Sunday, January 13, 2019

2020: When the EV Breaks Out

EVs make up a relatively tiny part of US auto sales, but the Tesla 3 outsold all other luxury cars and almost outsold the Toyota Corolla. It's still too pricey, but it's coming down this summer and there's a new, lower-cost model on the way.

More Affordable
GM's Bolt EV gets about 240 miles range, and is about $36,000 before incentives, which total $9,000 if you're in PA, until April, when the federal incentive is cut in half. It's a great car, but for me the seat isn't that comfortable. (One of the consequences of getting "cured" is my appetite is back and I put on some weight, so the seat's a bit narrow). The range is enough to allay your range anxiety; drive from Lancaster to NYC and back without recharging, depending on how you drive. And while you there you can always charge in one of the hundreds of charging stations, many of which are in parking garages.

New and Interesting
Hyundai is coming out with the Kona, which has a range of about 240 miles; it's like the Honda HRV, a small crossover with a good amount of space relative to the Bolt (guessing). It's selling now but not in the US. They aren' producing much, but it already seems like a very popular model with a ton of interest here in the US. Cost is about $29,000 after incentives.

Kia is coming out with the Niro. Nissan just improved the range of the Leaf to 225 miles (optional), and the big news is VW announced it's going 100% EV by 2025.

EVs are Mainstream and Taking Over
In short, we're here. Electricity is cheaper than gas, even at these cheap prices. 2020 will be the year the general public recognizes Renewables are cheaper than fossil fuels. (If I were a responsible blogger I'd provide links, but alas).

Energy companies would be wise to move aggressively away from fossil fuels and toward renewables. They've been dabbling, but they're not trying to disrupt themselves. That's a mistake--they'll become the Kodak of energy, in a sense, if they don't move fast.

Used Market
You can buy a used 2013 Leaf now for $7,000, with a range for 80 miles. With heated seats! Every two-car family should get one for local trips. How often do you drive 80 miles in a day? 40 up, 40 back? No often, even on a day heavy with errands. You'll save 75% on fuel, and have a peppy, fun, reliable relatively spacious second car for cheap.

Downside: Unemployment in the Auto Industry
The biggest negative impact I can see, with my limited view, is on the US auto industry supply chain and after-market retailers. EVs have something like 18,000 fewer parts than gas cars. Gas cars aren't going away entirely just yet, but fewer will be sold, and the decline is going to accelerate between 2020 and 2030 so rapidly there will be major upheaval in these markets.

Imagine a 20% decline in production of new parts--pistons, casings, bolts, screws, linings, exhaust, spark plugs, etc, etc, etc. They can't simply shift to electric motor parts--there just aren't a lot of them. 

Which means hundreds of thousands of people are going to lose their jobs--possibly millions over 20 years; they should start looking for another job now, while there's still time. It will be a sea-change shift, and we'll be better off for it--air quality, water quality, etc. Less athsma, disease caused by chemicals like benzene (from gasoline), etc. Gas stations really need to start adding charging stations --and lots of them. And cafes.

Other Thoughts
The one benefit a gas car has over an EV is refueling time, which will change in the next several years, but right now it's at least a 20-minute wait to recharge a Leaf to 60 miles. Cars with greater range take longer to fully charge; the Bolt takes an hour and twenty minutes. Hence the cafe opportunity :)

You can get a Tesla Model S for under $30,000, if you're willing to buy used. It's a beautiful luxury car, and happens to be electric. Fast, spacious, comfortable, and amazing. Sigh.

I sold my Leaf last year for $7k. I've driven a gas guzzling SUV (Ford Escape, 23 mpg) for on-road sales; I needed the range and couldn't afford a Tesla. But between the car payment, gas, and maintenance, I could easily own a used Tesla instead. But I'm waiting a bit.

So, yeah, I've loved electric cars since the 90's. I'm one of those people--I almost built my own (shoutout Brandon Hollinger).  I look up prices every couple of days, read EV news, spot the EVs on the road, look at industry stats, etc. I'm addicted to this great idea finally coming to fruition. The first EV was built in the early 1900''s been a very, very long road to getting to public acceptance. And we're just about here.

And yes I'd work in the EV or solar industry if I had the right opportunity. I'm super excited about micro-grids and the potential for people to organize their own power sources, cooperatively in neighborhoods. A friend of mine turned me on to some new ideas around that, and it's exciting. Lots of hurdles, of course--local, state, and federal laws, working with physical stuff like, well, stuff you have to install.

EV Sites I read
Inside EVs (pure EV site)
Green Car Reports (mix of EV and Hybrid, not dedicated to EV, sadly. Hybrids burn gas--they are polluters and resource hogs. But better than full ICEs. )
EV-VIN  (current lease deals, links to other sites)

That's what's on my mind this morning.

Monday, January 7, 2019

Return to Tech or Stay in Social Impact?

One of the decisions I've put off is whether to stay in the social impact world or return to tech.

Some might argue there's an intersection between the two, but I haven't seen much of it around the issue I care most about, which is poverty and the unfairness of extractive industries. I'm talking about excessive, escalating fines for anything from parking tickets to court costs, or bank fees, or cash checking, or Rent-a-Center, etc, etc.

I'm thinking a lot about that, but haven't found the angle just yet. Payday lending is top of mind; even the framing of that practice is unjust: employees work, then wait one to two weeks for a paycheck. They're basically lending money to the employer, who pays them without interest down the road. In the meantime there are bills to pay.

So it's really a line of credit they're giving to the employer--the employee is the lender, and the employer is the borrower. There's something to that. An employer will argue the interest is built in. But the delayed pay benefits the company's cash flow, as they're currently structured. But maybe they should be depositing part or all of the pay on a daily basis, and adjust their cash flow practices around that. Why? Because it's more fair and makes life easier for low-paid workers.

Is there a tech angle? Maybe, but it feels like more of a policy issue, or practices issue.

I'm interested in solar and EVs (been obsessed about EVs forever). There's an intersection there and I'm watching some interesting ideas. The price per kWh is below fossil fuels now, and battery technologies are advancing rapidly. Graphene might be the key. Or the new thing out of MIT. But getting those to mass production will take time.

I don't like the "buy one, give one" model. It's basically philanthropy, and while free shoes are welcome (thanks Tom's), it doesn't promote sustainability and can have negative side effects.

And I don't like the 1% model. Again it's philanthropy, rather than introducing systemic change through a business model--the holy grail of impact business. Philanthropy isn't necessarily a bad thing, but it's every inefficient with a lot of overhead, and tends to treat symptoms rather than root causes, many of which could be changed by policy.

So we'll see. I love tech--it's intellectually stimulating and can be a lot of fun. I'm looking at something pretty deeply right now. Not mine, but I'm pretty jazzed by it and I bet we could blow it up to something substantial.

What am I missing? Lots, I bet. It's a good time to dig in, do the research.

What excites you in tech and impact? Let me know in the comments.

Friday, January 4, 2019

Friday punt: Jay Coen Gilbert

Jay Coen-Gilbert is a cofounder of B Labs, the folks who started the B Corporation movement. He has a column in Forbes now and then I enjoy, including this one. 


Thursday, January 3, 2019

Startup Guy, Restarting

Welcome back!

Over the past few years I haven't felt much like blogging, partly because I was constantly tired and stressed out from managing The Lancaster Food Company through one challenge/cliffhanger to the next, and partly because I felt I had nothing new to say.

This blog had been my outlet for sharing insights about building startups; I hope it was helpful to those of you building companies or helping startups in some way. Writing is a way for me to process, and to share what I've learned so maybe others can learn what to do--and not to do. More to come on that ;)

Starting today, I plan to post almost daily, mostly about lessons learned over the years with startups, and if I come up short I'll post links to helpful articles or other blogs. And while I'll talk about certain problems in the companies I've started, I largely won't talk about the people involved, and in most cases won't identify the company; this is to make it easier to talk about some of the harder stuff.

The last five years have been, to say the least, tumultuous, filled with excitement, growth, problems, and disasters that only come with underfunded food companies, and of course conflict, disappointment, and deep pain--along with triumphs, inspiration, true accomplishment, proud moments, fulfilling new relationships, learning, and growth. It was a mix.

I'm still processing the loss of the dream of building an employee-owned food company designed to hire people out of poverty. But I don't miss the stress for the most part;  worrying about perishable products, layoffs, funding falling through or coming through, chains saying yes and then dragging their feet for quarter over quarter over quarter (wtf, food industry?).

But when it came down to it, they weren't buying what we were selling. Not enough of it, anyway, not fast enough. At our peak we had a run rate of over $1 million annually, and needed to be at $2.5 million to get to break even. We weren't a mom & pop shop; we tried to do this at a relatively small scale but the break-even point was quite the lift: 3,000 retail units per day, or 15,000 per production week.

Toward the end we only needed one additional chain to get us over the top. Private label with Trader Joe's (we were close but they were too slow), Costco Northeast (had the approval for 60 stores, which was delayed/changed by the head buyer), Whole Foods NE, etc. And there wasn't fat to trim, just a baseline overhead that needed more time and capital, with the capital coming in a pool instead of dribs and drabs. Long, long story. Hundreds of things had to go right from production to ops to capital, and any combination of a few could derail.

Variable product quality while learning a new production facility which led to a loss of a private label customer, delays in sales, illnesses, false starts with partners, competition with very deep pockets, Amazon throwing the entire industry into a frenzy, a poor choice in the freezing method for large-scale shipments. But it came down to execution over time, and perhaps a vision that exceeded our capabilities, a flawed strategy, or the wrong team for the growth needed. Or all of that. I recognized that I wasn't the person to lead the growth of a food company in summer of 2018, but we didn't act on it until I had to stop working in April from my illness--it took too long. And even then, it took too long in recruiting my replacement,

Lot of lessons here; the sale piece is a good lesson for any of us: if you're not getting that job, not getting enough clients, not selling enough product, there's a pretty good chance the problem isn't the company or customer, it's you, how you're selling it, or what you're selling. Positioning can make or break you, as can product, as can story, as can branding, etc, etc, and etc. You have to get most of it right, consistently.

And we did get most of it right, but as the main salesperson as well as the CEO trying to keep us running, I suspect my stress was evident to the buyers at the chains; they are typically conservative in their choices and tend not to take chances. They want career-building products, and startup food companies introduce risk. So telegraphing stress certainly doesn't help. We needed the deals, and they could sense it.

I'll write more about that and other things over the coming months. But I'm also looking ahead, building a new story, thinking through new ideas, and am excited about some of them.

I'm looking forward to 2019. The rest of this is an update.

A few of you asked on social media and in email, so here's the update: my health is good--better and improving. 2017 and 2018 were very challenging with respect to health, and I've been fortunate to be able to bounce back through access to the health system, a miracle drug, and the support of friends and family. I'm grateful for those who were in a position to help and did--I noticed.

I'm a startup guy, and I'm restarting. After investing five years and all of my loose (lost) change, I'm personally working on going from 0 to 1 again. But that's always been my strength. I've started four companies and have had two positive exits, one voluntary shutdown of an unfunded effort, and this recent involuntary shutdown (i.e., running out of money).

Recently I've tried to remind myself of my own accomplishments to try to get past the deep sense of loss: I've raised over $14 million in my career, battled successfully with giants like Microsoft, IBM, Salesforce, and unsuccessfully with Flowers foods and Bimbo. And helped people along the way, including dozens of startup founders. Designed award-winning software and built the third-largest fundraising software company. Moved some mountains along the way. There :) that feels a bit better. It's tough when things have been hard for a long time, but a friend reminded me "you're the only still thinking about the loss...everyone else has moved on." Most of us have, anyway.

Sometimes I need to remind myself that it wasn't all hard, and wasn't all a loss. It wasn't, and it's time to stop mourning it.

I'm officially looking for work--not sure what just yet. I'd like to run a funded startup, or help an existing company turn around, or to grow through innovation. Or consult, which isn't my favorite thing but I'm open to i.

I might start another thing. I've been kicking around some of my own ideas and have been asked to look at a few...we'll see where that goes. The toughest part of a startup for most people is getting it from concept to first revenue, but that's always been the easy part for me. And the most fun. And because of that I've thought about launching an incubator where I could have teams working on several projects at once, and also nurture other startups.

But we'll see.

After not much consideration I'm wintering in Grand Rapids, Michigan (because why not!) to be able to spend more time with a fantastic person. I'm glad I'm here, but it's a bit strange to step out of the networks I've developed over several decades, and exciting too--I get to learn about new things and meet new people doing interesting stuff. There's a strong startup scene and a thriving localist economy. Fortunately we're just a short flight from NYC, BWI, SFO, parts of Florida, etc. Warm places are on my list :)

So let's reconnect. I'd love to hear how you're doing, and what you're working on. 2019 is going to be a great year for me, and hopefully for you too.

See you tomorrow?

Tuesday, January 24, 2017

The Lancaster Food Company: 20,000 Loaves Donated

One of the biggest challenges of building a commercial bread company is handling unsold product, otherwise known as waste.

From the beginning we donated any unsold product, initially to the Council of Churches Food Bank because I had a previous relationship with them from my Lancaster Community Gardens days. Over time we added a variety of food banks, kitchens, and churches, including Crispus Attucks and Water Street.

One of our key indicators is our "return rate"; it's the measure of invoiced products vs. unsold product; we give full credit to stores for unsold bread. We lose money when there's a lot, and we make money when there's only a few. When there are no returns, we're leaving money on the table because we don't really know the strength of the demand.

The ideal scenario is that we keep increasing the amount we deliver, and it always sells out, but that doesn't happen ofter, so the next best thing is we find the bottom of the market, which is indicated by just one or two unsold units of each variety.

We don't currently disclose our unsold rate, so I'll just say we've helped feed thousands of families since 2014. While it's been a source of pride for us, it's also a painful reminder that not all customers at all stores want or know about our products, and we have to do a better job marketing them.

And donating bread doesn't align with our goals to get to profitability: we want to donate less--not because we don't care, but because we need to be self-sustaining before helping others (put your own mask on first).

So we've been testing selling previously unsold product at Grocery Outlet, which has 22 stores in PA and over 300 in California. It's going very well, so we'll continue to add more of the PA stores, to the point we expect to reduce our unsold product to a very low percentage. This strengthens the company, gives people with lower incomes access to tasty, locally made organic bread at a lower price, and keeps read out of the waste stream.

We'll continue to make donations, and we hope to get back up to our previous levels, but only as part of our overall growth plan. We much prefer treating root causes of poverty (with income through thriving-wage jobs), and keeping the company on the path to profitability.

Monday, December 19, 2016

The Search for Expansion Space: Part I

About a year and a half ago, two professors from F&M released a report on Lancaster's poverty problems.

The rate is about 29%; you can find data like this at the US Census bureau or through cool tools like PolicyMap, which also gives very refined views of neighborhood statistics.

Before we started The Lancaster Food Company in 2013, I spent some time on PolicyMap to try to figure out where we should locate the company. It's a lofty goal--try to reduce poverty by hiring people living under the line who live within walking distance, and there isn't a lot of real estate available in the city for food manufacturing.

Some of the highest poverty rates were right around South Water Street and Hazel. So we looked very closely at a few buildings when we started. We passed on the building that became Spring House's third location. It's a very cool building, but it needed a lot of work and we're not developers. The property itself is two acres, and has a remarkable view of the city from its north side.

We ended up leasing a space completely inappropriate for food manufacturing, but we were eager to see whether we could prove our concept could become a viable company in the increasingly competitive certified organic food sector.
Liberty St space before the buildout

So we took a space at 341 East Liberty, complete with flaws and obstructions, and made it work. We invested in a conversion of the space with a loan from Community First Fund (the landlord would not finance a buildout for a startup), passed our USDA Certified Organic and FDA & PDA inspections, and literally took our products to market. Things really took off--we grew 30% every quarter until March of this year, when we hit production capacity.

We knew early on we'd need to expand, so we continued to look for space while growing the company at Liberty.

Just to the east of the Spring House building is the Brookshire Printing Company building. Across the street is a city-owned lot, warmly called Lot 13. We felt we could work with the Brookshire building, and went into contract with it. It needed work, but we're flexible and figured out something that could get us to our own sustainability, plus the location couldn't be beat for impact. The area's poverty rate was something like 60% at the time. 

The bank required an environmental report. A "Phase I Environmental Report" is basically a survey of the immediate area. Phase II requires samples from the site itself. Old cities tend to build on top of themselves. As standards evolve, cities adapt, sometimes by burying the past and looking the other way. Lancaster is no different. 

Well. The Phase I report was alarming. There are high concentrations of PCBs next door, uphill on the UGI site; PCBs can cause leukemia and a host of problems you don't want. PCBs were banned a long time ago (Monsanto was a primary manufacturer), but the site was never cleaned up. There was also benzene and lead. A visual inspection found a tank somewhere below ground level in a sort of basement with an unknown liquid in it. 

We balked. We couldn't imagine building a food company in a space that could be potentially poisoning us and our employees, or tolerate even the perception that we were making food in possibly dangerous conditions. If that sounds like an overstatement, please read about the Housotonic river after GE dumped tons of PCBs into it.

We also looked at Lot 13 across the street, and asked for the most recent environmental report. Again, very high levels of lead, benzene, and some other harmful chemicals. We would have had to remediate the site, which isn't currently part of our mission, so we passed.

Later this week I'll post Part II about the space that almost was, and what we eventually landed on. It's been a long, challenging process that almost killed the company. 

Wednesday, December 14, 2016

Watching from the Shore

I almost drowned.

Two and a half years ago I stopped at the beach to get a swim in at the end of a sales day in NJ. It was a beautiful day--perfect sky, perfect air, perfect water. It was after hours so it was just me out there with some surfers beyond the breakers. The waves were large but you had to swim out to them because it was high tide and the sandbars that summer were further out. After riding some of the small inside ones and still feeling good, I started out for the big waves. At some point I realized I wasn't really getting anywhere, or it seemed like that; I looked back to the shore, and it seemed far away, looked toward the large waves, then tried to touch the sand with my toes.

I couldn't. I was in a fairly deep channel that was basically a wide riptide, and I panicked and tried to swim out of it. Then I tried to swim toward a visible sandbar about 50 yards away but the rip was too wide. So I turned toward shore, trying to get past the pull of the ripe, using the force of the waves and swimming hard.

Swimming hard was a mistake. I've been an ocean swimmer all my life, and surfed for 10 years, and there I was doing it wrong. I was tired. I didn't think I could make it so I floated a bit.

Someone noticed. Two lifeguards stopped their ATV on the beach, got out and leaned back on it, watching from the shore. I tried again. Stopped. Tried again, kept going. My arms were dead so I kicked hard as a wave would pass. I went under to see how deep it was and I could barely touch a foot down--I knew I was close, but I was done. I was ready to start waving, but almost too tired to do it. And then a larger wave passed by and I made one last effort--truly the last energy I had, because I was done and had given up. It worked--I moved forward enough to touch sand and keep my head slightly above water. It was enough of a break that I could make another push.

The lifeguards got back on their ATVs and drove off. They had been watching from the shore the whole time, long after their shift had ended.

People lose their lives all of the time because nobody's watching from the shore. When you live alone nobody's watching from the shore. Things aren't going well, nobody's watching from the shore. Even when you're not alone, often there's nobody watching from the shore. You bob up and down, try to breathe, try to keep your head above water, try to touch the sand, fight the wave... it consumes you, exhausts you. Giving up isn't a choice, it's inevitable: it's what happens when you have nothing left to give. That's why those watching from the shore are so important.