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Our biggest adversary in the sales cycle is just a do nothing decision.
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Welcome back to another episode of Builders. As always, this show is brought to you by Frontlines IO, Silicon Valley's leading B2B podcast production studio. If you're bringing technology to market and want to learn from your peers, we have a library of more than 1200 interviews with Venture backed founders and marketers. Where they talk, all things go to market. Of course, if you want to launch your own podcast, we offer podcasts as a service to more than 80 tech startups. The idea there is very simple. You show up and host, we do everything else. Now with all that said, let's jump into today's episode. Our guest today is Mike Carter, co founder of Fleet Zero. Mike, welcome to the show.
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A
Hey, thanks Fred. Appreciate you having me on.
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B
Of course. Really excited for this conversation. So let's go ahead and jump right in. When it comes to the problem that your technology solves, how would you describe it to someone if you're just sitting next to them on a flight?
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Yeah. So the problem that we're looking to address is ships today. So, you know, vessels that sail the high seas, that carry, you know, roughly 90% of the world's goods to us are just, you know, stuck in the past with antiquated technology. There's a big topic of conversation today around fuel and what the future fuel for ships is going to be if it's not a big diesel engine. And so we provide the solution for that. We electrify really big boats and maybe shockingly so, you know, we electrify not just small pugs, ferries and things like that, but we electrify container ships and bulkers and really big vessels. So we're just trying to make the maritime industry, you know, more competitive, especially here in the US where we're based. And that's what we're up to.
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B
And what's the backstory here? This sounds like a very specific problem, not something like you would have just read an article about the importance of electrifying this industry. So what's the backstory here?
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Yeah, no, good question. Steven and I, my co founder, we grew up together in the mountains of North Carolina, in Nashville and so about as far away from the coast as you can get. That's really where the fleet zero story starts. We're not, you know, your typical founders that maybe come from, you know, the venture community or from other startups. We both had lives as mariners sailing the high seas and, you know, we studied at the. Yes. Merchant Marine Academy. You studied ship propulsion and Ship design, because we thought that was really cool and that was interesting. We thought also it'd be an existential crisis problem for America as our quantities of ships was quickly dwindling, which is an issue that we're faced with today. And so we wanted to just throw ourselves at that problem and get to understand and know the industry and how these behemoths of these marvels of technology worked. And so that's where it started to be studying ship technology there. And then we both had careers in the energy space. So I worked for an offshore drilling contractor based in Houston, Texas, and to the extent in the software industry. And Steven worked for Shell as an energy major running offshore platforms. And so we, again, just being, I guess, nerds around the topic of electrification and chip propulsion technology, we just figured that, you know, during, I guess it was Covid actually, we just started having conversations with each other about, you know, again, nerdy ship things, propulsion technology. And we decided that we wanted to do some math, understand, you know, what technology, if not, you know, drop in liquid replacement for ships would govern and dictate the future of the maritime space. And so in that effort, we arrived at electrification shockingly. You know, it was one of those things that was top of our list early on. But energy density and batteries and cost density had really increased and costs had really come down over the years. And so we found that there was a solution for propulsion of ship technology to be replaced with batteries. And that's what we started focusing our efforts on. So that's kind of the origin story. We're just, you know, a couple of ship engineers that just thought that there was a better way to power ships. And that's where we landed.
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And what does it look like to convert a ship over?
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So it's different, and there's so many different types of vessels on the water, so everything looks a little bit different. But you've got two major classifications of ships. You've got new build and you have retrofit. And so in the new build category, you get to integrate, you know, electric propulsion system into an entirely new vessel design, which means that you get to put batteries in places you might otherwise not and have interesting electrical propulsion arrangements. And in retrofit, you're using an existing ship and, you know, taking out some existing equipment and putting in new stuff. And so depending on the vessel size, those installations can be quite massive, the battery installations. And then for smaller vessels, you know, that on the smaller side. But one of the projects we're working on this year is with at which is a company that operates in Houston, Texas, a series of what you call offshore supply vessels. So these would be maybe medium sized vessels, and we're retrofitting one of their ships with our technology. So we're taking out their diesel engines that are installed on board today and replacing them with electric motors and putting, you know, an awesome battery system or a leviathan battery system on board to power the vessel. So it can look like a lot of different things depending on the vessel type, but relatively, you know, easy drop in replacements for, you know, what exists today for retrofits and even easier if it's a new build.
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When I just look at the timeline here, and I don't know too much about your industry, but I see founded in 2021 and two years later you had your first vessel on the water. Like, is that common in this industry? Because if I just think about tech in general, that seems like you're moving very, very fast.
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Yeah, we did, I think absolutely. The industry moves extremely slow, especially in physical products. It takes a long time to engineer and to build something that you can get in the wild. I think the maritime industry too is notoriously slow, just in general. I mean, when we were studying at Kings Point, our textbooks were from the 1960s and, you know, it was a little depressing to see that technology hadn't quite advanced the way that it needed to over the last several decades. A lot of that was just the pace of engineering, which is the snail space. So when we started Fleet zero, that was kind of a core thesis of ours. If we wanted to change the industry, we had to do it quickly, within our lifetime. And so we actually bought a 265 foot offshore supply vessel, which is a rather large ship that we could not only test our technology on, but we could train our people how to work on ships. We had a lot of great folks that came from the maritime industry and the battery world that, you know, some had knowledge of ships, some had knowledge of batteries. We wanted to blend those two disciplines together and get them up to speed as quickly as possible on the technology. And so in buying that vessel just allowed us to move much, much quicker. We deployed our leviathan system on the vessel in about a day. So after we built the battery system, we had it connected to the vessel in a day and just gave such an immense education to those early hires that we brought on board. And those folks are now leading different elements and parts of our company that has just allowed us to move, I think at lightning speed now of just innovating into new marine Technologies outside of just the propulsion system, which is pretty cool.
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This show is brought to you by Frontlines Media, a podcast production studio that helps B2B founders launch, manage and grow their own podcast. Now, if you're a founder, you may be thinking, I don't have time to host a podcast. I've got a company to build. Well, that's exactly what we built our service to do. You show up and host and we handle literally everything else. To set up a call to discuss launching your own podcast, visit Frontlines I.O. podcast. Now back to today's episode and from a go to market perspective, where do you even begin with technology like this? And in an industry that does move slow?
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Yeah, I think, you know, there's a lot of stakeholders in this industry that you have to bring up at the same time. And because of that, it's a complicated sales process a lot of times just with all of the various stakeholders. So we have three major categories of people that we sell our system to. It's vessel owners, integrators, or people that take systems like ours and integrate them into existing vessels and shipyards. So the people that build ships, each of those, you know, different customer groups are key targets of ours. I'd say the ultimate customer for us is the vessel owner. Integrators and shipyards have a pretty big role to play in electrifying a ship, but vessel owners are the ones that are going to hold onto the asset for years on end, sometimes decades. And why they choose to buy our products is because we allow them to operate cheaper than what they otherwise would with things like diesel. Ethan. Which is really a crazy thing. A lot of green technologies, so to speak, are more expensive than diesel. So it reduces fuel cost, it reduces their maintenance cost reduce. And that's really, you know, what's driving their decision to buy is just, you know, reducing their opex and capex. And so that's who we target. And because of that, you know, we've onboarded some amazing investors and partners like at I mentioned before. But we also have Maersk and Mol, which are two large shipping companies that are investors and partners with us as we look into these new areas of technology. And it's a global industry, you know, it's, we're crossing borders. It's not just inside the United States. So depending on which geography you're in, yeah, things work a little bit differently. So just being aware of that, I think being mariners helps us to understand the market dynamics a bit more than outsiders coming into this space. We just understand how you know, vessel design works in Southeast Asia and how that differs from Northern Europe and how that differs from the Gulf in the US So it just takes a lot of just knowledge and understanding of the marine space.
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What's a normal payback period when an owner does invest in this technology?
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So I would say a normal payback period is within three to five years. We look at those are the projects that really, I guess get us out of bed. If, you know, if we're looking at payback periods beyond six or seven years, we'll usually just, you know, be transparent with the, with the owner and say, hey, maybe this project doesn't make sense, you know, maybe we should wait a couple of years and just come back and reassess. But most of the projects we look at now are ranging in that three to five year time Spanish, which is getting a lot of vessel owners excited. I mean they've never heard of payback periods that quick. With a lot of the other technology, sometimes they'll never recognize payback period.
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And what would you say are the objections? So as you're in sales conversations, if a deal doesn't move forward, why is that?
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I think it goes back to the stakeholder management piece because there are so many parties involved. You know, sometimes influence of one party to another, concent deals, you know, if you have a vessel owner that's really excited about your product, but a system integrator that maybe not as excited about your product, they can start to steer the owner away from it. So just managing the stakeholders is what we do to keep the train on the tracks and keep progressing sales in the right way. But I think that's probably the most challenging part and that's why they wouldn't move forward. It's just, you know, parties with other interests, you know, guiding owners in a different direction.
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From a growth perspective, what are you seeing or where are you acquiring customers today?
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When we started the company, we got a lot of traction in the venture community and the people that were funding the company, they could understand and see how the technology could apply to the space. And actually vessel owners were the ones that were most skeptical. And again, being in an industry that does move pretty slow, if they initially were not as keen to, you know, adopting our technology or trying it, they just didn't believe that batteries could power ships. And so I think we're seeing now is batteries not just ours, but across the border becoming a bit more ubiquitous for the industry. You're seeing a lot of new build projects just include batteries. And so I think for us, vessel Owners that have, you know, an emissions target is a great starting point. They have public claims and they're committed to changing the industry in any way that they can. Is a great target customer that we get a lot of traction with. But it's also the customers that care deeply about their margins. And shipping is a margin based business. You know, everything really relies on, you know, driving better opex numbers from your operations and being able to hurdle lower than your competition for longer in some geographies. And so those that are very cost conscientious and care about the economics of their business also are looking for ways to optimize. And so it's those folks too that are great target customers for us.
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Let's talk about you being selected to build the world's longest range hybrid electric vessel. How did that come to be? Take us behind the scenes.
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Yeah, we're super excited about the project. First off, it's going to be, you know, hopefully we can have an event that we'll invite you to here later on this year. But it'll be a really awesome event to see this vessel hit the water. It's something that's been in the works for the last year or so, year and a half. It all came about because one of the champions of fleet zero at the company had sought us out, you know, had seen us in the news about the fundraising cycle, had seen a little bit about the technology that we're putting out there and heard good things about us in the market. So they actually reached out to us on a web form and we got it and we just engaged with that person, really sat down with that individual to understand how their business worked. Before we just made some broad based assumptions again that batteries would work. They own several vessels, different types. They own really small boats and really large vessels, really big boats, mostly in the tanker space. And so we got, you know, sit down with him as well as his operations group, his finance department, the people that, that worked on the vessel itself and hear from them what pain points they had and what areas of improvement, you know, we could an impact we could have on their business. And so from that analysis that we did alongside them, we were able to identify a few, you know, low hanging fruit projects that we wanted to engage on. And so one of those is this one. It's a vessel, again, like I said earlier, that operates in the Gulf in the US and it's a first of its kind in a lot of ways, being that a lot of offshore supply vessels and vessels of this type, they don't operate in fully electric mode. They may have batteries for some backup power supply or, or something like that, but we use it for primary propulsion. So it's pretty exciting. You know, can't say too much about the financials for the project, but very attractive. And so it was a bit of a no brainer for them in doing this project. And we're excited to partner with others to have a similar interest in business as they do. This show is brought to you by
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when you think about your competition, is your competition others that are electrifying ships or is it more just the status quo of people not electrifying anything at all?
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Yeah, no, I think that's probably the latter. I mean it's people that, I mean it's still a new, you know, technology. I mean there's batteries that are out there in the wild that have been for several years now, but seeing electrification deployment on things like tankers and bulkers and container ships, these really big ships that make up the majority of the tonnage in the world, is still something that's a bit new. And so I think our biggest adversary in the sales cycle is just a do nothing decision, which is let's just keep running things the way that they are today and we'll kick the can down the road later and make a decision on it sometime in the future. But that said, I mean there's a lot of vessel owners in the world, a lot of target rich environment for us to go after. And as we build relationships with these companies and trust and rapport as battery technology improves, things that they've considered in the past only look better as time goes on, especially with declining battery prices and even further improvements in energy density. And so a lot of those customers we've even seen in the last year or so come back and want to resurrect a project that they had previously looked at. And so for those reasons, I think it's just them getting comfortable with the technology and knowing that there's others that are doing it and they're not the first ones, you know, I think will help things in the future. But, but that's it. It's just no decision at this point.
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Now my final question for you. We always like to talk about the big picture vision so you can go out three years, five years, 10 years, even 20 years. What's the big picture vision for everything that you and the team are working so hard to build?
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Yeah, you know, stay tuned for the future of Fleet zero. Keep an eye on the news. We're going to have a lot of big announcements this year coming out about, you know, technology and things that we're building beyond just battery packs. And so the way that we think of ourselves, we're a marine technology company. We build a lot of awesome technology that's going to transform the marine industry. Not just the propulsion technology, but we're building a lot now in uncrewed, you know, vessel operations. And how do you remotely control vessels from a location onshore? A lot of cool things that we're currently working on in developing. And so I think in the next 20 or 30 years, the landscape of how the maritime and shipping world works is going to look a lot different than it does today, both in terms of, you know, operations and how vessels operate and how they move cargo around the world. And also the players that are in the space and the ones that are operating vessels, I think the ones that adopt the technology and are quick to act on a big shift like this will reap the benefits and the rewards from that. Much like you saw when we transitioned from wind with these unpredictable sailing schedules to coal and something that was predictable and gave certainty to the routes. You'll see that the people that benefited from switching to that technology will benefit greatly in their business. And the ones that don't adopt the technology will eventually get left behind. And so I think that the landscape of the people that are operating in the space will look different. So a much different world, but a pretty exciting world, especially coming from America. I'm super pumped to see what the next 20, 30 years holds for us.
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Is there a future, do you think, where 100% of ships would be fully electrified or is there always going to be diesel or gas as well?
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That's a shocking thing, I think. Overwhelming majority of vessels will be electric in the future. It's just a reality that is coming. A lot of that has to do with just the cost of shipping. You know, the electric propulsion system is just so much more efficient than diesel or ammonia or methanol or any other type of liquid or gas as a fuel for ships. There's just added cost to the fuels, added expense to the way the vessels operate. It also has a huge capex implication on vessel design. And there's other technologies that's just a much simpler and cleaner solution. So I think that as we look into the future again, Petra keeps getting better. With battery prices and energy density, you're going to see more and more vessels that are capable of being electrified. Today. You can actually have a large container ship cross on a transatlantic or Pacific route, say from China to the west coast of the US that can be fully electric. And you don't sacrifice room for cargo. You don't sacrifice vessel performance. So that is possible from a technology perspective. So we'll have to, you know, wait and see how it plays out. But yeah, the future of the world will be electric.
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Amazing. I love it. Mike, this has been so much fun. Really enjoyed the conversation. Really just have a lot of respect and admiration for you, your co founder and the rest of the team who are out there really tackling hard and important problems like this. Appreciate you taking the time.
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Yeah, thank you. I appreciate you having me on.
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Well, that's all for today's episode of Builders, brought to you by the Frontlines. If you want more amazing content like this, visit Frontlines IO, where you'll find a library of more than 15 interviews with founders, marketers and other GTM leaders, where we unpack the tactical lessons from their journey. And of course, as always, if you do want to launch your own podcast, we'd love to have a conversation with you. Visit Frontlines IO Podcasts as a service. Mention that you listen, mention you love the show, and we'll give you a 10% discount. Thanks for listening. We'll catch you on the next episode.