allows very high warming potential refrigerants to be used. Naturals, which are the next generation, are just starting to get adoption.
Cody Simms (13:58):
Such a fascinating story, especially because a lot of pushback I hear from people who are say like, "Oh, climate will take care of itself," is, "Oh, remember we had that hole in the ozone problem and it just went away?" Interesting to hear the story of how that happened.
Manik Suri (14:09):
Well, we solve some problems and then we happen to cause new ones and we have got to dig our way out of new holes, so we've got to figure out this other problem now. But people are working on it.
Cody Simms (14:19):
So that's, like I mentioned, the silent killer of the cold chain problem. Let's talk about the energy footprint side of things. What does the energy footprint of cooling look like today? I assume it's mostly just a mirror of the grid, but you also have a lot of trucks and transport that are happening in motion and aren't necessarily attached to the grid, which I presume most of them are not battery electric powered today. So that probably creates even more emissions footprint out of them. But maybe walk us through what the energy footprint of the cold chain tends to look like.
Manik Suri (14:49):
It's definitely one of these single biggest sources of energy consumption in the commercial world. You've got cooling equipment, which is refrigeration and air conditioning, in the vast majority of residential, light commercial and heavy industrial environments. That's just the stationary stuff, not including the trucks, trains, and ships that move things. Various estimates, but you could think of it as between 8% and 15% of all the electricity in the country is going into cooling. So it's just one of the single largest sources for electricity use.
(15:21):
And what I find really astounding, but also a reason for opportunity is there's just not a lot of intelligence in how these assets are used. They're not being turned up and down and on and off constantly and self-learning. They're basically run the same way they were 50 years ago. You buy a piece of equipment, you plug it in the wall, you set a lower and upper band and that's it. You let it go till it breaks or it fails. Using a ton of energy, still run fairly, basically pretty rudimentary and growing.
(15:51):
In addition, there's a lot of energy that goes into the moving of stuff across trucks, trains and ships. That's a combination of the way our supply chains are set up. We end up buying stuff from halfway around the world because we want to eat and consume things on demand, and we don't necessarily cycle our preferences around geography and weather and seasonality. And so you're having berries shipped 5,000 miles and sushi flown in 10,000 miles, and that stuff is just expensive and also super energy intensive to do at scale. We're going to take a short break right now so our partner, Yin, can share more about the MCJ membership option.
Yin Lu (16:31):
Hey folks. Yin here, our partner at MCJ Collective. I want 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, have since then grown to 2,000 members globally. Each week we're inspired by people who join with differing backgrounds and perspectives. And while those perspectives are different, what we all share in common is a deep curiosity to learn and bias to action around ways to accelerate solutions to climate change.
(17:01):
Some awesome initiatives have come out of the community. A number of founding teams have met, nonprofits have been established, 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, workshops and more. So whether you've been in climate 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 (17:33):
All right, back to the show. I assume a lot of this, then, in terms of optimization, ends up mirroring the work that other demand response companies in the climate tech space are doing, where it's all about peak load shaving and managing the responsiveness of your local system to the demands of the energy grid. And that doesn't exist today at all in the cold chain world, specific to that equipment that is itself using a huge chunk of electricity. Is that the crux of the problem that you're working on at Therma?
Manik Suri (18:07):
That's one of the key facets. It's one of the key dimensions of it. We started by monitoring refrigeration. We created a drop-in self-install sensor that a 20-year-old can get up and running in a matter of five minutes. So it's a drop-in-place sensor half the size of a deck of cards that uses long-range radio to get signal out reliably. Long-range radio works much better than Wi-Fi and Bluetooth so we're able to get this 24/7 signal and help catch spoilage and catch loss events.
(18:36):
By monitoring refrigeration continuously, we realized that it was possible to start thinking about turning it on and off without spoiling the product. And that's critical. No one's going to let you turn refrigeration on and off if you're going to spoil their product. That's just not going to fly. But by giving everyone 24/7 visibility, it opened up the possibility of actually turning the fridge off or turning it warmer for a few degrees timed at the right moment.
(19:04):
The way refrigeration works, you have these large buffers. You can actually store stuff, deep cold, without spoiling it and actually let the refrigeration warm up or turn off with no effect on the product. Now, that means that the refrigerator or the freezer has a battery built into it. That battery is the fact that the product inside can stay cold for a certain number of minutes or hours. That's the battery. We've never tapped these batteries. There are 90 million of these commercial batteries out there in the world and we're just starting to tap them. And tapping them means turning them off either when no one's using them or turning them warmer or off, say when the grid needs the extra power and diverting that power to something more critical like an ICU in a hospital.
(19:49):
And so again, it's all about getting the timing right. You can't do this for too long or you're going to have spoiled product, but what's exciting is there's a lot of low-hanging fruit. We've got schools out there, K through 12. Turns out that schools have a lot of refrigeration and are closed for several months of the year because of holidays. Well, guess how many schools turn off refrigeration when they're closed? Not many, because these assets are run the same way they were 50 years ago. You plug them in the wall and you let them go till they break or they fail. No one turns refrigeration on and off dynamically because you'd have to manually do it. Someone would've to go out and unplug it and plug it back in. People just don't do that. And also it's risky.
(20:25):
That's an example of really low-hanging fruit. We've got hotels. Well, hotels have a lot of seasonality. The larger hotels have huge refrigeration systems and banks. In the off season, they might only use half or a third of their refrigeration. They're not turning off that extra refrigeration. It's just sitting there running at full tilt. So those are areas where we can bring some intelligence in and start creating real efficiency.
(20:49):
The more sophisticated work that we're doing is around tapping those batteries when the utility needs the power and taking advantage of demand response, meaning the utility actually will pay for capacity curtailment and in some cases demand charge reduction by cutting the peak. Lowering the peak use can actually save the customer a lot of money and save the utility not having to have that extra power. Multiple ways to create savings, just using less of it when no one needs it, tapping into demand response and getting paid by the utility, and then optimization with demand charges. So we're doing all three of those on top of our monitoring.
Cody Simms (21:24):
So the monitoring helps just with general like, "Hey, you're not going to have spoilage." You're going to actually be able to prove that the goods that you transported from A to B to C all stayed at the required temperature the whole time they did. That also gives people confidence in allowing you to control so you can optimize the temperature by shutting it on or off, but keeping the core temperature inside the unit appropriately chilled. And then the optimization layer is the ability to actually have a third-party actor say, "Hey, I want this power right now and I'll pay you for it. Shut it off and I'll pay you to shut it off because we want to keep the grid from hitting peak right now," during a heat wave or likewise.
Manik Suri (22:05):
That's exactly how we think of it. It's a layer cake. We're building the foundations and then scaling from there. So we started with the idea for monitoring a couple of years ago. Now we've got 15,000 of those sensors deployed and growing. And the controls idea was one of those, "Huh? I wonder if you could turn the fridge off?" And one of our customers told us they turned refrigerated warehouse off for three days and saved huge amounts on the power bill during a storm. We're like, "Wow, okay. Interesting. Thermal battery."
Cody Simms (22:30):
Oh, they were just doing it manually. They were like, "Oh, I've got this-
Manik Suri (22:32):
Manually.
Cody Simms (22:33):
"... monitoring system and now I can sit here and make sure that the temperature doesn't go above this level."
Manik Suri (22:38):
Exactly. And it was like, wow, totally makes sense. I've had that happen in my fridge or freezer at home. Stuff stays cold for a while. Why aren't we tapping that battery? That's a thermal battery. And then of course you can apply data science and AI to that and scale it.
Cody Simms (22:50):
Well, and let's start with your journey. You mentioned the start of it was this monitoring use case. How did you land on that? You said that you saw draw down, talk about refrigerants reduction being a huge part of the problem. You, I believe, worked in the Obama administration. You've done a lot of work across some of these problem sets. Maybe walk us through how you got here.
Manik Suri (23:12):
I certainly wasn't planning to work on refrigeration when I was a kid. It was something I hadn't thought a lot about until a few years ago and now I think about every single day. But I think life sometimes makes sense in the rear-view mirror. You don't necessarily know where the road has taken you and then you look back, and one thing led to another. I started out my career working in finance. I was an investor, my first job out of school. I'd grown up in California, went to college at Harvard and later law school at Harvard as well. So a lot of winters, a lot of snow, made up for plenty of summers in the Central Valley.
(23:43):
I decided to learn about how business and finance worked by working at one of the best known hedge funds, a place called D.E. Shaw, for the gentleman who ran the firm, was there for a few years. Decided to go back to law school because I wanted to work around the public sector and public policy. Did a short stint as a junior guy in the Obama White House on the economic policy team. I was trying to figure out whether to stay in government and I met a woman, the Deputy CTO, Beth Noveck. She jokes she's a recovering lawyer as well, and had gone to Harvard 10 years before me.
(24:15):
Beth had taught herself how to write code and was working on how tech could be deployed to work on big public problems. And I listened to her give a talk in DC. It was a super inspiring talk. The thesis was a book she'd just written called Wiki Gov, about how tech was transforming social life, how we dine, how we date, how we engage in everyday activities, but big problems like safety and sustainability and governance just weren't being tackled and there's a huge opportunity. So I decided to leave government and join Beth.
(24:44):
We started a center together at NYU and MIT, where she teaches, called the GovLab. That was 10 years ago in 2012. That's how I got into tech. It was to build tech for good. I helped Beth build this Do Tank up. We raised some grant capital for it and we were trying to figure out ways to kind of really scale impact on these big public problems. My third co-founder there, a guy named Aaron Cohen, he was teaching at NYU at the time. He's a serial entrepreneur who'd been an internet entrepreneur. He's worked on startups for 30 years. Aaron convinced me that we needed to leave and start a company. He basically said, "Look, if you really want to scale impact on these problems around safety and sustainability, you've got to actually build product. That's how tech changes the world. You've got to actually build great solutions."
(25:29):
And so he and I left and started a company which was the precursor to Therma and that was called Collaborative Inspector, CoInspect. And the idea was to reduce waste and improve outcomes in the food supply chain to improve food safety and sustainability. Food, because a couple of things. One was 2015 and Chipotle was having a bunch of food safety issues at the time and we realized, wow, these big food companies are still using pen and paper. And maybe more personally, I'd grown up in Fresno, California in the Central Valley with farms beyond my house and knew a lot of growers. And so I actually knew a little bit about the food industry from firsthand exposure and I knew how big and how antiquated it was. A lot of people in the Valley were saying, "No one from the Bay Area comes and meets us. No one really talked to us about technology. We could really use the help."
(26:16):
So that's how we got started working on Farm to Fork. CoInspect turned out to be working on the right problem with the wrong solution. So three years of scaling CoInspect, we got into 5,000 locations. What we discovered was most people were checking temperature. That was a big part of what they were doing with our mobile app. We were replacing a piece of paper with a mobile app, but no one wanted to check this stuff on a clipboard. It doesn't matter if the clipboard is on a piece of paper or on a tablet. They just don't want to have to check this four or eight times a day.
(26:45):
So we were watching users using our mobile app, trying to figure out how to improve the UX/UI. And one of my colleagues who's our head of engineering, looked at me and said, "I don't think we're solving this the right way. People don't want to do this work. We're basically making them do something they were faking on paper. Now we're time-stamping it and geo-locating it. That's not the right way to solve this. We should automate this. We should use sensors and automate this." That was in the summer of '19 and that's when the idea for Therma was really kind of born. So it was meant to be a better way of solving this problem on how to keep the temperatures right without making people do work they didn't want to do or have time to do.
Cody Simms (27:22):
Awesome. And then you developed basically the hardware module to start. Does it plug onto each individual refrigeration units or does it plug onto your electrical panel or something like that? How does it actually work with a given system?
Manik Suri (27:36):
They're drop-in-place, so there's no installation. It's a self-install. So you drop them in, you can stick them with a zip-tie, tape or screws. And we started working on hardware. We actually went through a hardware climate accelerator called Urban-X in Brooklyn, which was run by early CoInspect investors, Urban Us and BMW. Timing is serendipitous.
(27:57):
We were reading Project Drawdown and I was talking to some of our CoInspect investors and they were saying, "Look, if you're thinking about refrigeration, you should be thinking about both the food waste and the refrigerant piece. If you can monitor this stuff continuously, you could have a significant impact both on reducing waste and spoilage, and food waste is obviously a huge and pretty underappreciated problem around climate. And also these refrigerants leak and if you can catch equipment failure with 24/7 monitoring, you can actually stem some of those refrigerant leaks."
(28:27):
So we went through a hardware accelerator, we built hardware. That was interesting and challenging. The sensors, we had about 100 sensors in the world in the beginning of 2020, a couple of customers. And then the pandemic hit and, despite the pandemic, things took off. Turned out that it was the right way of solving this problem.
Cody Simms (28:47):
The monitoring equipment itself monitors not only temperature, not only can help now control and optimize energy use, which I want to understand from you how that's plugged into the actual flow of electrons into the building, but it sounds like but also is able to sense potential refrigerants' leakage as well. So of the three big areas of the cold chain that we talked about being problems, waste, energy utilization and refrigerants, you're tapped into helping to prevent all three from causing emissions. Am I understanding that correctly?
Manik Suri (29:19):
You are. You are. That's the ambition and that's what we're trying to do on all three. The tech itself was a couple of things that are working and in place. We've got the sensors which can monitor temp and humidity continuously. Then on top of those sensors, we have a series of software. We've got web and mobile, and then we've got an analytics package. The analytics is basically taking the historicals and forecasting or predicting future performance. So by looking at time series, we can start seeing patterns.
(29:49):
Turns out that equipment that's going to fail starts showing signs of it. The amplitude on the waves might change, or the way in which it doesn't hold temp starts to show a sign that hey, this thing is going to go down. So that becomes an early warning sign for refrigeration failure, which could be because of a refrigerant leak or because of wiring or even in some cases a door jamb. We've caught all kinds of issues. Once, we found operators that were leaving doors open in the middle of the night for two hours because they were doing food delivery and cleaning and just leaving the door propped open. So we find all kinds of stuff across the 10,000-plus sensors that are deployed.
(30:21):
The controls product I should just mention, Cody, is an add-on. So we actually have smart plugs that we send out. The smart plugs are used to turn stuff on and off on top of the sensors. So the sensors are there to provide the guardrail and then the smart plugs can be used to remote control and turn things on and off. And then there's a separate software layer on top of that. So there is an additional piece of hardware for this new controls project, which we're just launching now. That's actually launching just in Q4.
Cody Simms (30:48):
Got it. That makes a ton of sense. And is the business model mostly on the software side today? Mostly on the hardware sales? A little bit of both? How are you envisioning the company growing over time?
Manik Suri (31:00):
We've been really focused on reducing the frictions around adoption. One of the things that we observed was there's a ton of refrigeration out there. I mean, literally 90 million commercial fridges and freezers. The vast majority are not monitored or optimized. It's hard to find refrigeration that's being optimized in realtime. You can almost not find a company that does it. Starbucks doesn't, McDonald's doesn't, Marriott doesn't, Pizza Hut doesn't. So there's just a ton of opportunity, and I think being a company that was formed in the middle of the pandemic, really that started to take off despite the pandemic, we realized there's just so much going on for operators that you have to make it really frictionless if you want to get people to pay attention. There's just so much in 2020 and '21 that made it hard for hospitality.
(31:44):
So we went for a pure subscription-based approach. So there's no hardware costs, no installation, no implementation. Really, it's just you're paying for inventory protection, equipment monitoring, and now energy optimization. So it's designed to be something that you get ROI on, on month one. There's no upfront investment of expensive hardware installation like many people have had in the past. And that model seems to be working. It requires some risk and definitely our venture capitalist investors are taking on some of that for us by giving us the chance to actually bring a solution like this into the world.
(32:20):
But what we're seeing is we can sell this to very margin type operators. These are folks that do 4% to 10% margin. Your McDonald's, your TGI Fridays. They're not super cash-intensive businesses. And it brings a solution like this into their reach. And it also means we can sell it to not just large corporates, but also SMBs. We've got a huge number of small and mid-sized businesses that have 10 locations or less. We've got hundreds of those customers as well, which I love because it's fun to be able to work with and gratifying to work with independents as well, not just the big players.
Cody Simms (32:50):
It seems like the cashflow risk for Therma is not just cashflow in terms of, hey, we have to have money to create these and essentially give them away upfront in exchange for amortizing them over the course of a software license, but also manufacturing timeframes. You have to be really good at forecasting what the demand is going to be on your system in terms of how many of these things you need to produce and how quickly. How have you done that?
Manik Suri (33:16):
It's definitely dynamic. I mean, supply chain was complicated, to say the least, in 2020 and 2021. Just a lot of stuff going on in the world that made it hard to predict ships and shipping times and delivery windows. But I think we're gotten better and better. I think the first year was really tough. We made every mistake you could make. We had a lot of pop-ups go up on our website saying, "Sorry, your order has been delayed two or three weeks because of shipping and fulfillment issues." But I think we've started to A, we've gotten just a better and better team in place. Our team brings a lot of experience now in hardware-enabled business lines, in manufacturing ops, in supply chain and fulfillment.
(34:00):
Just having that experience and ability to know what mistakes not to make, that's helped a lot. Second, we're better capitalized. We've raised a little over 30 million, so by Silicon Valley standards, a drop in the bucket, but we have some capital now, which means we can afford to hold inventory. When we were getting started, we couldn't afford to hold much inventory because we didn't have any loose dollars. But now we can actually store some inventory, which gives us a little buffer.
(34:22):
And we're also getting into larger production runs, which means we're getting better economics, we're getting a little bit more opportunity to find new vendors in OEMs, original equipment manufacturers. So we don't have to take on as much of that risk. We're now starting to work with a network of partners and looking for new partners in '23 and beyond as well. I think that means it's normal, but growing pains.
Cody Simms (34:44):
And it seems like, as well as you're proving out the customer demand for the software side and there's revenue attached to that demand, there's clearly potential for some debt financing on the equipment side for you to continue to grow into, I would think. And maybe on the demand side, share a little bit. You've got some pretty marquee brands that are using your service at this point.
Manik Suri (35:06):
I mean, it's early. We've got a couple of great early adopters at the national level. Most of our customers are independents and franchisees. These are operators of marquee brands, but we haven't got portfolio-wide deployments yet. We've got our solution installed with folks that run some of the leading hospitality brands, Starbucks, McDonald's, Taco Bell, Pizza Hut, Dominoes, 7-Eleven, Marriott, Hilton, Wyndham and beyond. As well as some really interesting supply chain and logistics groups like UNFI, one of the largest Food Naturals distributors. You'll find their products in Whole Foods. We're in all of their warehouses across North America. Folks like Now Foods which does Nutraceuticals. We're working with some big cold chain and supply chain leaders. We're under NDA, but you'll see their trucks around your local neighborhood.
(35:57):
So we're trying to really prove out the technology. We're in this early stage where folks are saying, "Okay, this is interesting. How could I deploy this across 10,000 units or 100,000 units?" Again, I think the market is massive, 90 million piece of refrigeration. We're in a little over 10,000. We're barely scratching the surface and most of our customers are in the US. We've deployed Therma in 11 countries, but 95% of our customers are in the US. So we've got a few customers in Canada, Mexico, a couple in Europe. But the reality is, there's refrigeration everywhere and there is this waste around food, energy and refrigerants is happening everywhere. It's not just a California problem. So we would love to bring the technology beyond. Small team, got to start somewhere.
Cody Simms (36:41):
Well, what's next for that small team? What are your next big milestones you're working on?
Manik Suri (36:45):
I mean, we're very excited about energy and the energy optimization product. It's been a work in progress all year. We've been building out the controls and the data science, trying to make sure we can turn things on and off dynamically. And we've just started to launch that in the real world, meaning outside of our test kitchen in San Francisco. And the early tests are really interesting and positive. The savings has been significant. Talking about double-digit savings on the bill, which is a number that people are excited about, especially this winter. Energy prices are skyrocketing, inflation is still running rampant and we're talking about recession every week. So getting to a double-digit savings on the utility bill is getting a lot of people's attention.
(37:26):
That's, to me, a big part of our potential, which is to create real savings and create real ROI. Because I think if you really want to build something that's pro-social in sustainability or really in any category, as an operator and as an entrepreneur, it's got to create ROI for the user, otherwise it's philanthropy. So we've been super focused on how do we get that business ROI. We could never get there with CoInspect and we've started to get there with Therma.
(37:52):
To me, if we can get that financial return, then it becomes just a matter of scaling. That's top of mind, energy's top of mind because it's cold and everyone needs power this winter. It's in the news a lot. But I think beyond that, we're trying to hire and build out partnerships, so we've got a dozen open roles across the team and we're always looking for new folks to join us and help us.
Cody Simms (38:13):
What kind of talent are you looking for the most right now?
Manik Suri (38:16):
Right across the board, we are looking for folks to help us scale the data science side of the organization. We've got a small team. We're building that team out. So we're looking for applied ML. We're also looking for a full-stack engineering. We've got a web and mobile apps that we're kind of scaling. Some product roles are open, product marketing as well as product management. We're building out and scaling a new product, essentially. So it's kind of a ground-level opportunity. Some of the bread and butter type stuff, finance and ops, but also critical sales support and ultimately folks that are even just generalists.
(38:52):
We're looking for some support on internal tooling, fulfillment, a little bit of specialty hiring around energy, so we're looking for a couple of folks to join us on utility and energy markets and an HVAC-R technician, someone to lead our installation program. So if you know any technicians who are looking to leave the HVAC-R sector, who want to come work with a tech startup trying to create clean cooling, let me know. That's maybe my favorite role.
Cody Simms (39:19):
That's what's so exciting about this whole space. The whole space, meaning climate tech broadly. Hey, you're solving this problem that most people don't even think about and yet is a hugely important problem from an emissions perspective and a giant potential business, if you can crack adoption, and requires all sorts of different skillsets, from software to hardware to folks who haven't really had the career path that's given them exposure to a tech startup in the past, necessarily, but that clearly could be part of one.
Manik Suri (39:48):
It's super fun and also really gratifying to see people from all walks of life caring about these problems and coming together to build these solutions. This is not an ivory tower problem, this is very brass tacks. We're talking about refrigeration and cooling. So you really have to understand the physical world, but it's also the kind of problem that's both un-sexy but also really powerful because it's everywhere and obvious. We're not trying to build some new tech that may or may not work in 30 years. It's like, let's fix this stuff that's out there right now. It's a very interdisciplinary team. Our team brings a lot of different skills together. Very fun.
Cody Simms (40:24):
What should I have asked that we didn't cover today?
Manik Suri (40:26):
That's a great conversation. I've really enjoyed it. I would love to keep the conversation going, Cody, if folks who are interested. My joke and what I say is I'm trying to make cooling cool. It's one of the more un-sexy problems to think about. Not many people want to talk about refrigeration all day, but hopefully this was interesting.
Cody Simms (40:43):
Super interesting to me and I'm sure people who are listening enjoyed it very much as well. Manik, thank you so much for being on the show and I look forward to following your journey.
Manik Suri (40:53):
Real pleasure. Thanks again for having me, Cody.
Jason Jacobs (40:56):
Thanks again for joining us on the My Climate Journey podcast.
Cody Simms (40:59):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem-solving capacity. To do this, we focus on three main pillars, content like this podcast, and our weekly newsletter, capital to fund companies that are working to address climate change, and our member community to bring people together, as Yin described earlier.
Jason Jacobs (41:21):
If you'd like to learn more about MCJ Collective, visit us at www.mcjcollective.com. And if you have guest suggestions, feel free to let us know on Twitter @mcjpod.
Cody Simms (41:36):
Thanks and see you next episode.
