Industrial emissions are a difficult problem because every facility is unique and profitability is at the front of everyone’s mind from day one. Raleigh-based Ndustrial is aiming to help these industrial facilities ship more products, use less energy, and make more money. All of this with an eye toward reducing the environmental impact on a per unit basis. It’s a challenging problem that goes beyond the software platform they are building. I caught up with the CEO Jason Massey to understand more about how he got into this world and what makes this problem so tricky.
Below you will find a lightly edited transcript of the interview for those who prefer to read. If you prefer to listen, this interview is also available on YouTube, Apple Podcasts, Spotify, and as an RSS feed.
Dustin: Hi everyone, welcome back to the Sustainable Advantages podcast. I am here with Jason Massey from Ndustrial. Jason, do you want to introduce yourself?
Jason: Dustin thanks for having me on the podcast. My name is Jason. I'm one of the founders of Ndustrial and CEO and janitor and whatever job is required. Started the company back in 2011 and we joke we’re the oldest startup in the Raleigh-Durham area. Still grinding and still kicking.
Dustin: I love it. You get to wear a lot of hats early so if you got to sweep the floor and also raise a fundraising. Then…
Jason: Got to do it. Yeah.
Dustin: What were you doing before you popped into this?
Jason: I'm a recovering internet bubble VC. I'd actually started my career after I left NC State and moved up to New York. Took The Wall Street Job at the time. We were still called stockbrokers now they're called financial advisors, but that gave me a really fortunate time to go from that traditional kind of retail side of Wall Street to venture Internet bubble that was really heating up in the late 90s. I was able to transition to venture capital and that got me out to Silicon Valley for about a decade
I got to see the Internet bubble crash got to see all the down rounds and recapitalizations. I joke my MBA was going through that. Towards the end of 2008 into 2009 we were thinking about moving home to North Carolina. So that was about the time that I made the transition. I'd left venture several years before. Most of the VCs that I had really admired had operational experience. They’d started companies. Had to hire and fire people and make payroll. Do all those things that you need to do to build a business.
I thought if I ever wanted to be a great VC or come back to VC, I better go get some operational experience. That's what prompted me leaving VC and then working with startups directly and then ultimately moving back to North Carolina. It was during that time that transition period that I got to work with a small team.
It was about five of us who worked directly with Al Gore to launch the climate project in China. So this is where Al Gore teaches people how to give the Inconvenient Truth PowerPoint presentation. We negotiated with the ministry of science and technology for about two years to get the agreement to allow Gore to come in and train 300 Chinese people on how to give that presentation and I think that was my wake-up call around how are we gonna bend the curve on decarbonization and really tackle manufacturing and industrial type situations. That was brought me from being like an armchair quarterback environmentalist to really focusing in on things that I might be able to do to make a difference.
Dustin: That's really interesting. There's a joke in there somewhere about Al Gore inventing the Internet, the bubble bursts, and Jason’s like, “OK Al, now what’s next?”. That’s cool though, it’s kind of the first genesis of how you got into it.
Jason: Unfortunately, Because of Al Gore's involvement in that effort it became too politicized Sustainability and climate change took on some political leanings and that was really interesting moving back to North Carolina to kind of see that and when we started the business you really couldn't go into a factory in North Carolina and wag your finger and say Al Gore said clean up your factory. The good part about our business is it's a big tent that handles lots of different political ideologies from folks that just really care about making American manufacturing more competitive. Folks that really do deeply care and are worried about climate change those things aren’t mutually, exclusive.
I was friends with a Belgian family that had moved to the United States to set up manufacturing. So if you've ever had a synthetic wine cork in your wine bottle that probably came from the Noel family in Zebulon, North Carolina. we had all read Ray Anderson's Radical Industrialist around sustainability. That kind of served as our Bible when we started the part of the company and we use their factories in North Carolina as our initial guinea pigs to see if this would actually work and could we convince a CFO that they needed to invest and things like sustainability and that would be actually profitable for them to do that worked out really well.
Dustin: That's really cool.Zebulon, North Carolina, for people listening that don't live North Carolina, is not exactly necessarily a hotbed of liberal politics. I guess this is a good time to introduce what Ndustrial actually does. You're not leading with a message of let's save the Planet. You’re leading with the message of let us help you make some money, save some money and help out your opex. Oh and by the way, this also helps reduce your carbon footprint which increasingly is important with new SEC rules and stuff about reporting. So yeah, could you help define Ndustrial a little bit more?
Jason: Yeah, so what was really interesting during that time was the way we would pitch this type of stuff would be very financial. Right, we would say if the internal rate of return of this project, whatever you want to call it: energy efficiency, sustainability. If that internal rate of return is higher than the profit margin of your business as a good steward of capital you got to do that project because there's production line, you can stand up there's no additional widget you can make that would generate the same type of return is doing this project. Basing it in financial terms then the byproduct of success is all these other kinds of components, but again, you can go back to true conservative principles, which do more with less don't waste a lot of resources.
We would go in after we do all these energy efficiency projects and be invited to do a talk on Earth Day at a factory and we would talk about things when this factory opened a barrel of oil cost X now It's Y and you keep your factory clean. Why wouldn't you keep the earth clean and the environment clean? So we're able to make those connections in a very organic, authentic way. You really didn't have to have these kinds of existential, political ideological fights, but for us when we started we were doing the physical projects and what we kept hearing from CFOs and leaders and plant managers of these facilities was, “Great but let’s quantify your savings and I want you to disaggregate that for my production processes.”
We really looked at not building software, but maybe reselling. There were and are still around 300 companies. Small companies, big companies, and startups doing this stuff and we were technologically savvy enough that when we looked under the hood of some of these products. What we found was they were very fine-tuned to commercial buildings. They weren't fine-tuned to industrial manufacturing sites. They didn't understand the relationship between making the widget and how that would impact the energy usage or the kilowatt demand load of that facility. That was when we decided to effectively build the product ourselves. A lot of interesting epiphanies came out of that effort so that we could focus on things like production-normalized energy intensity. What are the kilowatt hours per widget on that site? Then that opens up a lot of really interesting analysis and interesting ways to kind of change the profile of that facility. That was the first real instance of what we call our context platform that allowed us to contextualize very disparate data sources into some interesting insights.
Dustin: Yeah, I mean honestly when I saw it the first time I was like okay energy intensity I saw this in high school physics class, it's not something that is necessarily deeply profound when you first look at it. Then at the same time, this is pretty niche. Looking at this and this industrial setting until you realize that every one of these factories or warehouses are snowflakes. Every one of them is made to do a bespoke job. That's pretty complicated and adapting to understanding the story of energy intensity for each one of those is tricky. You're talking a lot about making widgets but a big thing that I noticed you guys talk a lot about is refrigerated warehouses and the ways there and something that I was trying to rationalize was do I need a deeper understanding to tell everybody to close the door because hot air is rushing in from the 95 degrees outside Mebane, North Carolina chicken warehouse, or can they just do that in a common sense way? What do you see that happens with that deeper understanding?
Jason: Sure, so it's interesting. We use that term production and it feels weird to say storing cold food in a warehouse is not the same as making a synthetic wine cork. In reality, freezing something and holding the temperature is that facility’s production process? But then again, you can go a little bit deeper dive and this is where the production data that you would find in a warehouse management system or in other control systems is a lot of these sites are blast-freezing food. So they're going in at negative 20 degrees and maybe they're blast freezing chicken for 48 hours or the forklift operators are forgetting to take the product out of the blast freezer and put in storage. These are very energy-intensive activities production that if you sped that up, you would dramatically reduce the energy intensity of that facility. So now we're back to general production things like throughput. If you can increase the throughput of that site then you'll need to install fewer blast freezers. You won't have to add on to the warehouse another 100,000 square feet. You won't have to add a new ammonia compressor to that site. You can impact the throughput of that facility. Increase utilization – meaning put more chicken in the warehouse, You’ve got all this wasted space sometimes and if you can just re-rack the warehouse and put more things in there. It doesn’t look like Energy Efficiency type measures like you'd see with doing a lighting upgrade or an HVAC upgrade, but it has an actually greater environmental impact playing around with utilization and throughput, and for those sites, it is sometimes an order of magnitude larger than the environmental impact of upgrading to LED lights.
Dustin: Right, and it's not a capital investment. It's like a reprocessing or reorienting process.
Jason: Reprocessing yeah, and if there is a capital thing that needs to happen, you've got to spend money this kind of goes back to the original questions we get from the CFO to disaggregate these things. Do the attribution that oftentimes is really hard. Is this thing that I'm doing really impacting or is it something else that I'm not measuring that’s actually impacting my utility bill? There is a simple litmus test that we would do is ask folks customers and even investors when we're out pitching for fundraising. Let's say I've got a factory that has a $1,000,00 utility bill this January but last January had a $900,000 utility bill. Is it more or less efficient today than last year? Almost everybody will say obviously it's less efficient because the utility bill’s more. Then we would also follow up with what if I told you that the site doubled there's throughput? Obviously, it's more efficient today than it was last year.
Dustin: Yeah, that's why you want these unit measurements as you go along the process. I think it's as far as I have seen a pretty unique approach actually and it makes sense that Ndustrial has been in the startup World for so long. Refining this problem over and over again is complicated.
Jason: Exactly, yeah. And it doesn't pattern match to traditional Venture Capital B2B SAS business models and that's challenging. As a recovering VC, I know what the pattern match is supposed to be, and oftentimes when we're pitching investors will quasi-try to scare them away and go, “This is complicated.” You said it earlier perfectly each factory is a unique snowflake. Every vertical is a unique snowflake. Anybody that tells you there's no customization industrial world is straight up lying to you and our job is to build tech that's 80% extensible and then that other 20% that's unique right by side or vertical by vertical. It takes less time, less effort, less cost to do some of those customizations because at the end of the day, what we're trying to do is: every factory has a unique equation and we're trying to discover Turn that equation into a digitization kind of filter for a variety of different analysis and ultimately automation that's going to happen in that site.
Dustin: The goal is not a lowest common denominator solution. It's kind of a tailored solution.
Jason: You want it to feel very bespoke to the customer. But the reality with this stuff is all the picks and shovels are about the same effort or the same back end. we worked with a company called novizimes to help them those enzymes, at a more effective rate for ethanol plants. And that optimization, in terms of how you manage it and deploy it, looks very similar to optimizing a refrigeration system right? Two completely different outputs but the way you manage the APIs and the way you manage the data, the way you generate an output and send that output back to a control system. All that stuff is pretty much the same.
Dustin: I think my favorite part of that answer is you telling me: They're about the same, right? Then looking to me for confirmation. I don't know but sounded pretty good! But yeah, I mean if there are some basic building blocks then the software platform starts to make sense.
Do you find any kind of customer that you wish that you could grab that you can't with the current building blocks that you have? Like automobile factories, for example, would they be a bad fit for the current situation? Would you build more picks and shovels or does it work everywhere?
Jason: Yeah for us we just got through our first closing of a series B round and press, going vertical by vertical is just a resource constraint or subject matter expertise. We happened to get really good at the cold chain, and we've had other customers in different verticals, but we really need to staff into some subject matter expertise so that we could confidently go into the cement industry. We constantly get asked if we could go into the data center market. It has a thermal load that oddly behaves very similarly to the cold storage warehouse. For us, the answer is, with a high level of confidence, yes. We’ve got to staff a team dedicated to that. We’ve got to build some partnerships in that marketplace. So we've got confidence we can go vertical by vertical. It's just we're a very customer-first-centric organization. If we don't feel like we can service that customer with their specific needs with a white glove approach on top of our technology stack, then we won't go into that vertical. Now that we've got some extra coins in our pocket, we've got the ability to expand into other verticals.
Dustin: Yeah, and that tickles that VC bone that you had before where you're like, “Oh yeah software platform. I could scale up into that new vertical is pretty quick if I have the people who have the expertise,” right?
Jason: Yeah, cold chain we call it Cold OS right now, but there's no reason that we can’t work with a group like WL Gore on the textile and chemical side. There's not a big jump to get a textile OS right and some other types of things and again most of the back end and those things are pretty common pieces of functionality like to ingest utility bill and break it apart and all that stuff. That's gonna be the same protocol by vertical. It's just when you get into some automation and optimizations, those are going to be more specific to the site and the vertical.
Dustin: In the verticals in you’re in, cold chain is talked about a lot, do you have one where you went into the customer and they said it makes perfect sense let’s go do it. Does it not really work that way because every site is so specifically individual?
Jason: I think what we found is se get pleasantly surprised when we go into a new situation. So it helps to have an entrepreneurial mindset that goes, “We could do that.” If we hit the wall, we'll figure it out. We've got a massive tire recycling plant in Houston, Texas, a company called Genan. Obviously we’ve never done tire recycling, never integrated with this particular ABB control system. But we had enough of the building blocks and, oddly enough, we had just hired a new integrations engineer who had experience with PLCs. One of his first projects was working on that, and it was just a matter of weeks and we didn't have to put any boots on the ground. We were able to read the control diagram from the ABB system map out effectively all the significant energy users, which you'll hear people call SEUs. Then build a logic off of our existing demand response load control system that says as the Texas ERCOT prices increase by X percent, curtail 200 kilowatts. Then that system runs automatically. We were able to ship an edge device. They were able to install it, test it, and make sure we wouldn't do anything to blow up the factory. We were pleasantly surprised at how straightforward that actually was so that gave us a confidence to start trying things that we normally wouldn't have done rather than just kind of stick to our knitting and things like cold chain.
Dustin: Did you say you shipped a device or you repurposed a third-party device?
Jason: Right, we don't make any hardware. To get into the geeky weeds, we're very much a dockerized code shop so we can port a lot of our kind of cloud-based infrastructure pieces to the edge and use a variety of different edge devices. Just depending on the use case. So our code can then reside on that. We create a safe relationship between that edge device and whatever legacy systems may be in place. So in the cold chain, if we were part of an optimization loop and an algorithm sends a 32-degree set point to the refrigeration control system, it wouldn't respond to that. They already have their checks and balances, so there's no way for us to do something bad or have a food safety issue at that site. So we purposely set that up. We’re not trying to replace a refrigeration control system. We're just trying to augment that refrigeration control system.
Dustin: I would have thought that you were more analytics-heavy before I started talking to you. I think that when I read the website for Ndustrial I hear SaaS, analytics we're gonna tell what to do. It almost sounds like you're much closer to the customer than you would be if you were just like, “Hey, here's some software that can help you figure out how to do optimizations.” With that in mind, how does that evolve? Is it just more verticals and geographies or are you looking more at maybe shipping some devices or maybe we do want to do some kind of new technology area? Maybe you just want to get into policy and lobby people? What is it?
Jason: Yeah, it’s a little bit of all of the above.There's cold chain. We call it the value stack. We can go up the stack even more so because of the data that we have. we can get into fleet electrification and specifically get into things like truck refrigeration unit electrification, so while everybody's attention is on these big Class 8 truck electrifications that little refrigeration unit that sits on the trailer while it's at the loading dock that can be easily converted to kilowatt-hours versus burning diesel and idling while the trailer’s loaded and unloaded. That's a direct emission thing. That's some additional fast revenue for us. But what you see from an evolutionary standpoint is we start with software as a service. The vast majority of our revenue is that pattern match to a software as a service. But what we're effectively doing is contextualizing a baseline understanding of the operation so that then we could start to morph into managed services and ultimately energy as a service. Once we have confidence in a facility, we may be able to go out and do a better job of arbitraging the energy markets right? Whether that's through energy supply contracts, demand response, work with different partners to kind of push more value to our end user, our factory customers through that additional intelligence. So you're almost always going to onboard a customer software as a service. Bunch of reporting data wrangling and just getting organized around that has its own set of value. But ultimately you can see this to energy as a service. Then there's enough horizontal pieces that we can do load control and different verticals. We're even in the oil and gas space with water filtration pump systems and in Texas. We see a lot of kind of vertical growth because of the horizontal pieces that we had and the back-end platform.
On the policy side for us, it's interesting. We obviously would love to see more demands and conversions. Back to our roots of financially driven internal rate of return, right now things like Trucking refrigeration unit conversion it's just simple math. The cost to kilowatt hours is less than the per gallon cost of diesel. Without any type of California regulation sticks or carrots, incentive tax benefits, IRA money. It just makes sense to do those independently and you get this massive emissions reduction. I would say the thing on the policy and regulatory side and maybe even the capital markets take care of this themselves. Carbon needs a price right at the end of the day. It needs to be trusted right? It can't be some weird forestry carbon credits-type stuff. It's got to be real quantified, methodical measurement verification around carbon reduction. Therefore we can put a price on carbon because that's ultimately what we want to see here is a cost externality, carbon, that is now on the books of a business and in a very authentic way. Again, we're finance geeks as much as we are software engineers. When we tell a CFO that your utility bill, which is normally seen in your profit and loss as an operating expense, when we say it's a cost of goods sold, that changes the financial calculus very quickly for the way they plan and do things. Then what you're saying is effectively carbon is a cost of goods sold, right? It is actually part of what it takes to make this widget and you need to consider and it needs to be on your financial statements. So once carbon has a price that people feel is not manufactured or weird or manipulated Then it's game on right and this stuff gets a lot easier financially.
Dustin: Yeah, it already makes sense to do some of the things but it makes a ton more sense to convert that diesel generator on the truck when you also factor in the carbon price, it's like why am I even doing this at all? Just setting money on fire?
Jason: It's huge. It's painfully obvious, right which is awesome.
I guess the last thing that I'll say and maybe you’ll cringe, is Ndustrial the future of virtual power plants? Is that what I'm hearing? You're going to demand reduction is that where this is going?
Jason: We've used the term IVPP – industrial virtual power plant, I think. And there are a lot of acronyms, DERs, microgrids, batteries. I mean, sometimes it's hard for us much less our customers to navigate all these terms. As we think of the Virtual Power Plant World and the way it's been kind of set up is they're much more power generating, energy supply relationships, right? They're typically more utility-facing and we are more behind the meter VPP, right? So our customer is the factory we want to game the system on their behalf but by doing that and aggregating that data and those loads and what's controllable and what's flexible that does make it very compelling for the grid and you need the utility-facing VPP to be able to talk and interact with the behind the meter industrial VPP. And if we can build that glue and that connectivity then I think we've done something meaningful on the VPP front.
Jason: Fun, it's complicated. There's a lot of stuff inside the four walls of the building and knowing what to do with it.
Dustin: Like I tell my kids, it’s like John F. Kennedy said, “We do these things not because they are easy but because they are hard.”
Jason: It's spot on. We have a little mantra inside our company: we run towards hard. Because again, a lot of people won't do it. They want to try to build the lowest common denominator energy management tool that can address everybody and what you find is when you overgeneralize it's just not very valuable to any one group. This stuff's hard you’ve got to run towards that and that in and of itself is a bit of a differentiated moat for a company like ours.
Dustin: Jason, I appreciate you taking the time talk to me about all of this Ndustrial software platform and all the other stuff that comes with it. It's very interesting story.
Jason: Yeah, thanks for having me.
A Conversation with Ndustrial CEO Jason Massey