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Founder's Story
He Raised $350M to Rent Roofs: The 1 Sales Rule That Built It | Ep. 394 with John Witchel CEO & Co-Founder of King Energy
00:24:55
Daniel Robbins interviews John Witchel, CEO and co founder of King Energy, on why solar did not “lose,” it simply needed the right business model. John breaks down the split incentive problem in multi tenant buildings and how King Energy solves it by renting rooftops from landlords and selling power to tenants at a discount. They also unpack why solar and batteries are now cheaper than fossil fuels, why energy price increases are forcing action, and how John built his 10th startup by speaking the customer’s language instead of selling ideology.
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Transcript29 lines
- [00:00]
A
Most parts of the country are seeing 7, 8, 9% year over year price increases for energy that does not work for a small business that is not acceptable. Oil and gas prices spike today. Everything that's happening in the Middle east is impacting us. And the answer to how do I solve the cost of high energy today
- [00:21]
B
is so you've been doubling every year. Last year $10 million and revenue.
- [00:27]
A
Don't explain to them your business, talk to them in their own language. The most important things that you look for in a startup is, number one, you want to be in a.
- [00:38]
B
John, I have to say, if I look at the topic that's been talked about the last few months, everyone is talking about energy and where is the best energy. There are companies saying that they will put data centers in space that will use solar because these data centers require so much energy on top of energy costs rising. So I'm curious, from your perspective, is solar still a viable thing?
- [01:04]
A
I get asked the same question every day, every time I go out to lunch or dinner with friends that want to talk about, you know, how everything that's happening in the Middle east is impacting us, how data centers are impacting us. Is there new technology coming out that could save the day? And the answer's already here. It is solar. It's solar and batteries. And really, if you look at energy, it boils down to a couple of things. How much does it cost to generate and deliver a megawatt hour of energy and where is that energy coming from? And today a huge amount of that energy is coming from fossil fuels generated energy, whether that's coal or natural gas. But we can generate a megawatt hour of energy more cheaply than any fossil fuel based energy generation. And we don't have to deal with the global disruptions in the supply chain and we don't have to worry about war or shipping lanes and those kinds of things because the energy that we generate locally on site just makes sense.
- [02:10]
B
Everyone was like, so solar, solar, solar. I know California was giving out things, there was federal things that were happening. I'm not trying to get too political in this question, but why do you think solar kind of got put on the back burner?
- [02:23]
A
Well, it didn't get put on the back burner. What happened was that the, the cost of solar kept coming down over the last 10 years. We didn't really need the subsidies anymore. In the early days, you know, in the sort of the 2010 timeframe, solar was expensive and it didn't really pencil, it didn't really make sense without subsidies. Today that's not true. Today it's just as good, if not better source of energy than any fossil fuel generation that you can find. And so when we look at the idea that nobody's interested in solar, nobody cares about solar, it's not political, it's not in the everyday news. That's because it is in the mainstream now. And whether you're a large commercial business or you're a property owner, solar just is going to make a lot of sense for you to either rent the roof and install solar, which is our business, or if you're, you know, building something or manufacturing something and you want a lower cost of energy, which will be able to make you more competitive in the marketplace. Or frankly, if you're just a yoga studio and you have a very high energy bill, you look around, you go, what are my options? Well, as a yoga studio, space based AI driven satellite is not an opportunity for you, right? What will help your business is putting a couple dozen panels up on the roof and you can have that today. I don't know about all this satellite based energy generation.
- [03:53]
B
You have a very unique business model. It's very different than what I've seen when it comes to solar. So going back to the beginning when you started in 2020, what was the problem that you saw that made you want to solve it?
- [04:05]
A
Yeah, great question. So I started looking around to do a startup. This is King Energy is my 10th startup. I've been doing startups since I was right out of college. I started with a, my first company out of college was part of the dot com boom and then eventually the dot com bust. And now in the year 20 when I started looking around to do another startup, I really wanted to be in renewables. I really wanted to be on the right side of history. I thought if I can build a business that can help the environment create jobs in my community and I can have it make economic sense for all the parties involved, then that would be a, be a great way to grow a business. And so I was looking around and like I said, renewables made economic sense at the time for homes and very large businesses. But what nobody had solved was what was called the split incentive problem. And, and the split incentive problem exists in multi tenant commercial buildings and apartment buildings. And the split incentive problem goes like this. A landlord has no incentive to install solar on a multi tenant building because they're just passing the energy costs on directly to the tenants. And the tenants have no incentive to install solar on a building they don't own so no one does. If you could find a solution to that problem, then you would activate all of these big, flat, beautiful rooftops that you see all over the country as you fly into LAX or you fly into Phoenix, or you fly into Newark and you look around and you see all these giant commercial and industrial properties. They look like perfect sites for solar. Why aren't people installing solar on these big, flat, beautiful roofs? The answer is the split incentive problem. King Energy was designed to solve that problem. And the way that we do that is by approaching the landlord and say, hey, you know what? We'd like to rent your roof. Don't worry about solar, don't worry about how we make money. As long as we make our rental payments, we maybe we'll put solar up there, maybe we'll put some lawn chairs up there. We're just going to rent your roof. And it's plain and simple. The landlord says, hey, that's found money for me. I wasn't renting my roof before. I loved rental income. So let's do it. Then we take that space, we install solar on the roof, and then we turn around and we sell the energy to the tenants in the building at 10% below the retail rate of energy, which is a great offering. Whether you're Starbucks or Panda Express. As a corporation, it's real easy for you to work with King Energy. We work with large corporations all the time. But again, if you're just a noodle shop in town, you get to save money too. You don't have to spend any capital, you don't have to think about the engineering of solar. You just get a lower rate. And that is a really nice thing for both big large corporations as well as the everyday mom and pops. Everybody gets to save money, the landlord gets to make a little more rent, and King Energy has a business.
- [07:15]
B
So when you thought about the go to market strategy for this back six years ago, was your focus on the people that have the largest roofs or the people that can make the decisions faster? Because I imagine it's like a no brainer, you're saying to me is a no brainer. But I think you and I know some companies require a lot of decision makers to make a decision. So what did you see in the beginning in order to really make make a big splash quick?
- [07:41]
A
So that's a great question. And the real insight on go to market for us was don't talk about climate change, don't talk about the penguins, don't talk about melting icebergs. Nobody wants to hear that stuff, who would be motivated to spend money to help climate change, had already installed solar, like that was it. And whether you were a do gooder or maybe you were a certain political bent or you were just highly motivated, that was all in the rearview mirror. So what we set out to do was say, hey, we want to go to market with a message that has nothing to do with climate change. It's all about does it make economic sense? And the best way to tell that story is to go to your prospective customers and use their language. Don't explain to them your business, talk to them in their own language. And for landlords, that language is rent. And so we talk to landlords about earning more rent, rent rolls, their cap rate, talk about questions that they're going to care about, which is not what kind of tax incentives are you going to do we get for, for installing solar? What those guys care about is are you going to take care of my roof? What happens if you accidentally damage the roof? What do you, are you going to be here in 25 years? Because you're asking for a 25 year lease. What happens at the end of the lease? Are you going to decommission, remove all of this equipment off my roof and leave it swept? What happens if I need to put some more H VAC equipment on the roof sometime over the next 25 years? These are the questions that landlords want to talk about. And we came prepared to answer those questions with a great solution for each, each and every one of the questions that landlords really want to talk about. And so then they look back on that and say, hey, these guys really understand our business. These are the kind of people we want to work with.
- [09:38]
B
You're looking at these people that have empty space that can add extra money. I think anytime somebody can make a business that makes people more money or saves people money overall, I think it's always a fascinating business, like you're helping these people over a 25 year period basically make money. That's a no brainer. You even talk about this, how software is looking at five year contracts, you're looking at 25 year contracts. Do you think having something like a 25 year contract makes the conversation harder or easier? When you're talking to somebody in general,
- [10:18]
A
landlords, people who own large, large commercial properties, which is really where our focus is, own assets that are, you know, these are, these are buildings that have been built to last 50 and sometimes a hundred years. So the time horizon of a 25 year lease is, is uncommon when compared to Say, oh, I want to, you know, I want to open up a, you know, a pizza parlor. A pizza player doesn't ask for a 25 year lease, they usually ask for a five year lease. Um, but, but in terms of a 25 year time horizon, for a landlord, particularly a large landlord like a REIT who deals with tens of millions of square feet, it's pretty normal. It's more for them about whether or not if you're, they'll look at you and they'll look at you and say, well, are you legit? Right? And at this point, King Energy has over 250 buildings that we are working with that we are either live or in some stage of construction. We're, you know, we, we started our business in California and within a couple of years we expanded and now we're in Delaware, Maryland, New Jersey, Massachusetts, New York, Illinois. These people look at our business and think, yeah, these guys are, these guys are legit. And, and then they'll often ask us questions, not so much about the lease, how long is the lease, but what kind of financial shape are you in? Does, does it make sense to work with you? Are you going to be around? And we've raised quite a bit of money. We've raised over 45 million in venture capital and we've raised over 350 million in project to build these systems. And so when people see that level of support and that level of financial backing, what they, what they think is, yeah, they, this, this is the real deal.
- [12:17]
B
I think a lot of people don't realize how important it is that you have to speak the language of the person you're selling to your client base because you don't want to lose them speaking some sort of other language, the lingo that they don't care about. You had mentioned this earlier around understanding their pain points and being able to speak that versus talking about something that is not at the forefront of what they care about. You have had multiple exits across multiple companies, yet it seems like you go back to the fundamental problem with energy and infrastructure. Do you just find that there's broken things and you can fix them, or is there another reason why?
- [12:56]
A
Personally, I just, I love the renewable industry. I mean, I'm just, I'm just into it at an engineering level and at a business level. And honestly know, part of my personal motivation is I want to be on the right side of history. Right? I want to. There's a lot of problems in the world that you can work on. Some of them are regional and local and regional and Some of them are national and some of them are international and, and I like working in a business that the, the, the fruits of my labor and the fruits of my team's labor is going to be enduring. I, I find the idea that you could build something that's going to be helpful to the world at large, to both small businesses locally as well as globally for the next 25 years to be, it's just an attractive space to work in. And if I compare that to the software space, which I also really like and I've done, I've done well in the software industry. In the software industry, time horizons are quite short. You, you sign a three or a five year contract with a, with a new customer and to install some software and help them manage whatever their internal business process might be. Five years is a long, is a long contract in software and you basically are going to take that sales rep out to drinks that afternoon if he, if he or she signs a five year contract. In, in our business, sort of the minimum duration is, is 20 years. And I mean I, I, I plan to be alive then, but there's actually a decent chance I might not make it to the end. And I, and I love that idea of, of there actually being legacy in the work that I'm doing today.
- [14:33]
B
Why would you want to do blood, sweat and tears as an entrepreneur if you don't have some sort of legacy and good that you're bringing to the world? What else does that mean to you? Legacy when you think about it beyond just helping the environment or being on the right side of history?
- [14:47]
A
Well, just to sort of talk about the idea of, of, you know, the, the motivations, it, it's, it's never just your personal motivation. That's always an important part of the founder story. Why are you personally doing it? You always have to pay attention to what your, your customer's motivations are. And, and the truth is is that the y, the yoga studio doesn't care about energy at all. Right? He or she cares about yoga. Right. And the, the pizza parlor doesn't care about where their energy is coming from. They care about pizza and they care about their families and their community and sending their kids to college. And if you come in to their restaurant and sit down and start talking to them about your big ideals and high minded ideas, thinking around, you know, what you want to do for life, you're going to get a pizza and a Coke and you're going to get walked out the door. But if you come to them and you talk to them about what's important to them. And you say, look, I don't want to spend a lot of time here because you got your own customers to take care of. What I can offer you is a lower cost of energy today. And sometimes they're curious and they're like, well how do you do that? And let me understand your business. But, but it's a genuine curiosity. What they care about is their own business. So come to them, talk to them about their motivations, talk to them about their objectives. And that's also true large corporations. When you're talking to Dollar Tree or a large REIT that owns tens of millions of square feet, you know the person in, in that office building, they have a job to do and their job isn't your job. So help them do their job efficiently, help them understand their motivations, and you're gonna find a partner. And in, and in America that is like you said, is, is almost always predominantly, you know, make money. And as, as we say in the industry, you want to do well by doing good.
- [16:50]
B
So you've been doubling every year since 2020. Last year, 10 million in revenue. What is one or two things that you feel has really been able to move that needle beyond the things that you've mentioned?
- [17:03]
A
There is a lot of tailwind right now in our industry because of the dramatically rising costs of energy. So 10, 12 years ago your electric bill was fine. Like it, it wasn't nothing but, but it wasn't, you know, ne the year before it was about the same. It was maybe 2 or 3 higher this year than it was last year was maybe 2 or 3% higher than it was the previous year. That is not true anymore in the United States. Most parts of the country are seeing 7, 8, 9% year over year price increases for energy. And that does not work for a small business. That is not acceptable for corporations with razor thin margins. That is not okay for you and me as consumers. Energy burden. How much of your, of your monthly paycheck goes to just energy, heating your house, running your life. And, and, and people are looking up and saying I gotta figure this out. I gotta do something here. I gotta keep this, this price low. What are my options? And then you, you open up the Wall Street Journal and they're talking about run building a nuclear plant in 10 or 15 years as a pilot project. That doesn't solve my problem today. Like I gotta solve my problem today. And the answer to how do I solve the cost of high energy today is solar and storage. It is the only answer that is Actively in play today. And as smart, thoughtful business people look around and they say, what are my options? They rapidly conclude the same thing. Which is, okay, if this energy is too expensive for me, I got to find a solution. That solution is going to be solar. Do I want to own the solar? The answer to that question is usually no, I don't want to own solar. I don't really know much about solar. And then that's where companies like King Energy become extremely valuable to them. We come in, we say, hey, we'll just start saving you money each month. You don't have to own it. We'll own it, we'll operate it, we'll take care of everything. The only thing that's going to happen here is your energy is going to be cheaper. And they say, that sounds great. And they can get back to making pizza.
- [19:27]
B
I like that. So I think we always hear about the people that are early investors, early advisors. I know for you that that's been the case, for example, credit karma. What is it that you see early on? Because I think we always hear this story of this person was early investor, early advisor, or you know, early with these 15 different things. But what is it that they are seeing and you are seeing when you evaluate and you see these diamonds in the rough?
- [19:57]
A
The most important things that you look for in a startup and when I was designing King Energy and I was designing previous companies or I'm advising other startups, is number one, you want to be in a big market, Big market, right? You want a lot of people to have the same problem and you want your product to intuitively and visually solve their problem. And we call that product market fit. If I, if I give you the classic elevator pitch, what, what problem are you solving and how do you solve it? Right? It, it, you, you, you can't spend five minutes explaining problem. You can't spend another five minutes explaining how your solution is, is making people better. It's, it's just gotta be in and out. One or two sentences. How does your business work? Well, we rent the roof from landlords, they make a little bit of money on rent. We sell the energy at 10% below. Does that sound good to you? And everybody goes, yeah, that sounds pretty good. I'd like to hear more. Right? And then you can have a longer conversation. But if you can't get your business rolled up into one sentence like that, you, you should keep working and keep ideating on your product until, until people viscerally react in a, in a very positive way and say, yeah, that could be a fit for me. I'd like to know more. And then you need millions of people who, who have the same problem. And in our case, those millions of people are every single commercial building in the United States.
- [21:30]
B
So obviously we see the successes from the outside. But I'm sure you've had times where you were just like, this is it, I'm gonna go get a job. Like this entrepreneurship thing, or I wanna exit, I wanna get out, I wanna retire on the beach, I wanna do something else. What was the moment like that for you?
- [21:47]
A
Yeah, I keep having that moment. You know, for me, I lived through the dot com bust in, in the 2000, 2001 timeframe. I lived through the 2008 market crash. I lived through the 2012 14s. I lived through the 2022 rate hikes. The thing that is so dispiriting in entrepreneurship is when these large externalities that have nothing to do with your business come crashing down on your head. So you're running your business, things are going well, Your customer's happy, you're happy, your employees are happy. And then all of a sudden, America's at war in a part of the world that, that has nothing to do with your business. The stark the stock market takes 50% wipeout because of nothing to do with your business. And then your customers call you and they say, well, it may not have nothing to do with your business, but it has something to do with our business. And we need to tighten up these contracts or you know, we need new pricing. And, and, and the thing that has been allowed America to be so successful over the last 200 years, 250 years, is this has consistently been a place of economic stability, of lee, of stable laws. The rule of law has existed in America for 250 years. This is a great country to do business in. And when we have these whipsaw events nationally and globally, it, it's, it's exhausting. And, and that's not just me, and that's not just King Energy. It's a lot of, a lot of men and women like me just look around and be like, really, are we really doing this again? And if, if we just stopped some of that behavior, I think companies like mine could, could, could grow companies, you know, all over the United States would just be, and the world frankly would be happier if, if we just had a little more stability in, in the day to day operations of the business, Monday to Friday. And then we can all get to what we really want to be doing, which is having barbecue on Saturday and Sunday, which my true love in the
- [24:04]
B
future we might not even have to work. So we might just, just be doing barbecues all the time. Who knows at that moment? And that could happen in our lifetime at this point with how fast things are moving. But John, great conversation today. I really enjoyed it. I learned a lot. I'm going to take this away because I think there's so much opportunity right now to do. But this has been great. John, if people want to get in touch with you, how can they do so?
- [24:32]
A
Yeah, we have a website@kingenergy.com and of course my email is the CEO's email is jwitchellingenergy.com and I'd welcome any emails or if anybody just wants to chat or think big picture, I'm always available to anybody who cares about solar.
- [24:50]
B
Well, John, thanks again for joining us today.
- [24:52]
A
Terrific. Thank you so much. I really enjoyed the conversation.
- [24:55]
C
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- [25:26]
B
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