Tell us a little about Axiom Exergy and your business model?
Axiom Exergy is essentially an industrial “internet of things” (IOT) company. We make a product called the refrigeration battery, which transforms the world’s cooling systems into cloud-connected, intelligent, cost- effective batteries. Rather than selling customers an entire battery solution from scratch, we focus on customers who already own 75% of our solution: anyone who owns a large, central refrigeration system.
Our initial customer target is grocery stores, which already own and operate enormous refrigeration systems. We shine a light on these systems, which have been ignored and forgotten – sitting in the back room of the store for the last hundred years, chugging away 24/7, 365 days of the year. That old paradigm worked great for the last century when electricity prices were flat, and we had large, centralized base load generation plants on the electricity grid. That old model is fundamentally incompatible, however, with what is happening on the grid today.
The modern grid environment is much more volatile, with lots of intermittent wind, intermittent solar, and intermittent electric cars charging off the grid, for example. There are skyrocketing peak demand charges and highly variable electricity costs throughout the day. This volatility is a problem for grocery stores because they have to run their refrigeration systems all the time, regardless of electricity prices. We bring these electricity systems into the 21st century by connecting them to the internet and adding an energy storage buffer, thereby making it possible to actively manage refrigeration systems for the first time.
How did you come up with the idea for Axiom Exergy?
My co-founder, Anthony, and I formed a close friendship 10 years ago while playing in music groups together at Stanford. He is a Grammy-award winning saxophone player, and I play the trumpet. Because of our common passion for sustainability, engineering, and entrepreneurship, we knew we wanted to start a company together, with Anthony in a technical role, and me in the CEO role. After we both completed engineering degrees at Stanford, Anthony got his PhD in materials science at Berkeley. I worked at an energy services company in Washington D.C. for a couple years.
Anthony and I reconnected when we knew we were ready to start a company. We were really interested in enabling renewables on the grid by figuring out a way to offer renewables more cheaply than anyone else could. Ultimately, we realized that energy storage is the key barrier, and the only remaining barrier, to widespread adoption of renewables on the grid. It’s not cheaper solar panels, it’s not cheaper wind mills, it’s energy storage that’s really going to unlock this renewables revolution. So, we focused on that.
The huge light bulb moment came while I was at the energy services company, leading a $100M retrofit of 74 supermarkets on the eastern half of the U.S. for our big client, a national super market chain. On the very first day of that project the client said to me, “Find all the energy and water savings opportunities you can in our facilities”. They showed me their energy pie, and refrigeration was the biggest energy consumer, with 55-60% of that pie. They told me, “You can’t do anything about that piece of the pie, so ignore it, and focus on everything else”. I realized then that refrigeration systems are this enormous asset that is overlooked by other people because it is seen as immutable.
Armed with that insight, and my intimate knowledge of the market segment’s desires and constraints, Anthony and I thought, “Why not help supermarkets with their really specific problems and bring a solution to market that helps this particular customer?” That was the advent of the idea, and then we built the refrigeration battery. We’ve really tailored the entire company around the very specific needs of the grocery industry. We are a built-to-order company with a built-to-order product for this specific customer segment.
Pictured: The integration of Axiom Exergy’s components into a typical refrigeration system
How did your past experience influence the creation of the company?
Through my work with the energy services company, I became intimately familiar with all the physical systems in a grocery store; every system that uses water and uses energy. In addition, I became familiar with the needs, desires, and constraints of the people who manage grocery store chains. I got a really good sense of how these organizations operate – what their balance sheets look like, what their priorities are, how they think, and the personalities of various industry stakeholders.
I got to know the market well and identified a very specific problem – that grocery stores over the last 10 years in the U.S. had incredibly thin margins; an average net profit after taxes of just 1.38%. And to make things worse, due to the energy demands of refrigeration, they are spending three times more energy per square foot than the average retail facility. Energy is the third largest line item cost supermarkets face after people and buildings. So, every dollar we save supermarkets on energy goes directly to their bottom line, making energy savings one of the most powerful levers we can pull to help them improve their profit margin. As up-front cost, risk, and balance sheet impacts are often the largest barriers to new technology adoption for supermarkets, we plan to offer a “storage-as-a-service” model.
How does your technology compete with on-site solar, which also reduces businesses’ energy costs?
Solar plus storage creates an increasingly common value proposition. The two technologies provide different value streams. Solar provides clean energy generation, but it’s intermittent. Storage, such as the refrigeration battery, provides energy flexibility and can be used to firm the intermittency of solar production. So, there are some great synergies between our product and on-site solar.
Given solar photovoltaic technology’s efficiency constraints in converting light to power, there is simply not enough space on a rooftop to meet the entire load of a grocery store. Solar has not had a lot of luck penetrating this market vertical for that and other reasons. If a refrigeration battery plus solar are installed so they can operate intelligently, they can provide even deeper energy bill reductions and firm up the value streams associated with demand savings.
How has the investment from Element 8 helped you make your company successful?
Element 8 angels and the Element 8 Fund have both invested in Axiom Exergy. Those investments have allowed us to continue growing and hit our milestones. Importantly, as a start-up company, that early capital attracts more capital, enabling us to achieve revenue and profitability more quickly. In addition to capital, we benefit from forward-thinking angel investors who are interested in investing in a vision and a team rather than investing in a very de-risked business. We have access to some really incredible people – particularly Chris Preston, who is one of our most trusted advisors and on our board of our directors. He is really smart, kind, and a valuable asset. He has provided us help with marketing and sales, but also a lot of insight and context in terms of the project financing element of our business.
Since Element 8 and the Fund invested:
We started collecting data from the first full-scale project, which is up and running at an international super market chain in Northern California.
We received a patent from the U.S. Patent and Trademark Office – the seminal patent for thermal energy storage, which includes refrigeration and various types of air conditioning technology.
We brought on a new director of sales operations, which was a big gap in our team’s expertise. With that addition, we are better-positioned now to execute on contracts and projects.
We signed a contract with a manufacturer in Oregon who is producing the next few refrigeration battery systems.
In addition, Anthony and I were named to the Forbes 30 under 30 list recently, which was a very nice recognition.
Where do you see Axiom Exergy three years from today and what does your long-term vision of success look like?
In the next few years we’ll have a much greater installed base and resulting dataset from the field, which will provide us strong evidence that our technology should be deployed across all grocery stores. We want to make the refrigeration battery the standard for every new grocery store; to make every major chain aware of our technology, and realize they are at a competitive disadvantage if they aren’t implementing it.
To execute in future product lines and address future customer segments beyond grocery store refrigeration, we think we are going to require OEM partnerships. Over the next couple years we will prototype additional product platforms to prove that our core technology is relatable to these other products and market segments, such as parts of the air conditioning market. We’re already working with some of the really large OEMs to figure out how we’re going to commercialize these additional product lines. So, within two years I think we’ll have a large OEM partnership that will enable us to address additional market segments.
Where do you think the clean tech market is headed in the next 5 – 10 years?
I’m not able to comment on the trajectory of the clean tech market, because I consider Axiom Exergy to be an “internet of things” company rather than a “clean tech” company. What we’re really doing is taking big industrial systems, connecting them to the internet, and enabling them to act intelligently. That has great energy and clean tech implications, but we are not the typical clean tech company, so we stay away from that label.
What is the most important piece of advice you’ve ever received as an entrepreneur?
The most important piece of advice I’ve received, and which I would pass on to other entrepreneurs, is to always seek third-party validation. Every step of the way in the early days, with every aspect of your business, make sure you’re able to say, “Don’t take my word for it, here’s evidence”. This relates to your team, your technology, and your product market fit – the three main elements of an early-stage company. If you can get a really strong body of third-party evidence to support your hypotheses in each of these three areas, then you potentially have a winning idea and a winning company.
For instance, on the team side, if you’re able to convince someone to join the company before you’ve even raised funding, to sell them on the idea and give them some equity, etc., that really helps to prove your ability to put together a strong, compelling team of folks who are aligned with the vision.
On the technology side, evidence includes getting validation through prototypes, third-party review of prototypes, or third-party review of models. For example, we had the National Renewable Energy Lab go through our energy models and calculations for accuracy. We also had engineers and scientists review our prototype and provide statements that it was real and was going to work.
On the market side, you have to prove that customers actually want your product. That demand is demonstrated by signed contracts, letters of intent or MOUs, or at the very least, a statement of interest from a customer.
Anything else you would like to add?
Element 8 support has been instrumental in helping us build the company thus far. Putting us through the process of asking difficult questions is really valuable; obviously, providing capital is really valuable; and continuing to provide support, mainly through Chris Preston, has been incredibly helpful. We’ve had a positive experience with Element 8, and have referred other early-stage companies to the organization.