#184 Ventrix: The Gas Plant of the Future

0:00Rohit Gupta: Welcome to The Pitch, where startup founders raise millions and listeners can invest. I'm Josh Muccio.

0:05Elizabeth Yin: And I'm Lisa Muccio. And on the show today, we have Sonny with Ventrix. He's raising$2 million.

0:11Rohit Gupta: Pitch listeners know this. I'm a beer guy. I brew it in the garage.

0:16Elizabeth Yin: Yes.

0:16Rohit Gupta: And did you know that when you brew beer, there's CO2 involved, right?

0:20Elizabeth Yin: Of course.

0:21Rohit Gupta: Okay, so you need it in the beer, but also in the process of making the beer, a ton of CO2 escapes into the atmosphere. Boo. If only one could capture their own CO2 and then use it to carbonate their own beer.

0:39Elizabeth Yin: It would be great if you didn't have to pay for CO2 because you're already making your own CO2.

0:44Rohit Gupta: Good thing that is what Ventrix is building, the gas plant of the future. They've built this little modular fridge-sized gas plant that you can install in your brewery instead of having to pay these huge billion-dollar gas plants for your gas.

0:59Elizabeth Yin: Which means breweries and pretty much anyone who carbonates can control their own CO2 supply.

1:06Rohit Gupta: The question is, will one brewery be enough to prove that Ventrix can hop to the top?

1:13Elizabeth Yin: The pitch for Ventrix is coming up after this.

1:16Rohit Gupta: But first, we are hosting two live shows this season, one at SF Tech Week in October and another one in November in Brooklyn. And we're also hosting our big pitch event to record season 17 in San Francisco. You'll get to hear all the pitches live and ask questions that might get featured on the show.

1:37Elizabeth Yin: To learn more about any of these events, go to pitch.show slash events. Growing teams need a corporate card built for more. Something that doesn't sacrifice speed for control. Introducing the American Express Corporate Cashback Card. Get 1.5 % cash back on eligible business purchases, advanced spending controls, and real-time visibility, plus intelligent expense management. Get started at go.amex slash amxcorporate. Terms and cap apply.

2:12Rohit Gupta: Welcome back to the pitch for Ventrix. Let's meet the investors. Mike Ma with Sidecut Ventures. I got strings. I'm not an easy yes. Rohit Gupta with Future Communities Capital. Sloshing money around all over the place. Michelle Kwok with Draper Associates. We were deep in the cut for three hours. My brain just like lit up. Jesse Middleton with Flybridge. I'm so sick of people that are building stuff for building stuff's sake. And Elizabeth Yin with Hustle Fund.

2:41Michelle Kwok: My best deals have been the ones that I've committed on the spot.

2:49Elizabeth Yin: Okay, what do I say? Jesus Christ. The name of the company. That was solid. You have one job. You have one job. One opportunity. To take everything you ever wanted. I've been looking forward to being in real life with you, buddy. His palms are sweet. Your palms are heavy. The bottom of the sweater already. Moms are getting his nose. He's on the surface, but he's calm and ready to drop bombs. but he keeps on forgetting what he wrote down. The whole crowd goes so loud. He opens his mouth. But the words won't come out. Thanks for that. That's pretty good. Are we going for karaoke tonight? Oh my god.

3:26That'd be so fun. Hi. Hello. Hi, how are you doing? I'm good. How are you? Mike. Sonny, nice to meet you. Hi, I'm Michelle. Nice to meet you. Hey, Jesse. Nice to meet you.

3:34Michelle Kwok: Hey, Sonny. Elizabeth. Nice to meet you. Rohit, good to meet you. Nice to see you.

3:38Elizabeth Yin: I feel like we met. We have. Yes.

3:41Michelle Kwok: Did you invest?

3:42Elizabeth Yin: No, we met once. Did you ghost him? Or is that? Oh, okay.

3:47Michelle Kwok: You had the floor, not this guy. Yeah. I'm Sonny. I'm the co-founder and CEO of Ventrix Labs, and we're building modular industrial gas plants, starting with CO2. Did you know that CO2 is actually in shortage in the UK since last week, and we don't have enough CO2 to make dry ice for food preservation, and now we have a food security problem. And every time something like this happens, last time was in 2023, the UK lost around 2 billion pounds. And this is not only a UK problem, it's a global problem because the plants that extract and purify industrial emissions into high-grade CO2 takes around two to seven years to build and hundreds of millions to$1 billion to deploy.

4:31And what we build are these modular units that you can stack from single units up to thousands of units together to replace these gigantic industrial plants. And as a result, we can cut the deployment time from years to days and deliver CO2 costs by up to 50 % for our customers. So far, we've built our TRL6 unit in three and a half months, signed our first commercial off-take contract, and currently have world's largest beverage and equipment companies in our pipeline. We recently received a$1 million grant from the UK government, and we're raising$2 million to turn the planet's biggest waste into our industrial gas supply security.

5:08Cool.

5:09Elizabeth Yin: Nice. All right. So what are the use cases you're targeting? Or are you sort of agnostic? We basically bolt on to different industrial plants and anything that's above 5 % concentration of CO2, we can extract and purify. Downstream use cases include food and beverage for carbonation and food preservation, as well as e-fuels making. You put CO2 and hydrogen together to make methane and you can put it into construction materials to sequester permanently and also reduce the cost of concrete. So a lot of different use cases and you can also use it to make them as chemicals. And help me to understand the sort of prior where it was two to seven year builds.

5:45Elizabeth Yin: Do they build these plants like next to existing manufacturing plants or were they historically trucking these gases somewhere and now you're building on top of the plant? Like just help me to understand the difference between the old method and the new Ventrix method. Yes, so old method is you building a plant next to one of the industrial plants. You're doing that from scratch. So what we're doing differently is we built these modular ones that are around two cubic meters, single door fridge sized. So you're stacking as many as you want to replace these plants. So you just plug into their existing exhaust and you get high-grade CO2 out of it.

6:19Got it.

6:20Michelle Kwok: What is your background? So my background is math and AI. Previous to this, I was working at a Sequoia-backed AI startup. I also have a family background in cement. Matter of fact, our entire family team grew up in very traditional industries in cement, conservation, steel manufacturing, and terrain manufacturing. So we all understand how to actually scale technology in the speed that China can. So we're thinking of ways to actually commercialize. So how did you actually land on this problem? So we all met at a climate entrepreneur society at Imperial College London. We started with this material that we wanted to commercialize.

6:55It can only trace molecules the size of CO2. And it's very transferable for other gases as well. We're like, yeah, this one has a lot of potential. Started out as capturing CO2 from the air. Realized the supply chain is actually a bigger issue. Because why is the UK currently chucking and shipping CO2 from other countries, spending more carbon to get more carbon? It doesn't make any sense. So we're like, this is a better problem to solve rather than just looking at carbon cut as a market.

7:19Michelle Kwok: Yeah, that makes sense.

7:21Elizabeth Yin: And with that, out of curiosity, is that a hope from these plants that the CO2 is then used more locally so you're not transporting it? So either they'll reuse it, they might even be your customer, the one that has the exhaust. Yeah, exactly. Like using it on site has like both the carbon benefit where you have less transportation emissions. But when it comes to gas, like 87 % of the cost is actually transportation. So if you use it on site or locally, it's a lot cheaper. Are you selling to the plants or are you just selling to like commercials that need to use CO2? Both. We're targeting on site use cases first because the economics are the best.

7:54So specifically, we're targeting food and beverage markets first. Breweries, they're currently emitting CO2 into the air. They're also buying CO2 from gas majors. So you've got two parts. What we're doing is closing that loop so they have it on site. So it's a lot cheaper. So for them, we're cutting probably 50 to 60 % of the cost while maintaining a huge amount of margin. Can I ask how you're charging for this? What's the revenue business model in comparison to what the cost that they're spending today? Yeah, our business model is leasing. Our customers are paying anywhere between$200 per ton of CO2 to$2 ,500 per ton of CO2.

8:26and in times like this where there's a fluctuation, you are looking at$5 ,000 per ton of CO2 for merchants. What we're doing is leasing our equipment to them. Depending on their size and how many they're leasing at once, we're adjusting the price, but usually we help them to cut 50 % of the cost. Are you varying your pricing based on market demand? No, no, we're not. So we're not kind of selling as a commodity. We are charging a one-off installation fee around 20K that should cover our scaling cost. The lease annual reoccurring and revenue is anywhere between$5 ,000 to$15 ,000 per year, depending on how many you're leasing at once.

9:03Elizabeth Yin: So the old model, if they're bringing it in, you were giving the pricing for that. For you, if they lease this from you, they pay for install, they lease, and then whatever the throughput is, they can use 100 % of that CO2. Got it. Yeah. So if they have excess CO2 that they capture, they can also sell that to a gas major.

9:20Michelle Kwok: Can you talk about the volatility of the CO2 market? Like, what are the drivers for that? How much does it vary? Because that will effectively impact your business when prices are better. Like, people will be less excited about this. Maybe now it's a good time, but that's going to change. What does that look like? Before we talk about the volatility, like right now, even just by physics, it's very difficult to build these plants. It takes a long time and it takes a lot of money to build. So the supply is still scarce. And then in times like this where you have, let's say, conflicts and then you are short on fuel.

9:52so you can't really transport CO2. So that's what's mainly causing the fluctuations right now. I would say that's one of the main drivers. The other ones that cost electricity. Basically, to produce CO2, you have to spend energy. So those are two big ones. I would look at it kind of like electricity, where it's just like a commodity, but you're not really charging on the commodity itself. You are charging the uptime. So you're charging the customers on how secure the supply is. Yeah. So how does the technology work? Like, what is the feedstock that creates the fuel? And then does the company that you're working with, they have to have some sort of output, like a waste output that goes in as a feedstock in order for there to be a loop?

10:30Yeah. So we deal with any flue gas that has above 5 % concentration of CO2. It goes through a pre-processing to get rid of all the impurities. And then it goes into an absorption chamber where we have this material that kind of works like a sponge. It only traps molecules the size of CO2. And once it's fully saturated, we push the CO2 out. and at this point it's pretty much pure CO2, and then we'll liquefy it. So pretty much every kind of factory has this waste output that you can utilize to be the feedstock? If they're burning or fermenting, that has carbon as an output that we can do. If I run a brewery, what is the replacement value that your customers are seeing by incorporating your technology on a dollar basis or pounds, whatever you'd like?

11:14So basically, currently they're probably paying around$200 per ton of CO2. What we can do is actually cut that in half once they install us. And what's more interesting for them is that they're also subject to U.S. 45Q tax credits. For any ton of CO2, they get another$60 per ton reduction if we're helping them to recycle that CO2 into like e-fuels or construction materials. We can capture probably 100 % more than them and we can open that as a new revenue stream. Yeah.

11:42Michelle Kwok: So I'm trying to understand where this shortage of CO2 comes from. because presumably for like a large company, they can kind of forecast a bit, like our sales are going to be X in five years. So we should start building our plant now and they have a lot of money to do so. I imagine on a unit basis, it's probably cheaper to build one of these big plants than to work with many modular ones. I'm just guessing here. Like talk to me a little bit about why is this dichotomy exists? Like is it poor forecasting or? Yeah. So when you were talking about 1 million tons per year output. Yes, it works for them.

12:18But when it comes to building for smaller, like small to medium-sized emitters, it's much viable to use ours because our units are mass manufactured. When you mass manufacture standardize the same unit, you can kind of reach like solar panel or EV level of learning rates. So they can reduce quite quickly. And for the past decades, we've been building the same huge plants. Learning rates are around 3%. So your costs effectively have not gone down at all. So if you want to be able to deploy them fast to make them cheap, we're going modular. I see.

12:46Michelle Kwok: You're basically saying it's been built the same way all of this time. Yeah. And it's not any more efficient or optimized. Well, it's been built in the same way in a sense that it's bespoke for every single plant. Yeah. Which is why it's difficult. But we've seen cases where modular things are a lot cheaper to deploy, right? Solar panel at the beginning was very, very expensive. And then now we were able to deploy them kind of anywhere in a distributed way. And their cost has gone down really quickly. It's interesting because solar panels started out new, if you will, right? There was no company that came in and said, we're going to make solar paneling better.

13:19Michelle Kwok: It's like we are making solar panels in this modern age and we're replacing other sources of energy. I'm still trying to wrap my head around why somebody would use this new thing, if this makes any sense. Yeah, I would say there's another thing that people have not thought about building modular, let's say, stacking hundreds of thousands before the age of AI, because it's pretty much impossible. Each unit has around, let's say, 20 to 30 parameters. If it's stacking hundreds of them or thousands of them together, that's 20 ,000 parameters controlled at once. And now we have the compute to be able to do that.

13:49But before that, it's pretty much impossible. So this is kind of our software mode that we're building. Tell me about the customers that you've acquired. Yeah. So we signed our first commercial offtake with a brewery in Wales. And then we have seven allies within the pipeline. Some of them include energy plants and other breweries are larger. So when you go into this brewery and want to sell them, can you walk us through that sales process? I'd assume they're not, this brewery in Wales is not like at the cutting edge of AI. Is that fair? Yeah. So can you walk us through like how you made that sale?

14:25Why'd they buy? what objections you encountered and how you overcame them in that particular circumstance? Yeah, so they already understand the pain. We don't have to explain it to them. So the supply shortage is a thing that actually affects their operation.

14:37Michelle Kwok: Sorry, even dig into that. What is the pain? Because if you're willing to pay anything, you can get CO2, right? It's a transport cost that's high. It's the electricity that's high. Yeah. So what is the specific pain? It's like, my cost of CO2 has now gone up to X and I can't afford it. Yeah. Is that the pain? So there are cases where you can't get CO2 at all when there's shortage. They will prioritize distribution to hospitals for medical use cases. And if you don't have CO2, you can brew beer. So can I parrot back something? If I were to repitch this real quick. Yeah. Actually, the old way with the large plants of CO2 actually is not necessarily a problem, except for the fact that the geopolitics of the last five years has changed such that the UK really has a shortage of CO2 and that is why they need to be self-sufficient?

15:24I don't think this is a trend. I don't think it's something that's only geopolitics. I think it's...

15:30Michelle Kwok: But isn't that what has driven all of these issues? Like if these issues had not happened in 2021, 2023, now, et cetera, would they have this problem? Yes, it's because the demand is growing. So we have sectors such as e-fuels and constructions are growing at 23 and 30 % CAGR. So the demand is actually outgrowing supply by a lot. and we simply cannot keep up. Can I return to the sale in Wales?

15:56Rohit Gupta: Sorry about that, Mike. We'll have an answer to your question after the break.

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17:10Because we got as far as they understood the pain. Tell me the story of how you closed this deal. Yeah, so essentially we approach them, we tell them, we understand your problem. Is this true? They said it's true. And we're actually kind of tired of our current supplier. We want to switch to you. They're essentially our pilot customer. And before we finish building this, they're like, we actually want to switch to you because sometimes the existing supplier does not deliver and we don't want to be subject to the security problem.

17:37Michelle Kwok: And what are they paying you as part of this contract? They're paying$10 ,000 per year. So this is exactly how much we have within our model. And how much does it cost you to build one of these? So right now, we're the first of a kind. We're building this around$40 ,000. So we're looking at once we start manufacturing, it's around$20 ,000. Per what? Per unit. Per unit. So you have a net loss for at least a couple of years? No. How many units are you leasing out? For this brewery, we're leasing one. we get 10k per year so we get them back and also for your payback no two well for your payback on the 40k at 10k but you also said there's normally an installation fee and all that 40k for first of a kind so we have a grand that cover the capex of this because this is the first plan i've ever built oh you have a grand yeah so once we start manufacturing it's around 20k we're charging the installation fee up front as well so one year payback so it's like 20 it's it immediate payback exactly the pilot is 10 when you go to market it'll be 20.

18:40have you tested the 20k up front where people would pay that yeah so within the industry we have other competitors not selling co2 let's say farmers or anaerobic digestion plants are buying industrial equipment they're selling equipment first on top of their charging leasing amount payback period for them is usually between 7 to 14 years usually what they do is they bundle a 20-year contract within and then they do a special SPV, essentially. And what we're doing is actually making it much more financeable for these customers. It's a lot better than the market standard.

19:10Michelle Kwok: So who do you go to to sell? So we go to actually enterprise customers. We actually now have inbound. Last week we had a very large beverage company that you probably heard of that I can't tell, came to us. We go specifically to two people, supply chain lead and decarbonization lead. And from both sides, the incentive rhythm, both of them are huge. That's our way in normally. How much does the Welsh brewery spend on CO2 annually? Currently, they're paying around$1 ,000 per ton per year. And how many tons? 20. They're looking to increase to 40. But our unit captures between 60 to 120. So it actually covers an above.

19:47Yeah. They can make extra money from selling CO2 as well.

19:51Michelle Kwok: You should take a cut on any resales. The way that we structure the leasing amount kind of covers that. So if they do purely resell, their payback period is around three years. But if they're using it on site, it's anywhere between three months to two years. So the single unit already gives them more CO2 than they ever would have used in a year. Yes. But there are other people who are demanding, let's say, like 3 ,000 tons per year. That's like a small to medium-sized brewery. And then for like AB &B, for example, they're demanding probably like 10 ,000 tons per year. So once you get the enterprises in, are there lock-in incentives?

20:27Is there stickiness? Because I imagine if other people who are creating CO2 see your invention, do you see this being commoditized in the future? How do you see your future going in the next few years? Yeah, we definitely will lock in a longer contract. So even with a pilot customer right now, we're doing three-year, but normally we'll look at anywhere between five to 20 years, especially for the larger size, let's say a waste-to-energy plant, we're probably looking at a 20-year. That's just the market standard. What's the material that you use? It's a solid sorban. I can't just go exactly where it is.

20:59I can tell you off camera. Well, I mean, maybe this goes to some, I don't want you to divulge the IP, but can you give us contours of your intellectual protections? Lay person. Dumb guy. I don't even know anything specific. Basically, our IP is on the process engineering part, how we design the unit, and then how the unit can communicate to each other. It's basically the mechanical design that allows this to happen. And the networking of the different units and the coordination of the fridges. Again, dumb guy. So that's more the... So it's like a trade secret, right? Like the software part is just a trade secret.

21:33And then modularity is the IP. And anything related to how they communicate with each other is like a family of the IP.

21:39Elizabeth Yin: Who owns the IP on the adsorbent? We don't own it. We're working with a manufacturer offshore to produce it. But that category of adsorbent is pretty much like research. Is it owned by a university? No. So who owns it?

21:53Michelle Kwok: But you have to pay like a licensing fee? We don't pay a licensing fee. I think the manufacturer pays the licensing fee to someone else. Do you have an exclusive? No, but it's not a material that's difficult to make. We're thinking about manufacturing it ourselves with a little twist to the formula.

22:09Elizabeth Yin: Okay. So if you alter the formula, change the end, I guess, substance, then could you file IP on that? Potentially. Because I guess the risk or one of the risks here is that they could essentially say, like, we don't want to sell to you anymore. Yeah. Or we're not going to give you a license or whatever. Somebody else will block you out of the market. Yeah. We are technically sort of agnostic, so we can deal with any sort of solid sort. And if we want to develop our own later, it wouldn't be a difficult switch. How long would it take you to create your own? Probably, I'll say, a year or two. I don't think it's difficult.

22:46Michelle Kwok: When did you start this company? We started around a year and eight months ago while we were still doing our master's. And does Imperial have any economics in this? We build everything in our own garage and then talk to advisors for technical validation and commercial validation. As a segue into that, regarding the cap table, it sounds like you've raised money before. How much have you raised and roughly how much of the company have you sold and all that? It's pretty much founder-owned. I raised a roughly around 400K, 500K angel round before with participation from Alexis Ohania and the co-founder of Reddit, as well as a few other family offices and one small institutional from the U.S.

23:25Michelle Kwok: And what were the terms of that? That one was 5.75 mil pounds. So that's roughly around 7.6, 7.7 million dollars. And this new raise is 2 million pounds or dollars? 2 million dollars. And what are the use of proceeds? So we're specifically finished deploying our industrial demo, which stacks five units together. We're finishing on the AI control layer. And then during the process, we'll also scale our sales. We're actually looking to mass manufacture at the end of 2027. So getting a lot of contracts piled up together so we can manufacture more. So that's the goal for the pre-seed.

24:01Elizabeth Yin: Can I ask this maybe a silly question? I'm not sure, but is CO2 used much with regard to things like data centers and general cooling? It's obviously used in manufacturing processes, but in the operations of. Yeah. So you can use it as a refrigerant. Some data centers do use it. Actually, I just had this very interesting conversation last night where there's a lot of natural gas plants right next to data centers right now. And we can actually capture from there and then reuse it locally. So one of the use cases could be doing something with cooling in data centers.

24:31Michelle Kwok: When do you plan on deploying to this Welsh brewery? So we're doing it right now. Oh, awesome. We're finishing. Thank you. From start to end, it's going to be in six months. I think we're really quick. Like normally you'll probably need one or two years to do so, but because my CTO has like mass manufacturing experience, we're able to do this a lot quicker. If you zoom out and look at the total impact that your work and CO2 distribution has on the planet, do you have some thoughts? Bring me inside some of the conversations you have around impact and how you guys think about the good that you're creating.

25:05Yeah, so every ton used by our unit or recycled by our unit, you're saving essentially 1.1 tons of equivalent of CO2. For a brewery, essentially, instead of emitting and getting another part, you're recycling instead of reducing one part or your direct emissions. And then you're also cutting the transportation emission related to that, which usually is around like 0.1 ton per ton of CO2 that you use. Why do you guys care about that? We really cared about it because we were really worried about climate technologies and clean technology. They're not deploying as fast as we want. Around$80 billion has gone into carbon capture, and 80 % of them actually failed.

25:42And I think having family backgrounds in China, and we've seen there's opportunities that we can leverage Chinese manufacturing capabilities, and we can do things differently. We're really, really passionate about how to actually scale. I think a lot of people are looking at extracting values or creating breakthrough science technologies that are probably taking a few more years to deploy. And even when the U.S. or Europe are reindustrializing, we're not going to see the same kind of manufacturing capability for the next five to 10 years. So what do we do in the meantime? Are we just going to not save the planet in the meantime?

26:14That's just something that we care about a lot.

26:17Michelle Kwok: Are there terms already set on the two million or what are your expectations on that? Obviously, the lead will set the term. We're thinking about$13 million, but we're open to hear whatever's fair. So I would be in for$150 at$10 post, U.S. I know that that's not what you're looking for, but that's what we would be open to doing. Cool. And we wouldn't need a lead. Okay. I don't know if you're thinking about tranching it or whatever, but you can kind of take money at whatever price you want. It doesn't have to all be at the same terms. Okay. Are we in that process? Are we in that stage now?

26:52Elizabeth Yin: I don't know about them. No, you're there.

26:54Michelle Kwok: But I think you're really impressive. I actually have invested before in carbon capture. This is a very different sort of play. Candidly, I think the hard part to figure out is the customer acquisition. I think it's great that you got one. But I think one advantage you have is the European side of things. There are more European funds interested in climate, more families interested in climate. All of my European climate companies have no problem with money. There are grants. We don't have really any of that here in the U.S. So you should take advantage of that. Definitely. Like the grants are great, but also like the credits here are actually stronger in the U.S.

27:28than Europe.

27:29Michelle Kwok: Yeah. So I think how you can figure out how to straddle both is I think part of the key, because I think this will take a fair bit of capital even beyond this round, et cetera, just to kind of get this going. Yeah. But I think you're impressive. You learn quickly. So anyway. Awesome. Awesome.

27:44Elizabeth Yin: I want to learn more. I don't think I know enough about anybody in this space. Like if you were to ask me to name another company in this space, I didn't have that one either. The reason I asked about data centers, we're invested in a few different, both data center companies and AI companies deal with that. And that's obviously a massive tailwind right now is that industry. And so if you can not only solve this problem on the recycling side, but also produce twice as much as you need,

28:10Michelle Kwok: and then be on the right side of the trend of the building out of data centers and running them and operating them.

28:15Elizabeth Yin: There's a big advantage there. And so I would say I'm not ready to commit to anything. I would like to connect and learn more, but not yet ready to say, like, I'm in. Yeah, sounds good. I really love what you're doing and why you're doing it. I haven't gotten over the hump yet of understanding if this is going to be commoditized in the future, this type of form factor, and if the IP moat is strong enough for you to have that gap. I'm not quite sure if this is like a venture business or if you can continue to build on commercial contracts. And I think it can be a really successful business. But I'm also thinking other people may copy this type of technology.

28:59But I also could absolutely be wrong. I think I could also be biased in a way that we've done. I worked at another fund where we did a few carbon capture companies that didn't turn out in a venture scale the way that we thought they would. But they're all doing something positive for the world. So I definitely commend you on that. So I'm interested. That interest comes with caveats. So unlike Elizabeth, we're a slow check. We're writing 200 to 300, kind of in the quarter million range. We work primarily with the go to market. So I'm interested with that, knowing that my view is the same on the cap.

29:34It'd be 10. I don't think the 13 is something we would entertain. So if you're interested with those constraints to have that conversation, I would be interested as well. Sounds great. Cool. So we have a yes from me.

29:44Elizabeth Yin: We met a couple of weeks ago, so we're sort of in the middle of our process. Loved digging more and really understand the IP here because I'm just concerned that someone can pull the rug out from you. Yeah. Sounds good. Cool. Yeah. All right. Thank you. Thank you. Thank you. Thank you. Thank you very much. Thank you. Thank you. Nice to meet you. Nice to meet you. Nice to meet you. Great to see you again, man.

30:10Rohit Gupta: So this one's so interesting because it's like, I'm actually surprised you were able to come to a commitment, Elizabeth, just because he couldn't talk about the IP.

30:19Michelle Kwok: For me, it's less about the IP because having seen this with other companies, the struggle is always customer acquisition. Yeah. Especially in this industry. Such a slow cycle. Like, that's where they all fail. And so I wanted to understand what specifically the problem he's addressing through the eyes of what is he telling his customers as to why they should buy.

30:38Rohit Gupta: Yeah, what do they care about?

30:39Michelle Kwok: Especially if they already have something that's working, even if it's not working well. But I think it came around like it's worth the bet for the right price.

30:46Rohit Gupta: Yeah. Well, I wouldn't imagine that he's going to displace that many of the existing infrastructure, right? Like that infrastructure is already there. Yeah. The legacy players invested so much in it. It's probably the new market, those smaller breweries that want to create their own spot market, essentially.

31:02Michelle Kwok: Yeah, basically the startup breweries. Yeah. But I mean, that's sort of the other thing. Like he's going to need time for this customer acquisition cycle. And what we don't have in the U.S. is we don't have a lot of like free money. If they were in the U.S., I'd be hard pass. and what's your position Mike? I want to see him put spikes on and I want to watch him do it. Spikes? Like get on the pitch? Did you just pun me? Did your dad pun me? You punned me. I agree with Elizabeth that it's about acquisition and his answer about climate intrigued me enough to find out if they can do it.

31:39Elizabeth Yin: I was less swayed by the climate answer as far as like that was I don't think he's going to save the planet in this one take. But I think it's great as an advantage. And like, if somebody is right there and they're like, yeah, it's about equal spend or yeah, it's also good for the world. And you might make a few extra bucks. You know, if you're a smaller medium business, you may be like, yeah, sure. Like that sounds good. Plug it in. And that, I don't know enough to actually ascertain the quantitative impact. I want to understand, talk about carbon, what the carbon-based life form thinks and feels.

32:08Sure. I care a lot about that. Yeah, for sure. And so I just want to watch what he does. I want to see, I want to see, I want to see what happens. Let them cook. Let them brew. That's so true. Let them brew.

32:17Rohit Gupta: All right. It's a wrap. Nice. Great.

32:24Rohit Gupta: Sunny walked out of the pitch room with commitments from Elizabeth, Mike, Rohit, and Jesse. Though Rohit and Jesse were a bit less concrete, environmentally friendly carbon sequestering concrete. When we come back, communication starts to break down in diligence.

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33:13Rohit Gupta: Welcome back. A few months after his pitch, we caught up with Sonny from across the pond. How was your experience pitching on the show? I know you were very tired. You wanted to nap before your pitch, but Lisa said no. Then you started doing pushups to wake up. You seemed fine in the room though, but afterwards, I think you just fell asleep in the middle of the chaos. I did. Yeah. It was a very intense week because it was in the middle of San Francisco Climate Week. So I have to fly from San Francisco to Tampa, which was a great experience because it was my first time in Tampa, Florida, or that side of the country overall.

33:50So it was a really, really fun experience. And also meeting all the great founders. It was a bit nerve wracking, not gonna lie, but it was, I think I was in good hands.

33:59Rohit Gupta: Was it a good nap? No. I feel like naps are not really doing it for me anymore. But the couch was comfortable. That's good to know.

34:10Elizabeth Yin: Those couches were comfy. Yeah.

34:12Rohit Gupta: So, sleepingness aside, you got four commitments in the room. Elizabeth, Rohit, Jesse, and an invite from Mike Ma to the infamous foxhole. First up, what happened with Elizabeth? With Elizabeth, it was very quick. She wanted to do a second call the week after just to confirm on the terms.

34:33Michelle Kwok: I've already committed and would love to invest. Yeah. But I know that you had question marks about the terms, and I know you're going for something larger. Curious what your thoughts are. I think we'd love to have you on our cap table. I spoke to everybody at the Pitch Fund and also like I got to hang out with everybody else at the local pub, Irish pub. I don't know why they would have an Irish pub in Tampa. That was like my biggest question. But yeah, we'd love to have you. Everybody's been saying it's like, it's extremely fun to work with you. Oh, thank you.

35:09Rohit Gupta: So Elizabeth invested$150K. But there were three more investors to convince. Rohit and Sonny talked after the pitch, and Rohit connected him with a potential customer, a brewery in Florida. But according to Rohit, Sonny never sent a proposal. So Rohit's investment fizzled out from there. Which brings us to Jesse. We had another call. I think they were deciding whether to come in early on or they want to come in later. That was kind of where we left it. Okay. Jesse did not invest. No. I think I need to follow up. Oh. Since things are changing and moving very quickly. All right. That brings us to Mike Ma.

35:54Rohit Gupta: What was the project that you and Mike decided to focus on in the foxhole? So there was a couple of customers in the pipeline that are really large global beverage manufacturers and distributors. So it was basically enterprise sales. Have you ever done enterprise sales before Ventrix? Yes. It was different though, because it was more in the Web3 industry. And Web3 is a completely different beast. It's just like you grab a drink and then you talk about business. It was very different from hardware. With hardware, I think customers tend to trust very, very mature equipment providers. With software, you can like, oh, let's do a pilot, but the pilot really doesn't have to integrate into your system.

36:39But with hardware, you literally have to plug it in. So it's very different.

36:43Elizabeth Yin: What is sales coaching like with Mike? Can you give us your best foxhole impersonation? Oh, my God. When I was at Bank of America, this is what we did.

36:59And my boss told me that I have to go close this deal and that I have to fly there the next day and close it. It was very intense because every week we meet twice, right? So it's like you have to have progress, like a lot of progress within the week. So it was really, really intense. Rule one of sales, you said there are two decision makers. Yeah. That is inherently impossible. Okay. You have to know the people well enough to do this. And then some idea of like where they stand with you. Plus five is like they love you. They would have ventrix tattooed if they could. They would leave to work with you.

37:36Minus five is like they f***ing hate you. Over their cold dead body, would you ever do business with them? Every week you want to think through what do I got to do to move them one degree closer? Let me ask you a more plain, bold-faced question. Would you ever play a sport where you didn't know where the goal was? No. That's what you're doing. The reason I'm asking all these questions is not to be a pain in the ass. At some point in time, you're going to have to assess which one you should do first. Yeah. Of all the different go-to-market motions you listed, referral, LinkedIn, carrier pigeon, singing telegram, what's the universal measurement that tells you species A is better than species B?

38:23Yeah. And I'm struggling, I'll be honest, I'm struggling a little bit because you're doing so much right now. How do you divide and conquer? It was very helpful to get his perspective. And I think we also developed a framework that we use to assess the progress. It was super helpful for early startup. And we also talked a lot about the differences of decisions between smaller customers versus larger customers. I think that's kind of where our perspectives differ, because I thought larger customers have larger values. But then Mike mentioned that, oh, you might want to build a pipeline with smaller customers in order to get there.

39:04So there was also a lot of learning, just understanding our own thinking as well. Why do we gravitate towards larger customers? How do we actually use them to unlock further contracts? There was a lot of thinking about thinking, I think. A lot of thinking about thinking? Yes, thinking about thinking.

39:23Rohit Gupta: A couple of weeks into the foxhole, it sounded like everyone involved was feeling frustrated. What was going on? I don't think we're frustrated. We're just getting stressed because you have to deliver new updates like two times a week. And that was a lot. Why wouldn't you do this tomorrow? Time. Okay. Say more about time. Bandwidth. Like I am fundraising. So I have like investor questions to answer. Like I genuinely don't have time to run these. And no matter how many investors you have to talk with. Yeah. Nothing is more important. I think like both me and Elsa were just like, oh my God, like this, there's so much more that we need to learn.

40:08But it seems like it all has to happen at the same time, which is why it was stressful. Yeah. Yeah.

40:15Rohit Gupta: So did you emerge from the foxhole victorious? No, it was no at the end. There was different optics when it comes to the go-to-market strategy. I think Mike probably would prefer us to do more of a bottom-up approach when it comes to having another separate pipeline of customers. But we ended up not doing that. Do you think that's a fair critique? I think it's super fair. Honestly, I think we need a bit more time to figure it out. And we want to design more assumption testing rather than just being able to make a decision within a couple of weeks. What happened with the rest of your round? You were raising$2 million on the show.

40:55Yes. So we're raising$2 million on the show and we had a large lead investor who came in and told us we're not raising enough. Okay. To be fair, like a couple of investors told us that before and I just kind of ignored it until we actually did the finance again and realized this is a lot more capital intensive than we realized. So that was kind of why we moved on to like a larger round now.

41:25Rohit Gupta: How much are you raising now? So we're raising 5 million pounds. So that's roughly like 6.3, 6.4 million dollars. Wow. That's a big jump. Yeah, it's a big jump.

41:37Elizabeth Yin: How much did the lead put in? Like 60 % of the round. Okay. Okay.

41:42Rohit Gupta: I assume that's not the same terms you were raising in the pitch room. No. Yeah, it's different. Can you say the terms? No, I can't. It's still under exclusivity. I see. All right. So now to the matter at hand, we've been trying to invest$150 ,000 into your company alongside Hustle Fund for over a month. But it sounds like we're not able to with this new lead coming in and raising the valuation. Which is a bummer, Sonny. Sorry. Sorry. Like, I appreciate it, like the opportunity to come onto the show and like be introduced to Hustle Fund and also like meeting all the investors like that was incredibly valuable for us.

42:29So I think, yeah.

42:33Rohit Gupta: So my next question, you're a first time founder. This is your first time raising VC. Is it going how you thought it would? No, not at all. It's honestly, probably one of the toughest thing I've ever done in my life. because if you go on LinkedIn, you see very different stories. You just have a vision and you just really pitch the vision, but it's not about that. And also, the markets are changing constantly. It takes time to understand how it actually all works. And you'll have to relearn it all again at Series A. Yes, and then apparently it's like completely different. It is. Different game.

43:13Rohit Gupta: Well, thanks for coming on the pitch, Sunny. Wish we could go on this journey with you. wish you the best as you're building the company. Thank you for having me. Thank you for having us.

43:21Elizabeth Yin: Yeah, you're welcome.

43:29Rohit Gupta: I'm so torn on that one, Lisa.

43:31Elizabeth Yin: I know you are.

43:33Rohit Gupta: You know, I like the company and I was excited to invest in Sunny. And founders normally like bend over backwards to include room for us in their round. Like that is our experience running the show. Like we provide so much value for the founders.

43:50Elizabeth Yin: That we don't get pushed out of rounds.

43:51Rohit Gupta: We don't get pushed out of rounds. And I can't tell you how many tweets I've seen from VCs who are like, ah, it sucks when you provide so much value. And then the founder is like, nah, we're going to go with someone else. We don't have room for you in the round.

44:04Elizabeth Yin: This is like half of VC tweets.

44:06Rohit Gupta: Yeah. Yeah. I guess I'm not surprised that it finally happened to us. But we didn't get squeezed out of any rounds in fund one. And now in fund two, it's finally happening. And it's like, oh.

44:21Elizabeth Yin: Yeah. I mean, it's not uncommon. It's just uncommon for us.

44:25Rohit Gupta: I know. I thought we were different. I thought we found the hack.

44:30Elizabeth Yin: Statistically speaking, we were probably ready to have someone push us out.

44:35Rohit Gupta: We were statistically ready to have someone push us out?

44:38Elizabeth Yin: How long can you go without? I'm just kidding.

44:41Rohit Gupta: Like one in 50 companies we don't get access to. That's not too bad.

44:46Elizabeth Yin: I think that's some good odds. Ultimately, I really believe in the way we run things at the pitch. And I would rather be a generous VC that provides value to founders and believes in people to like choose us. Yeah. Than force people to like take our check.

45:05Rohit Gupta: Yeah. No, 100%. No offer to invest in Ventrix is being made to the listening audience on today's show. But did you know that we have a venture fund where we invest alongside the VCs on the show most of the time?

45:19Elizabeth Yin: When you invest in the Pitch Fund, you get ownership in all the companies that we invest in on the show. We're open to new investors through the end of the year. To learn more, go to thepitch.fund.

45:28Rohit Gupta: Next week on The Pitch.

45:30Michelle Kwok: May I ask sort of an A-hole question? Please. It sounds like you've got a bunch of different cities in parallel, but they've barely started.

45:37Rohit Gupta: Everything is lined up for us to be able to hit the big green button and go big. That's next week. Subscribe to The Pitch on your favorite podcast player so you don't miss future episodes. You can watch full-length versions of every pitch over on our Patreon at The Pitch Uncut.

45:53Elizabeth Yin: And if you're a founder raising a pre-seed or seed round, apply to pitch at our next event. It only takes a couple minutes. Go to pitch.show slash apply.

46:00Rohit Gupta: We'll see you next week in the Pitch Room.

46:53Michelle Kwok: We'll see you next time.