Base Power's $200M Series B Co-Led by Lee Fixel of Addition, A16Z, Lightspeed, & Valor Equity Partners

26:34We now have over a thousand batteries in the ground and we've kind of earned the right to unlock new problems that we have to go figure out. And I think had we taken the approach of let's get the perfect home battery dialed, it'll take us two, three years, we'll raise a bunch of money. We'll be in R and D phase for a long time. And then we'll like, ta-da, we did it, we wouldn't have earned the right to solve all the problems that we've kind of earned the right to solve by executing quickly and iteratively. And that approach, I think, has really helped us. Executing violently. Executing violently.

27:05I want to go into the vertical integration piece of that. So could you just walk through the process from the very base of base to the customer. So can you just walk through how you're manufacturing to getting this out the door? Yeah. First, let's talk about why vertical integration. The way that we describe this is we are working to develop a compounding cost advantage through vertical integration. And what that means is by doing everything, by designing the batteries, making the batteries, installing them, doing all the logistics and warehousing, the deployment operations, selling power directly to the customer doing the support the maintenance everything it allows us to take cost out of each step of the equation and ultimately drive down the price for our customer at the end of the day electricity is a commodity right there are no sexy electrons as we say people want their lights to stay on and their bills to be low no one wants to pay more for power and so we take the view that we have to develop the technology and the operations to eventually be able to sell power to our customers cheaper than anyone on the planet.

28:15And the only way to do that is to take cost out through vertical integration. There's no magic sauce that we can drop on the business that gives us this cost structure advantage other than vertical integration and building technology across each part of the stack, whether it's the way that we design the batteries, the way that we manage our logistics and warehousing, the way that we manage the operations. And by doing all these things, you're able to affect other parts of the problem. So by designing the actual packs, we can lower the cost of the installation, because you can design the battery for a faster install for a de skilled install.

28:52So you don't need a very expensive kind of master electrician to be out there for four hours, you can have someone who has a little less experience doing the stacking, and then you have a qualified electrician come in and do all the hot work and you kind of shorten the time that you have the higher wage person out there. And so by controlling all pieces of the puzzle, you can drive cost out and ultimately drive prices down for the end consumer, which we think is critical in a commodity industry. Maybe Justin, if you want to talk a little bit about the hardware strategy and how we take a battery from our design all the way through installation and then serving the customer.

29:30Yeah. So we have today, we have basically three generations of hardware that we're either deploying or in process of deploying. And again, kind of back to the prior point, we're iterating on hardware going more and more custom over time. So Gen 1 has a bit of custom mixed in with off the shelf. Gen 2 is a lot of custom. Gen 3 is fully custom. them. Gen one is primarily outside manufacturer. Gen two is a combination of contract manufacturing and us manufacturing. And Gen three is fully us manufacturing, or for the most part, fully us manufacturing. And so basically the customer, maybe take you the customer journey is perhaps the easiest way to think about this chronologically.

30:12So the customer comes into the website or is referred to us, somehow, you know, basically comes to us. We talk to them, we offer them our product and they sign the contract, now sort of starts the clock on getting the battery installed. And as Zach was mentioning earlier, this timeline, this total timeline from when the customer says, okay, I'm ready to go, I'm interested, to battery is operating on their home, providing them backup and serving the Texas grid. We want that time to be as short as possible. And this is kind of my background in manufacturing as we think about that whole problem as a manufacturing problem.

30:49Every step is like a station in the line. There are specific skill sets of people at each station that have specific documentation and tooling and work instructions and all that. And so while it's a combination of digital and distributed physical process, it's not like all happening under one building necessarily like a manufacturing line is. We think about this whole deployment process as a manufacturing problem to solve. So customer signs up. We go into a process by which we get photos from the customer. They send us these photos for us to basically check their eligibility of their home and do what's called a site layout.

31:27That site layout is done internally by software that we've developed primarily for the most part automatically. and then that site layout and permit package is sent to the local city if the permit's required and to the utility for what's called interconnection agreement. Once those things come back, we then pack the kit at the warehouse or we have packed kits already. So we own all of the warehousing, we receive in all the goods, we do all of the assembly onto the pallets and then day of install or the day before the install, we send our truck out there, drop it off and then we have our electricians come in the next morning and do the install.

32:06And that install is done in less than a day. The customer now has backup protection. They have the app on their phone where they can check the status of their battery. They're also being served by us as their retail electric provider, meaning we sell them electricity every month based on what they use. So we have a bill that we send them every month for that electricity used. And then right then and there, we're We're operating that battery in the wholesale markets here in Texas through the ERCOT market. And we can talk a lot more about that if you're interested later. That's kind of the chronology of the customer.

32:41And as we get further and further vertically integrated, we do more and more assembly and manufacturing of the hardware. And we're doing more and more of the installs ourselves. We started with some contract labor. We're now bringing that in-house. We started with contract warehousing. We're also bringing that in-house. And we kind of take each station in the line, so to speak. We think about it in terms of what is the value that we can add by doing it ourselves? How can we drive down costs? How can we drive up quality? And very importantly, drive up the experience that our customers, we call them members, our members have.

33:16And so, for instance, by virtue of us doing our own installs, as opposed to having a third-party contractor do it, we now have this personal face-to-face relationship with our member that is a base employee. And they're able to provide the member a really thoughtful and thorough experience installing and showing them their new battery. Yeah, the benefits to that are, you know, we talked about the cost side, right? By doing everything, we can take costs out of all parts of the equation. We build software and automations to manage a lot of the process. But also for the member, you don't have to communicate with a bunch of different counterparties to get a battery or a backup solution on your home.

33:55So the status quo today is you buy a battery or a generator from an OEM. They then pass you to an installer that you have to work with to schedule your installation and do the permitting and do the interconnect agreement. And then you have to go find a separate retail electric provider. Maybe they will give you a better rate because you have a battery. Maybe they won't. And you have to manage all of these parties yourself. By doing it all ourselves, we can directly interface with the customer across all parts of the equation, which allows us to shorten the time for installation significantly. So today, if you go buy a home battery, it's probably going to take you two to six months to get that battery on your home.

34:31We can get a battery on a home. You know, it varies by permitting requirements from the local municipality, but on the order of two to four weeks. And there are certain parts of Texas where we can get a battery in the home the next day. And that's just not possible if you're not able to vertically integrate all these steps. Wow, that's impressive and super fast. I was actually really curious the more that you explain the process out compared to, let's say, like the greater energy landscape. If you're seeing base as like the SpaceX, the Andurl of energy, how do you see where the value is accruing in the broader part of the industry?

35:14Like, who are the players and why is it so slow? Yeah. So there's a relatively broad question. I guess to break out the energy industry or maybe the sort of like the electricity market, you've got kind of these three broad categories. You have generators, people that own and operate plants that produce electricity, whether that's nuclear, wind, solar, natural gas. You have the poles and wires companies. They own substations and transformers and poles and wires. And then here in Texas, you have what's called reps, retail electric providers, and they sell power to homeowners. Reps will buy power from the generators, pay the poles and wires companies to get it to them, and then sell it at a retail rate to the homeowners.

36:00And that's the Texas market. I think it's important to explain that because it's not something you think about every day. And that's specific to Texas, as I just outlined it. In certain other areas like California or honestly, a lot of the country, you have utilities that are vertically integrated. So they generate the power, they transmit the power, and they sell the power. Here in Texas, these things are relatively separate. And what you find in the market is that especially the utilities that own the poles and wires, the sort of utilities in the traditional sense, if you squint a little bit, they're kind of similar to the defense primes, actually.

36:38So coming from Anderil, this was kind of a realization we had as we were talking about the company, the idea for the company. The incentive structure is interesting actually for these companies in that they are typically financially incentivized to spend money, not to save money. So in defense, this is called cost plus. In the utility world, it's called rate making or rate basing. Basically, if you spend a dollar, you can earn a return on that dollar as a utility. Similarly, if you spend an engineering hour on a fighter jet, you can earn a return on that via the cost plus model in defense. And so the incentive structure is not great for consumers.

37:22And also somewhat similar to the defense primes, there's not a lot of technology in the existing sort of landscape. So one major thing that kind of how we're thinking about the grid is the utilities today think about it as a one-way street. That one-way street runs from the generator through the poles and wires and to the home. And with distributed assets, distributed generation and storage like we do, the grid is now a two-way street. You can have power flowing back from what used to be the load or what is the load most of the time up to the substation and around to other homes. And this small thing enabled by technology is like a big change in fundamentally how the grid operates and the grid works.

38:06And I think that's like a sort of key difference between how we think about the future of energy and how maybe the incumbents or the existing players in the market think about energy. It's more of a network rather than a single direction. Yeah. I also think that the existing companies in the space have just thought about the problem differently. The home battery companies and the generator companies have thought about selling premium products at a high gross margin. And you sell a battery, you sell a generator, and then you make your gross margin, and then you move on. And then it's on the customer to go schedule and install with an electrician and then find a retail electric provider.

38:47And we have a very different business model. We do not sell batteries. We sell affordable, reliable power. And by bringing to market that different business model, it incentivizes a different product, right? We actually care about deploying as much storage per home as possible. and so we want to build bigger batteries with more storage with more power we want to manage the whole thing ourselves we want to take costs out of out of all parts of the equation and it just makes for a much more kind of efficient system when you have a product that fits into the business model and you don't have to fit the business model around products that are not designed for it the other thing i'll say is that by doing it all ourselves we can offer a really compelling product to the regulated utility.

39:28So actually just today, we announced our first utility partnership with Bandera Electric here in Texas, which we're super excited about. And you'll see over the coming months, we'll announce more of these that we're working on in Texas and outside of Texas, where we partner up with the utility and we say, hey, we'll deploy storage in your service territory really fast and really cost effectively for you. And then we'll give you a fleet of storage, 10 megawatts, 50 megawatts, 100 megawatts that you can use to lower your costs and pass those savings on to your customers. And if you're a utility before base, your options were go find an OEM, go find a software provider typically called DERM, Retributed Energy Resource Management Systems, find someone to do the installation and then staple all those systems together.

40:10They typically don't talk to each other very well. And so utilities have tried to do this. The uptake hasn't been that strong. They've kind of stopped doing it. And we show up with a totally integrated product and say, hey, we can deploy storage in your territory really fast and really cost effectively. And they seem to be very excited about it. So this works in the deregulated market where we can go directly to customers and deploy these things and be a totally vertically integrated gen tailor. But it also works in the regulated markets where we can show up with a kind of out-of-the-box solution for utilities to deploy flexible capacity in their service territory really fast and really cost effectively.

40:49So I want to talk more about Texas and why it's so special, particularly on the regulation standpoint. So if you could just break down the regulatory hurdles across the country that make Texas attractive to you to expand this business. Yeah. So we call the Texas energy market or electricity market deregulated. It's a bit of a misnomer. It's very heavily regulated still. But what it fundamentally means and what most people when they sort of say Texas is a deregulated energy market, what they actually are referring to is what's called retail choice. So if you're a homeowner or a tenant in Houston, Dallas, just north of Austin here, a lot of the southern and western part of the state, you can and actually you have to choose who you buy your electricity from.

41:39So if you live in Northern California and you want electricity at your house, you have one option, which is in that case PG &E. And here in Texas, you have over 100 options. And those companies are called reps, retail electric providers, as I was mentioning earlier. And they are responsible for selling you the power that they buy from the generator companies. Then they pay the poles and wires companies to get to you. So the poles and wires companies in Texas are deregulated, meaning they can't own generation assets and they also can't sell you power. So that's like one very sort of specific thing that is very Texas centric.

42:18I think there's the broader point about Texas the regulatory environment in general is it's very pro-business, right? So there's relatively low regulations around permitting of manufacturing facilities around taxes and sort of like state oversight in various sort of business operations. And so Texas in particular is just very inviting to businesses in general, not just electricity companies or energy companies like us, but it's inviting to businesses just in general. And I think that in combination with the challenges that the grid has in combination with this deregulated or retail choice electricity market really sets up a company like us to really sort of take market share.

43:06And we're very happy to be here in Texas. And I think it's like a perfect fit for what we're doing. Yeah, I think Texas is the perfect place to start. And this goes back to the iterative approach that we talked about, where we can get in market fast. We can get batteries on home quickly. We can sell power to customers quickly. And we can start learning. But the rest of the country needs the same technology, right? Like load growth is happening in all parts of the country. You have massive data center build out in Northern Virginia. You have electrification and transportation and heavy industry in California, in the Midwest, in the Northeast.

43:44And so we think that the entire country needs distributed energy technology. Texas just happens to be the place where we can move the fastest and we can execute the most violently, to use Paki's terminology. But we want to bring affordable, reliable power to every neighborhood in America. and you know the partnership we announced with bandera electric is the first example of us partnering up with a regulated utility and and and you know bringing to market our technology through that business model and you'll see us pursue opportunities like that in states outside of texas and hopefully all 50 states in the coming years and so while texas is the perfect place to start actually the entire country needs this technology and we think is well suited for And you guys are in Austin, Dallas, Houston, with this$200 million in fresh capital.

44:31You're going to, I'm assuming, expand further into Texas and then hopefully across the United States. So at what scale are you deploying new units each day? What exactly are you looking to hit? What would be the goal for deployments a day? I think we did 19 installations today. so we're on the order of 15 to 20 installations a day. That number is going up, obviously, by the week. We want to be the fastest battery developer in the country, and we're kind of already on a megawatt per month basis right in line with the fastest battery developers in the country. By the summer, we'll be deploying at twice the rate.

45:15So we'll be the fastest battery developer in the country in the next three months, and we want to grow exponentially. So, you know, we'll go from 20 a day to 50 a day to 100 a day. And eventually, hopefully we'll be doing, you know, thousands of installations a day in the coming years as we go from Texas, you know, to the rest of the country. Yeah, maybe just a deep dive on that real quick. So battery developers, basically no one or very few folks are doing battery development, meaning putting batteries on the grid and offering grid services to the grid in a distributed model, meaning behind the meter.

45:53And so there are other companies, of which Zach mentioned a few previously, that a lot of the big PE firms own, that buy and basically construct these sites, think like a shipping container on some farmland. And those take many years to deploy, but once they're deployed, you have hundreds of megawatt hours. The size of a battery is measured in either kilowatt hours or megawatt hours. And so if you take your 100 megawatt hours, it took you five years to deploy, you did 20 megawatt hours a year. We are measuring ourselves against that rate, basically. How fast can we get storage onto the grid? Because if you're a utility like Bandera Electric, like many of the others we're working with, they're concerned about the load growth that is happening now, not that is happening five years from now.

46:40They're worried about getting more capacity on the grid today or next week or this month. And so because we can take this much faster approach, we think that's a very compelling offering for utilities. And so the distributed model we're proving out now and we're hoping to continue to prove out as just a far more effective way to put the incremental storage onto the grid. In terms of the go-to-market strategy, you mentioned a couple partnerships. I'm really curious, does seasonality affect that as well? I would love to just break down the go-to-market strategy. Like, is it a like partnerships and then be like also seasonality or there are other components maybe that you're riding off of?

47:20I would say it certainly does. Right. When, when, when it gets really hot in Texas, people are super focused on the power grid. When it gets super cold in Texas, people are super focused on the power grid. Uh, when there are outages, obviously people are really focused on backup power, but, uh, really in any month people want to save money. Right. So we offer two things. We offer outage protection and we offer lower monthly electricity bills. And so we find that there are definitely spikes in demand around outages and extreme weather events, but we see pretty consistent demand from customers who are looking to save money on electricity.

47:52We think about customer acquisition in really two ways. There's a direct channel and the indirect channel. The direct channel is mostly referrals, direct mail, paid advertising, word of mouth, field marketing, brand marketing, those kinds of things. And then the indirect channel is partnerships like what we've announced with Lenar, one of the largest home builders in the country. If you're buying a Lenar home in select communities in Texas now, I think it's 25 communities across the state. When you go to buy a Lenar home, you have the option to sign up for base at kind of effectively checkout so that when you move in into your Lenar home, your home is base powered and you have a battery in your home and we're your electricity provider.

48:31and we're working on additional partnerships with other home builders and other home adjacent companies to bring base to more customers, more members throughout the state. And how does the business model work? We're an asset owner, so we're really a battery developer. So we install our battery on our members' homes. When the grid is up and running, we use that battery to support the grid and that's how we make money. So we bid the battery in the wholesale electricity markets and when the grid goes down, the customer gets that battery to back up their home. So we make money really in three ways.

49:04One is by monetizing the batteries for grid services. Two is by charging a monthly fee. So you pay$4.95 up front, which is another source of income, and then$17 a month. And then we sell power to the homeowner and we make a margin on that as well. Given all of this and how fast you guys are moving, I want to know more about the team behind it all. So could you explain more about how you've composed the team? Yeah. The team is the most valuable asset at the company by far. I think, you know, building a complex coordination business like this that is vertically integrated, you need expertise in hardware, software, operations, and kind of everything in between.

49:44And so we've been able to recruit some of the best and brightest engineers and operators in the world to help us build this. We're about 80 people now. and we've got a really strong group of people who have, I think, seen the mission and the vision and actually many of them come to us and said, hey, what you're working on is super important. It looks hard. It looks meaningful. I want to be a part of that. And I think almost half of the team has relocated from some other part of the country to Austin to come join the mission. And look, we talked about the violent execution joke, but what we do is hard.

50:21It's intense. It's painful at times. And it's not a nine to five. It's not a place to come just hang out. It's a place to do the best work of your career, the most meaningful work of your career. And we've had top engineers from companies like Tesla and SpaceX and Anderil and Apple and many of the top technology companies that folks know reach out to us and say, hey, I want to be a part of that mission because that's super meaningful. And this is something I'd be proud to tell my family that I'm working on. So I think both of us have been very pleasantly surprised by the amount of really exceptional individuals who have come to us and said, hey, what you're working on is important and I want to work on that.

51:02So I speak for both of us, I think, like it's an honor of a lifetime to get to lead this group and be a part of this team and work with these folks every day. They work incredibly hard. They're incredibly smart. They're incredibly focused and driven and mission aligned. And all the success we've had is due, is credit to the incredible team that's come together around this very challenging problem. Yeah, I think the only thing I'd add to that is the sort of, the fact that the company is so vertically integrated and has such a variety of different challenges to solve brings in a ton of different sort of personas and profiles and folks with very, very different backgrounds and experiences and skill sets.

51:43You know, we have electricians that have mastered the craft over a career and are coming to work on sort of new technology as it relates to home electrification, mixed with folks that are doing creative work for brand marketing mixed with your sort of like PhD software engineer who's developing algorithms for bidding our batteries into the wholesale markets mixed with hardware engineers. And all of these various disparate disciplines need to work cohesively on this sort of complex coordination machine. It's been really fun to sort of meld these sort of cultures and backgrounds together. It's not your traditional, you know, SaaS company where you have some, you know, growth folks and some software engineers.

52:33There's like so much variety in terms of the backgrounds of folks that it's just been, it's really cool to see folks come together. And like, it all starts with a mission. Folks that are mission aligned will be able to work with people that are doing a totally different thing. They have no idea or background on how to do and collaborate really effectively. And I guess one thing that I'm quite proud of is just the folks who've been able to attract and the ability for folks from these very disparate disciplines to work very closely together. Yeah. And I think for anyone out there listening that wants to fix the power grid, wants to be a part of the modern power company of the electric era, wants to solve hard problems across hardware, software, firmware, operations, finance, marketing, sales, wants to work in person five days a week in an office, high ownership, low bureaucracy, move fast, focused execution.

53:29please reach out. We're growing the team here in Austin. It's an incredibly fun place to work as well. I think that's important. We like to have fun. We like to laugh, high five. Work should be a place that you enjoy being at. And we think that's really important. We cater lunch and dinner every day. It's delicious. It's healthy. It sounds silly, but it's really important. It's like people got to want to be at the office. And we focus a lot on creating an environment that people want to be a part of doesn't make it doesn't mean it's easy doesn't mean it's kind of laid back it's like certainly not that we are executing violently but you can execute violently and have a lot of fun doing it selling selling pretty well i will say uh i will say that i i think you'll attract some very highly qualified people and talented people especially if they made it this far in the pot so uh the the meals do help though i will say totally well um So just to close out, I'm really curious on your take.

54:30If you had unlimited resources, what would base power look like in five years? I'll give you where I think we will be in five years and not because we have unlimited resources, but I think we look, we have a group of investors behind the company that have a lot of resources and also see the long term vision and see that this is not a company that, you know, is designed to be around five years and then get bought and, you know, go do like we want to build a company that endures we want to we want to be part of the s &p 500 we want to be around for 50 years we want to uh build critical infrastructure for the country and what that looks like is being in all 50 states uh going up the stack into into utility infrastructure going down the stack into the into the home uh and building more products and services to lower costs and increase reliability for energy consumers whether that's homeowners owners or business owners.

55:23And you'll see us do all that over the next couple of years. And we're honored and proud to partner up with firms like Addition and Adresin and Lightspeed and Valor and Thrive and Altimeter and Trust. And folks who see the long-term vision have the resources to support us as we go from an 80-person company in one state to hundreds of, eventually thousands of people in all 50 states and hopefully touching a material percentage of the country's power demand. Yeah, I would frame it maybe a little bit differently. It's like it's less about kind of resources constraining the speed of execution and more the ability to bring on the talent and execute and have that talent execute on the problem rather than a like, you know, put one more dollar in and get, you know, one more incremental sort of second of, you know, of progress.

56:21The only thing I'd add, I agree with Zach and all that. I think the thing that I would add is basically becoming a household name and being an energy brand, I think is a very important and sort of next big step for us. You know, we spend a lot of time thinking about how we appear in front of our prospective members and think about reliability and they think about electricity. You want them to think about us as a company and we want to establish a really solid foundation of a brand. I think that's really important to the business. I think that's a bit of a moat to the business, so to speak. And so that'd be the only thing I'd add to what Zach said is in five or 10 years, we want to be sort of a household name in terms of electricity, not just here in Texas.

57:10Yeah, I think we want to answer the question of what if your energy company was a technology company, right? Like, you know, we want to be America's power company. And that's a very ambitious goal. But we think we have the resources, the capital, the team, the strategy to get there. And it's going to take violent execution. But we're really excited for the path ahead. And, you know, it's gonna be a lot of hard work, but a lot of fun and, you know, extremely meaningful work that we get to do. We're very lucky that our members trust us to serve them power, to deploy these assets onto their home, and we're excited to take our services from Texas all across the country.

57:53I will say your branding is beautiful. Your comps team is wonderful. Your website is sick. And to quote Packy, you're building a generational company. I would caveat that because someone actually commented below that and said, multi-generational. Exactly. I was gonna say. That's probably the mark. Yeah. That's the idea. Well, Zach and Justin, it was wonderful to have you on. Thank you so much for sharing more about BASE. Thank you for having us. Thank you.