Ventrix: The Gas Plant of the Future

Josh: Welcome to The Pitch, where startup founders raise millions and listeners can invest. I’m Josh Muccio.

Lisa: And I’m Lisa Muccio. On the show today we have Sonny with Ventrix. He’s raising 2 million dollars.

Josh: Pitch listeners know this. I'm a beer guy. I brew it in the garage.

Lisa: Yes.

Josh: And did you know that when you brew beer, there's CO2 involved, right?

Lisa: Of course.

Josh: 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.

Lisa: Boo.

Josh: If only one could capture their own CO2 and then use it to carbonate their own beer. Ahh.

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

Josh: 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.

Lisa: Which means breweries and pretty much anyone who carbonates can control their own CO2 supply.

Josh: The question is, will one brewery be enough to prove that Ventrix can hops to the top?

The pitch for Ventrix is coming up after this.

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.

To learn more about any of these events go to pitch.show/events

BREAK

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 3 hours my brain just like, lit up.

Jesse Middleton with Flybridge

I am so sick of people that are building stuff for building stuff's sake.

And Elizabeth Yin with Hustle Fund

My best deals have been the ones that I've committed on the spot.

Rohit: Okay. What do I say?

Mike: Jesus Christ

Michelle: The name of the company

Rohit: Ventrix [clap]

Jesse: That was solid.

Mike: You have one job

Jesse: You have one job, one opportunity.

Michelle: Take everything you ever want.

Jesse: To capture it

Mike: I've looking forward to being in real life with you buddy.

Michelle and Jesse: [rapping Eminem]

Rohit: I screwed up?

Michelle and Jesse: [rapping Eminem]

[another Ventrix clap]

Elizabeth: That’s pretty good

Jesse: Are we going for karaoke tonight? Let’s do that tonight

Michelle: Oh my God that’d be so fun.

Sonny: Hi

Jesse: Hello

Mike: Hi. How are you doing?

Sonny: I'm good. How are you?

Mike: Mike

Sonny: Sonny. Nice to meet you.

Michelle: Hi I’m Michelle.

Sonny: Nice to meet you.

Jesse: Hey Jesse.

Sonny: Nice to meet you.

Elizabeth: Hey Sonny, Elizabeth.

Sonny: Nice to meet you.

Elizabeth: Nice to meet you.

Rohit: Rohit. Good to meet you.

Sonny: Nice to see you.

Rohit: I feel like we met.

Sonny: We have

Rohit: Yes.

Elizabeth: Did you invest?

Rohit: No, we met once…

Jesse: Did you ghost him or is that-

Rohit: Ohhh

Elizabeth: Okay. You have the floor.

Sonny: Yeah.

Elizabeth: Not this guy.

Sonny: 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, this is a global problem because the plants that extract and purify industrial emissions into high grade CO2 takes around 2 to 7 years to build and hundreds of millions to $1 billion to deploy.

And what we built 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 it deliver CO2 costs by up to 50% for our customers. And so far we've built our TRL six unit in three and a half months, signed our first commercial offtake contract, and currently have world's largest beverage and equipment companies in our pipeline. We recently received $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.

Rohit: Cool.

Elizabeth: Nice.

Mike: Alright

Rohit: So what are the use cases you're targeting or are you sort of agnostic?

Sonny: We basically bolt onto 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 it permanently and also reduce the cost of concrete. So a lot of different use cases and you can also use to make mechanicals

Jesse: And help me to understand the sort of prior two to seven year builds. 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.

Sonny: Yes. So, old method is you building a plant next to one of the industrial plants, you are 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.

Jesse: Got it.

Elizabeth: What is your background?

Sonny: 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 train 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.

Elizabeth: So how did you actually land on this problem?

Sonny: So we all met at a climate entrepreneur society at Imperial College of London. we started with this material that we wanted to commercialize. it can, only transform molecules the size of CO2 and it's very transferrable for other gases as well, we’re like, yeah, this one has a lot of potential. Started out as capturing CO2 from the air. But realized, the supply chain is actually a bigger issue. 'cause why is the UK currently trucking and shipping CO2 from other countries, spending more carbon to get more carbon? Doesn't make any sense. So we're like, this is a better problem to solve rather than, just looking at carbon credit as a market.

Elizabeth: Yeah, that makes sense.

Jesse: And would 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 they'll either they'll reuse it, they might even be your customer, the one that has the exhaust.

Sonny: 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.

Michelle: Are you selling to the plants or are you just selling to like commercials that need to use CO2?

Sonny: Both. We're targeting onsite use cases first. Because like the economics are like the best. So 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 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.

Mike: 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?

Sonny: Yeah. our business model's leasing, our customers are paying anywhere between $200 per ton of CO2 to $2,500 per ton of CO2. And 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.

Mike: Are you varying your pricing based on market demand?

Sonny: No. No, we're not, so we're not kind of selling it as a commodity.

Mike: Right.

Sonn: We are charging a one-off installation fee around 20K. That should cover our scaling cost. the lease annual reoccurring revenue is anywhere between 5,000 to 15,000. dollars per year depending on how many you're renting out or leasing at once.

Jesse: So the, 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 a hundred percent of that.

Sonny: Exactly.

Jesse: CO2. Got it.

Sonny: Yeah. So if they have excess CO2 that they capture, they can also sell that to a gas major.

Elizabeth: 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 gonna change. What does that look like?

Sonny: before we talk about the volatility, like right now, even just by physics, it's very difficult to build these plants. It take 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, so 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 one's the cost of electricity, basically to produce CO2 you have to expend energy. So those are two big ones. I would look at it kind of like electricity, which is 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.

Jesse: Yeah.

Michelle: 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 feed stock in order for there to be a loop?

Sonny: Yeah. So we deal with any fluid 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.

Michelle: So pretty much every kind of factory has this waste output that you can utilize to be the feedstock?

Sonny: if they're, burning or fermenting that has carbon as an output, that we can do.

Mike: if I were 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.

Sonny: So 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 US 45q tax credits. for any ton of CO2, they get another $60 per ton reduction. if we were helping them to recycle CO2 into like e-fuels or construction materials. We can capture probably a hundred percent more than them and we can open that as a new revenue stream.

Jesse: Yeah.

Elizabeth: 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 gonna 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 don't, I, I'm just guessing here, like, talk to me a little bit about why is this dichotomy exist? Like Is it poor forecasting or?

Sonny: yeah, when you are talking about 1 million tons per year output, yes it works for them. But 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 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 and make them cheap, we're going modular

Elizabeth: I see. You're basically saying it's been built the same way all of this time.

Sonny: Yeah.

Elizabeth: And it's not any more efficient or optimized.

Sonny: Well, it's been built in the same way, in a sense that it's bespoke for every single plant.

Elizabeth: Yeah.

Sonny: Which is why it's difficult. But we've seen cases where modular things are a lot cheaper to deploy. Like 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.

Elizabeth: It's interesting because solar panels started out new, if you will. Right. there was no company that came in and said, we're gonna make solar paneling better. It's like we are making solar panels in this modern age, and we're replacing other sources of energy. I, I'm still trying to wrap my head around why somebody would use this new thing, if this makes any sense.

Sonny: 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. 'cause this is pretty much impossible. Each unit has around, let's say 20 to 30 parameters. If you're 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, but before that, it's pretty much impossible. So this is kind of our software moat that we're building.

Mike: Tell me about the customers that you've acquired.

Sonny: Yeah, So we sign our first commercial offtake, with a brewery in Wales. And then we have seven LOIs within the pipeline. Some of them include energy plants and other breweries that are larger.

Mike: 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.

Mike: Right. Is that fair?

Sonny: Yeah.

Mike: So can you walk us through, like how you made that sale?

Elizabeth: Like why’d they buy?

Mike: Why’d they buy, what objections you encountered and how you overcame them in that particular circumstance.

Sonny: 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.

Elizabeth: Sorry, even dig into that.

Sonny: Yeah.

Elizabeth: What is the pain? Because if you're willing to pay anything, you can get CO2, right? It's the transport cost that's high. It's the electricity that's high.

Sonny: Yeah.

Elizabeth: So, what is the specific pain? It's like my cost of CO2 has now gone up to X.

Sonny: Yeah.

Elizabeth: And I can't afford it.

Sonny: Yeah.

Elizabeth: Is that the pain?

Sonny: So there are cases where you can't get CO2 at all when there's shortage. They will prioritize distribution to hospitals

Elizabeth: Okay. Yep

Sonny: For medical use cases. And if you don't have CO2, you can't brew beer.

Elizabeth: So can I parrot back something? if, if I were to re-pitch this real quick.

Sonny: Yeah.

Elizabeth: Actually, the old way with the large plants of CO2

Sonny: mm-hmm.

Elizabeth: 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.

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

Elizabeth: 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?

Sonny: Yes. 'cause the demand is growing. so we have sectors such as e-fuels and constructions are growing at 23 and 30% GCAGR. So the demand is actually outgrowing supply by a lot, And we simply cannot keep up.

Mike: Can I return to the sale in Wales?

Elizabeth: Yeah

Sorry about that Mike. We’ll have an answer to your question after the break.

Mike: Can I return to the sale in Wales?

Elizabeth: Yeah, please go for it

Mike: Because we got as far as they understood the pain. Tell me the story

Sonny: Yeah.

Mike: Of how you closed this deal.

Sonny: Yeah. So essentially we approached them, we told 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 wanna switch to you. They're essentially our pilot customer. And before we finish, building this, they're like, yeah, um, we actually wanna switch you because, , sometimes the existing supplier does not deliver. And then we don't want to be subject to the security problem.

Elizabeth: And what are they paying you as part of this contract?

Sonny: they're paying, 10K per year. So it's exactly how much we have within our, model.

Elizabeth: And, how much does it cost you to build one of these?

Sonny: So right now we're the first of a kind. We're building this around 40k. so we're looking at, once we start manufacturing this, around 20K

Mike: Per what?

Sonny: Per unit?

Mike: Per unit.

Elizabeth: So you have a net loss for at least a couple of years?

Sonny: No.

Michelle: Well, how, how many units are you leasing out?

Sonny: for this brewery, we're leasing one. we get 10K per year, so we get them back. And also,

Mike: So four year payback?

Sonny: No, two.

Elizabeth: Well, four year payback on the 40K at 10K. Right. But you also said there's normally an installation fee and-

Michelle: That’s 40k

Sonny: for first of a kind. So we have a grant that cover the CapEx of this, because this is the first plant that we ever built.

Elizabeth: Oh, you have a grant?

Sonny: Yeah So once we start manufacturing it’s around, 20k, we're charging the installation fee upfront as well.

Jesse: Yeah.

Mike: So one year payback.

Elizabeth: Immediate payback.

Sonny: Exactly.

Mike: The pilot is 10 when you go to market, it'll be 20.

Sonny: Yeah.

Mike: Have you tested the 20k upfront? where people would pay that?

Sonny: Yeah. So within the industry we have other competitors not selling CO2. Let's say farmers or anaerobic digestion plants or buying industrial equipment. They're selling the equipment first. On top of that they're charging a leasing amount.

Jesse: Yeah.

Sonny: Payback period for them is usually between seven to 14 years. usually, what they do is they bundle a 20 year contract within.

Jesse: Mm-hmm.

Sonny: And then they do a special SPV essentially. And what we're doing is actually making it much more financeable for these customers.

Elizabeth: Yeah.

Sonny: So it's a lot better than the market standard.

Jesse: Yeah.

Elizabeth: So who do you go to to sell?

Sonny: So we go to actually enterprise customers. We actually now have inbound, last week we had a very large beverage company that you've 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 incentives for both of 'em are huge. that's our way in normally.

Rohit: How much does the Welsh Brewery spend on CO2 annually?

Sonny: So currently they're paying around a thousand, dollars per ton per year.

Michelle: And how many tons?

Sonny: 20, they're looking to increase to 40.

Jesse: Yeah.

Sonny: But our unit captures between 60 to 120, so it actually covers

Jesse: So you do more than they, yeah

Sonny: Yeah. They can make extra money from selling the Co2 as well 

Elizabeth: You should take a cut on any resales.

Sonny: the way that we structure the, 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.

Michelle: So the single unit already gives them more CO2 than they ever would've used in a year.

Sonny: Yes. But there are other people who are demanding, let's say like 3000 tons per year. Like that's like a small to medium sized, brewery. And then for like AB InBev for example, they're demanding probably like 10,000 tons per year.

Michelle: So once you get the enterprises in, are there lock-in incentives? Is 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?

Sonny: Yeah, we definitely will lock in a longer contract. So even with the pilot customer, right now we're doing three year, but normally we'll look at anywhere between 5 to 20 years. Especially for the larger size, let's say a wasteful energy plant, we're probably looking at a 20 year, that's just the market standard.

Rohit: What's the material that you use?

Sonny: It's a solid absorbent. I can’t disclose exactly what it is, I can tell you off camera

Mike: Well, well, I mean maybe this goes to something. I don't want you to divulge the IP, but can you give us contours of your intellectual protections Lay person.

Sonny: Yeah.

Mike: Dumb guy. I don't need to know anything specific.

Sonny: basically our IP is on the process engineering part. how we design the unit and then how the unit can communicate each other, is basically the mechanical design that allows this to happen.

Mike: Yeah. And the networking of the different units and the, the coordination of the

Sonny: Yeah.

Mike: Fridges.

Sonny: Yeah.

Mike: Again, dumb guy.

Sonny: So that's more the, you’re not dumb. So it's like a trade secret, right? Like the software part is just the trade secret and then modularity is the IP and anything related to how they communicate with each other is like a family of the IP.

Rohit: Who holds the IP on the absorbent?

Sonny: We don't own it. We're working with a manufacturer offshore to produce it. But that category of absorbent, is pretty much like research. so it's-

Rohit: Is it owned by a university?

Sonny: No.

Rohit: So who owns it?

Elizabeth: But you have to pay like a licensing fee?

Sonny: We don't pay a licensing fee. I think the manufacturer pays the licensing fee to someone else.

Rohit: Do you have an exclusive?

Sonny: No, but it's not a material that's difficult to make. We're thinking about manufacturing ourselves with a little twist to the formula.

Rohit: Okay. So if you altered the formula, change the end I guess substance, then could you file IP on that?

Sonny: Potentially

Rohit: because I, I guess the, the risk or one of the risks here is that they could essentially say like, we don't want to sell to you anymore.

Sonny: Yeah.

Rohit: Or we're not gonna give you a license or we're, whatever, somebody else will block you out of the market.

Sonny: Yeah. We are technically absorbent agnostic so we can deal with any sort of solid absorbent. If we want to develop our own later, it wouldn't be a difficult switch.

Rohit: How long would it take you to create your own?

Sonny: Probably, let’s say like a year or two. I don't think it's difficult.

Elizabeth: When did you start this company?

Sonny: We started around a year and eight months ago while we were still doing our masters.

Elizabeth: And does Imperial have any economics in this?

Sonny: No. We build everything in our own garage. And then, talk to advisors for like technical validation and commercial validation.

Elizabeth: as a segue into that, uh, regarding the cap table, it sounds like you've raised money before. How much have you raised, and roughly like how much of the company have you sold and all that?

Sonny: uh it's pretty much founder owned. um, raised a roughly around 400K, 500K angel round before, with participation from, Alexis Ohanian, the co-founder Reddit, as well as like a few other, family offices and one small institutional from the US

Elizabeth: And what were the terms of that?

Sonny: that one was 5.75 mil pounds, so that's roughly around 7.6. $7.7 million dollars.

Elizabeth: And this new raise is 2 million pounds or dollars?

Sonny: $2 million dollars

Mike: What are the use of proceeds?

Sonny: 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.

Jesse: Can I ask a, this may be a silly question, I'm not sure, but, Is CO2 used much with regard to things like data centers in general cooling? It's obviously used in manufacturing processes, but in the operations of?

Sonny: Yeah. So you can use it as a refrigerant.

Jesse: Yeah.

Sonny: 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.

Jesse: Yeah.

Sonny: 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.

Elizabeth: When do you plan on deploying to this Welsh brewery?

Sonny: So we're doing it right now.

Elizabeth: Oh

Sonny: Yeah.

Elizabeth: Awesome. Congrats.

Sonny: Well, we we're finishing- Thank you. From start to end, it's gonna 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.

Mike: 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.

Sonny: Yeah. 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, your recycling so you’re reducing one part of 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.

Mike: Why do you guys care about that?

Sonny: We really cared about it because we were really worried about climate technologies and clean technologies. They're not deploying as fast as we want, around $80 billion has gone into carbon capture and 80% of them actually failed. And I think like, you know, having, family backgrounds in China and then we, we've seen, you know, there's opportunities that we can leverage Chinese manufacturing capabilities and we can do things differently. That's like, we're really, really like, passionate about how to actually scale. I think a lot of people are looking at extracting values or like creating breakthrough science technologies that are probably taking a few more years to deploy. And even when the US or Europe are reindustrializing, we're not gonna 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 gonna not, you know, save the planet in the meantime. That's just something that we care about a lot.

Elizabeth: Are there terms already set on the 2 million or what are your expectations on that?

Sonny: obviously the lead will set the term we're thinking about 13 million, but we open to hear whatever's fair.

Elizabeth: So I would be in for 150 at 10 post US. I know that that's not what you're looking for, but that's, what we would be open to doing

Sonny: Cool.

Elizabeth: And we wouldn't need a lead.

Sonny: Okay.

Elizabeth: 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.

Sonny: Okay. Are we in that process, are we in -

[crosstalk]

Elizabeth: I don’t know about them. But I, I think that, you know, I think you're really impressive. I actually have invested before in carbon capture. This is a very different sort of play.

Sonny: Oh.

Elizabeth: Candidly, I think the hard part to figure out is the customer acquisition. I think it's great that you've 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. Like all my European climate companies have no problem with money. There are grants. We don't have really any of that here in the US so you should take advantage of that.

Sonny: Definitely. Like the grants are great, but also like the credits here are actually stronger in the US than Europe.

Elizabeth: That's true.

Sonny: Yeah.

Elizabeth: So I think it, how you can figure out how to straddle both is I think part of the key. 'cause I think this will take a fair bit of capital even, you know, beyond this round, et cetera, just to kind of get this going.

Sonny: Yeah.

Elizabeth: but I think you're impressive. You learn quickly. so anyway.

Sonny: Awesome.

Elizabeth: Yeah. Awesome.

Jesse: I wanna 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 ask about data centers, we're invested in a few different, both data center companies and AI companies that deal with that. And it's obviously a massive tailwind right now is, 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, and then be on the right side of the trend of the building out of data centers and running them and operating them. 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. So.

Sonny: Yeah. Sounds good.

Michelle: 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 gonna 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, but 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.

Sonny: Yeah.

Michelle: But they're all doing something positive for the world, so I, I definitely commend you on that.

Mike: 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 go to market. So I, I'm interested with that, knowing that my view is the same on the cap it'd be 10, I don't think the 13 is something we would entertain. So I, if you're interested with those constraints to have that conversation, I would be interested as well.

Sonny: Sounds great.

Mike: Cool. So we have a yes from me

Rohit: And we met a couple weeks ago, so we're sort of in middle of our process. Love to dig more and really understand the IP here. 'cause I'm just concerned that someone can pull the rug out from you.

Sonny: Yeah. Sounds good. Yeah.

Rohit: Cool.

Sonny: Yeah.

Rohit: All right. Thank you.

Jesse: Thank you

Elizabeth: Thank you

Mike: Thank you very much

Sonny: Thank you.

Mike: Thank you.

Michelle: Thank you.

Sonny: Nice to meet you.

Elizabeth: Great to meet you.

Rohit: Great to see you again, man.

Josh: So this one's so interesting 'cause 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.

Elizabeth: For me it's less about the IP because having seen this with other companies, the struggle is always customer acquisition.

Jesse: Yeah.

Elizabeth: 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.

Josh: Yeah. What do they care about?

Elizabeth: And 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, it's worth the bet for the right price.

Josh: Yeah. Well, I wouldn't imagine that he's going to displace that many of the existing infrastructure, right? Like that infrastructure's already there.

Elizabeth: Yeah.

Josh: The legacy players have invested so much in it. It's probably the new market, those smaller breweries that want to create their own spot market, essentially.

Elizabeth: Yeah. Basically the startup breweries. But I mean, that's sort of the other thing, like he's gonna need time for this customer acquisition cycle. And what we don't have in the US is we don't have a lot of like free money. If they were in the US I'd be hard pass.

Josh: And what's your position, Mike?

Mike: I wanna see him put spikes on and I wanna watch him do it.

Josh: Spikes like, get on the pitch.

Mike: Mm-hmm.

Mike: Did you just pun me, did you just dad Pun me.

Josh: You punned me.

Mike: 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.

Jesse: I was less swayed by the climate answer as far like that, that was, I don't think he's gonna save the planet in this one take, but I think it's great as an advantage. And like if somebody's 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 small or medium business, you may be like sure, that sounds good. Plug it in.

Mike: 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.

Rohit: Sure.

Mike: I care a lot about that.

Rohit: Yeah, for sure

Mike: And so, I just wanna watch what he does. I wanna see, I wanna seeMichelle: Let him cook.

Mike: I wanna see what happens.

Michelle: Let him cook.

Mike: I wanna see what happens.

Michelle: That's so true

Mike: Let him brew

Josh: All right. It's a wrap. 

Michelle: Nice.

Sonny 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.

Break

Welcome back. A few months after his pitch we caught up with Sonny from across the pond.

Josh: 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.

Sonny: I did, yeah. It was a very intense week 'cause 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 'cause it was my first time in Tampa, Florida, or that side of the country overall.

Lisa: Yeah.

Sonny: So 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.

Josh: Was it a good nap?

Sonny: No. I feel like naps are not really doing it for me anymore. But the couch was comfortable, so.

Josh: That's good to know.

Lisa: Yeah. Those couches were comfy.

Sonny: Yeah.

Josh: So sleepiness 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?

Sonny: With Elizabeth, it was very quick. She wanted to do a second call the week after just to confirm on the terms.

Elizabeth: I've already committed and would love to invest.

Sonny: Yeah.

Elizabeth: 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.

Sonny: I think, uh, we'd love to have you on our cap table.

Elizabeth: Thank you ...

Sonny: I, I spoke to-

Sonny: everybody at The Pitch Fund, and then, 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, would love to have you. Everybody's been saying it's, like... it's extremely fun to work with you.

Elizabeth: Oh, thank you.

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 FL… but according to Rohit, Sonny never sent a proposal. So Rohit’s investment fizzled out from there. Which brings us to Jesse.

Sonny: We had another call. I think they were deciding whether to come in, like, early on, or they wanna come in later. That was kind of where we left it.

Josh: Okay. Jesse did not invest?

Sonny: No. I think I need to follow up. Um-

Josh: Oh.

Sonny: Uh. Since things are changing and moving very quickly.

Josh: All right. That brings us to Mike Ma.

Sonny: Yeah.

Josh: What was the project that you and Mike decided to focus on in the Foxhole?

Sonny: 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.

Josh: Have you ever done enterprise sales before Ventrix?

Sonny: Yes. It was different though because it was more in the Web3 industry. And Web3's 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, like I think customers tend to trust like very, very mature equipment providers. Like with software you can like, "Oh, let's do a pilot," but the pilot n- really doesn't have to integrate into your system. But like with hardware, like you literally have to plug it in.

Josh: Mm-hmm.

Sonny: So it's very different.

Lisa: What is sales coaching like with Mike? Can you give us your best foxhole impersonation?

Sonny: Oh my god. When I was at Bank of America, this is what we did. My job- And, and my boss told me that I have to go close this deal and then I have to fly there the next day and close it. It was very intense 'cause every week, like we meet twice, right? So it's like you have to have progress, like, like a lot of progress within the week.

Josh: Yeah.

Sonny: So it was w- it was really, really intense

Mike: Rule one of sales, you said there are two decision makers

Sonny: Yeah

Mike: That is inherently impossible

Sonny: Okay

Mike: 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. Minus five is like they fucking hate you. Over their cold, dead body would you ever do business with them. Every week you wanna think through, what do I gotta do to move them one degree closer?

Mike: 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?

Elsa: No.

Mike: That's what you're doing.

Mike: The reason I'm asking all these questions is not to be a pain in the ass. At some point in time-

Sonny: Mm-hmm ...

Mike: You're gonna have to assess which one you should do first.

Sonny: Yeah.

Mike: 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?

Sonny: Yeah.

Mike: And I, I'm, I'm struggl- uh, I'll be honest, I'm struggling a little bit, 'cause you're doing so much right now. How do you divide and conquer?

Sonny: it was very helpful to get his, like, 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 with decisions between smaller customers versus, like, larger customers. I think that's kind of, like, 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, like, smaller customers in order to get there." So there was also, like, a lot of learnings just, like, understanding our own thinking as well. Like, why do we gravitate towards larger customers? How do we actually use them to unlock further contracts? There, there was a lot of thinking about thinking, I think, um, happened during that period.

Josh: Lot of thinking about thinking

Sonny: Yes, thinking about thinking.

Josh: A couple weeks into the foxhole it sounded like everyone involved was feeling frustrated. What was going on?

Sonny: I don't think we were frustrated. We're just getting stressed.

Lisa: Oh.

Sonny: Because you have to deliver new updates, like, two times a week, and that was a lot.

Mike: Why wouldn't you do this tomorrow?

Sonny: Uh, time.

Mike: Okay. Say more about time.

Sonny: Bandwidth. Like, I am fundraising, so I have, like, investor questions to answer. Like, I genuinely don't have time to run through this right now.

Mike: But you have a team, and no matter how many investors you have to talk with-

Sonny: Yeah ...

Mike: nothing is more important.

Sonny: I think, like, both me and Elsa, we're just like, "Oh my God," like, "This- there's so much more that we need to learn." But, and it seems like it a- all has to happen at the same time, which is why it was stressful.

Lisa: Yeah.

Josh: So did you emerge from the foxhole victorious?

Sonny: No. It was a no at the end. There was different optics in when it comes to the go-to-market strategy. I think Mike probably will 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.

Josh: Do you think that's a fair critique?

Sonny: 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 assumptions testing, rather than just being able to make a decision within a couple of weeks.

Josh: What happened with the rest of your round? You were raising 2 million on the show.

Sonny: Yes. So we were raising $2 million on the show, and we had a large lead investor who came in and told us we're not raising enough.

Josh: Okay.

Sonny: 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.

Josh: How much are you raising now?

Sonny: So we're raising 5 million pounds, so that's roughly, like, 6.3, $6.4 million.

Josh: Wow. That's a big jump.

Sonny: Yeah. it's a big jump.

Lisa: How much did the lead put in?

Sonny: Like, 60% of the round.

Lisa: Okay.

Josh: Okay. I assume that's not the same terms you were raising in The Pitch Room.

Sonny: No. Yeah, it's different.

Josh: Can you say the terms?

Sonny: No, I can't. It's still under exclusivity.

Josh: 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.

Sonny: Yeah.

Josh: I- Which is a bummer, Sonny.

Sonny: I'm incredibly sorry. Yeah. Like, I appreciate, like, the opportunity to come onto the show, you know, like, be introduced to Hustle Fund, and then also, like, meeting all the investors. Uh. Like, that was, like, incredibly valuable for us. So I think, yeah.

Josh: Yeah. 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?

Sonny: No, not at all. It's honestly probably one of the toughest thing I've ever done in my life. Cause if you go on LinkedIn, right, you see very different stories, right? You just have a vision, and, like, 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.

Josh: Mm-hmm. And you'll have to relearn it all again at Series A.

Sonny: Yes. And then apparently it's, like, completely different.

Josh: It is.

Sonny: Different game.

Josh: Well, thanks for coming on The Pitch, Sonny. Wish we could go on this journey with you. Wish you the best as you're building the company.

Sonny: Thank you for having me. Thank you for having us.

Lisa: Yeah. You're welcome.

Josh: I'm so torn on that one, Lisa.

Lisa: I know you are.

Josh: You know, I like the company, and I was excited to invest in Sonny.

Josh: And founders normally, like, bend over backwards to include room for us in their round. Yeah. Like, that is our experience running the show. Yeah. Like, we provide so much value for the founders.

Lisa: That we don't get pushed out of rounds.

Josh: We don't get pushed out of rounds, and I can't tell you how many tweets I've seen from VCs-

Lisa: Yes

Josh: who are like, "Argh."

Lisa: Yes.

Josh: "It sucks when you provide so much value," and then the founder's like, "Nah, we're gonna go with someone else. We don't have room for you in the round."

Lisa: This is, like, half of VC tweets.

Josh: 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 I, and now in Fund II, it's finally happening, and it's like- ugh.

Lisa: Yeah. I mean, it's not uncommon. It's just uncommon for us. It-

Josh: I know. I thought we were different. I thought we found the hack.

Lisa: Statistically speaking, we were probably ready to have someone push us out. I mean-

Josh: We were statistically ready to have someone push us out?

Lisa: How long can you go without... I'm just kidding.

Josh: Like, one in 50 companies we don't get access to. That's not too bad.

Lisa: 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-

Josh: Yeah ...

Lisa: than force people to, like, take our check.

Josh: Yeah. No, 100%.

No offer to invest in Ventrix is being made to the listening audience on today’s show. But did you know we have a venture fund where we invest alongside the VCs on the show? Most of the time.

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

Next week on The Pitch…

Elizabeth: May I ask sort of an a-hole question

Tiya: Please.

Elizabeth: It sounds like you've got a bunch of different cities in parallel, but they've barely started.

Tiya: 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.

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/apply

We’ll see you next week, in the PITCH ROOM.

–

This episode was made by Josh Muccio, Lisa Muccio, Anna Ladd, and Enoch Kim. With deal sourcing by Peter Liu, John Alvarez, and Phoebe Sun.

Music in this episode is by The Muse Maker, Breakmaster Cylinder, The Firmware Rebels, Baleen, Our Many Stars, and Peter Jean & The Runaway Queen.

The Pitch is made in partnership with the Vox Media Podcast Network.