No Priors Ep. 136 | Base Power CEO and Co-Founder Zach Dell

Sarah Guo

Today on No Priors, I’m joined by Zach Dell, the founder and CEO of Base Power. Base just announced a $1 billion fundraise from folks like Addition, Thrive, Andreessen Horowitz, Lightspeed, Altimeter, Valor, and myself. Zach previously was at Blackstone working in private equity and at Thrive doing investments in various AI and software companies. I’m very excited to talk to him today about not only his company but also more broadly about the energy industry and how energy is an input into literally everything that we do and consume. That’s AI data centers. That’s the pencil you’re using to write. That’s your computer. That’s mining. That’s basically everything in the world. Energy is a major input. So very excited to talk with Zach today.

Zach, thank you so much for joining me today. Energy is an input into everything in the world that’s produced, right? It drives data centers and electric cars, but it also drives all of manufacturing. It drives the internet. It drives basically every aspect of our lives, and it’s a key cost input into everything.

So if you have very cheap energy, everything else becomes dramatically cheaper, and that opens up entirely new spheres. You’ve been working on Base Power for a couple of years now. Can you tell me more about how you landed on what you’re doing and what Base actually does?

Our mission is to lower the cost of electricity for all, and we think that is the most powerful thing we can do to promote human prosperity: to create a world of energy abundance where power is less expensive and more reliable.

I got here by way of the finance world. I started my career at Blackstone, where I was on the private equity team. I spent a couple of years at Thrive Capital investing in technology companies, and then ultimately left Thrive to start the company with my co-founder, Justin.

I think at those firms, I was able to see a lot of the industry and the energy value chain, as well as different kinds of technologies like solar and storage. I saw this paradigm shift unfolding where, if you look at the last 5 decades of energy, it’s really been defined by coal and then natural gas. It seems pretty clear now that, based on where the cost curves are going, the next 5 decades of energy are going to be defined by solar and storage.

There’s really no energy technology platform company built around that thesis. That is the vision—the idea around which we started the company a couple of years ago.

You just closed literally $1 billion in new financing, which I think brings your total over time to $1.3 billion. What is that money going to go to? What products and services do you provide? What are you currently doing?

The capital is really going to accelerate our vertical integration, which allows us to ultimately lower costs for consumers. Our strategy at the highest level is to develop a compounding cost advantage through vertical integration.

We design batteries, manufacture them, install them, own them, operate them, and sell power directly to homeowners. To answer your second question specifically, when you sign up with Base, we become your electricity provider.

Today, we’re only available in Texas. We sell power to deregulated customers who can choose their electricity provider, and we also sell our technology to regulated utilities in Texas, which then offer our services to their customers.

When you sign up with Base, we install our battery on your home. When the grid’s up and running, we use that battery to serve the grid. When the grid goes down, you get that battery to back up your home. We’re able to save our customers on the order of 10% to 20% a month on their electricity.

As we invest further and build new generations of the technology, our costs will go down and our returns will go up. We’ll be able to share those returns, so to speak, with the customer in the form of lower and lower prices—driving the price of the electron down and driving the availability, or the reliability, of the electron up. That’s really our mission.

You basically have these batteries that you install in people’s homes. It’s a sort of smart battery, so it can interact with other batteries across the network and respond to different power availability and fluctuations. It allows you to then make money off of that customer.

Another way to think about it is that we’re building the world’s largest distributed power plant. We install these energy assets all over the grid, use software to connect them effectively, and bid them into the market intelligently. We use all the income that we generate from that to drive down costs for our customers.

How did you decide to work on this problem in particular? You had a great vantage point working at Blackstone in private equity, which is a generalist team, and at Thrive, where you’ve invested in companies like OpenAI and Stripe and others. You’ve seen a wide swath of the world between those experiences. What honed you in on energy and this particular

It’s a great question. I first got really fascinated with energy in college. I actually worked on a project in the energy space there, and I worked on a number of projects. One in particular was to develop a solar farm, put panels in the ground, and sell the power back to the local utility in a very financially engineered way.

I’d been studying the energy value chain, so to speak, from a finance perspective for a long time. At Thrive, I was exposed to this pattern of companies going after big, incumbent-dominated industries where the leader in the space was not technology-focused, engineering-led, or R&D-driven.

It happened in autos with Tesla. It happened in aerospace with SpaceX. It happened in defense with Anduril. It wasn’t being done in energy. Energy is the biggest industry of all of those, and it’s the most important.

I was really inspired to go build that modern power company of the electric era: engineering-led, technology-focused, and R&D-driven. I think it’s the largest and most interesting category in the economy.

As part of that, you had to build a very multidisciplinary team. You have people working on hardware, mechanical engineering, software, and a variety of things. What was the founding team like, and how big are you now? What sorts of people are on the team?

This business is a complex coordination problem. We have to be good at a lot of things at the same time. The way to buy down execution risk, so to speak, is to build a world-class team of people across a bunch of different domains.

If you look at my co-founder and me, we have very different skill sets. Justin is very operational and technical. He led manufacturing at SpaceX and Anduril. Our first hire, Jared Green, our head of software, led the laser topology team at Starlink—the team that built the mesh that connects all the satellites in space.

Not only is Jared a world-class software engineer, but he understands firmware, mechanical engineering, and power electronics. Our next couple of hires included Cole Jones, our head of growth, who ran go-to-market at Starlink; Dana Paz, our head of deployments, who led manufacturing engineering at Anduril; and some other early team members.

Suzanne Deng, our head of supply chain, ran procurement at SpaceX for 10 years. Andy Ross, our head of manufacturing, led Model 3 battery manufacturing at Tesla. Dino Saserites, our head of hardware, led Powerwall engineering at Tesla and worked on the design of the Powerwall 3.

We’ve been able to pull together an incredible group of people with domain expertise across all these different functions. One of the really special things is that, if you think about those 5 or 6 leaders of the company, all of them were part of our first 10 hires.

As we went from 10 to now 250 people, the culture of the company was really defined by those core leaders and the people who are now leading teams. They were once the individual contributors doing all the IC work, and now those leaders are still doing IC work. I still do IC work every day, and so does Justin. It’s a big part of our culture to lead from the front.

Sounds like an amazing mix. Are there specific areas that you’re hiring for right now or looking for key talent in?

As part of our announcement, the big theme here is “Join the Charge.” It’s a call to action to the most talented engineers, operators, and creatives in the world to come join us on what we think is the most interesting, exciting, and important mission out there in technology right now.

We’re hiring across all teams: software, hardware, finance, go-to-market, business development, regulatory policy, deployments engineering, and manufacturing engineering. Specifically, some areas where we’re really focused right now are firmware, power electronics, mechanical engineering, and design engineering.

We’re hiring all kinds of software engineers—basically everything from very low-level firmware to front end, back end, and cloud engineering, and everything in between.

As you noted, we’ve raised $1.3 billion in the last 18 or so months. We’ve got more demand than we can serve, and we’re standing up our first factory in Austin to produce our product at really large scale.

The constraint is great talent. We want to put the word out there that we're open for business, and we want to bring more great people down to Austin to join our team.

How did you inspire such heavyweights to join you as ICs early on? Often, I think founders struggle with both determining the seniority of the people to hire and convincing somebody who has led a major part of SpaceX, Anduril, or one of these core companies that are still growing like crazy themselves. How do you convince people like that to join you so early?

I think it's pretty obvious that the best people want to work on the hardest problems and the biggest, most important missions, right? Very capable people want an opportunity to put a dent in the universe, and what we are going after impacts the whole planet. It impacts industry. It impacts homeowners. It's very visceral. People think about, well, my power bill has been going up every year for the last 10 years, and my power outages are becoming more frequent than they've ever been. This is a problem that actually needs solving.

I think most people are looking for 3 things. One is that they want to have fun at work. They want to do interesting work. They want to work with smart people who are nice to be around. They want to be pushed and challenged.

Number 2 is a massive, never-ending list of hard problems. I think you see companies hire a bunch of really great people and come up with a bunch of really awesome things, and then over time they struggle to retain the top talent as the problems become less and less interesting. If you peek under the hood at Base, which you have with the best of them, you'll see that the list of hard problems to solve is really mind-blowing. We unlock the ability to solve new problems as we enter new markets and release new products.

The energy space is big and complicated. It's hairy. It's this massive bucket of hard problems to solve. And then, look, I think the third is economic upside, right? We're going after what we think can be one of the largest opportunities in the economy and one of the biggest companies in the world. If we're successful, it's going to be very big. There's a really exciting upside case there for top talent.

As we were discussing earlier, energy is one of the most important markets for humanity, or one of the most important industries, because it drives everything else. It drives the cost of everything from AI to the car you're driving to the pencil you use to write, because energy is an input into everything.

The projections we were discussing earlier said that demand for energy may be going from a 2% compounded annual growth rate to closer to 10%. So the question is: How do we fill the supply side of that? Where does all this new production come from to make sure those needs are met? Do you think those projections are correct, and how do you think about solving for that?

I do think directionally the demand projections are correct, and I think they may actually be understated. I think there's a massive amount of electricity demand coming. Now, how do we serve it? That's the question.

You'll hear people talk all the time about, “We're running out of energy and we have no energy.” That's not really true. We're not using the energy that we have in the most effective way possible. Another way to think about it is that the U.S. grid's maximum peak demand is somewhere on the order of 700 gigawatts, but average demand across the country is closer to 300 gigawatts. So we've got another 300–400 gigawatts—up to 700 gigawatts, if you believe that peak is going to grow to a terawatt—of latent capacity.

The way to access that capacity is by time-shifting electricity, using batteries and software. We think our technology layer is going to unlock a bunch of latent capacity on the grid and help us meet that demand, but we will also have to build more generation.

What do you think are the most promising aspects of generation?

I think we've seen a lot of this progress happen in solar. The solar cost curves have been aggressive, to say the least, and they've played out.

It's largely been driven by Chinese subsidies, because I know the Chinese government subsidized a lot of very early solar production.

It's been the demand curve taking over. It's been driven by capex. A lot of the capex has been subsidized by the Chinese government through Chinese companies. A lot of capex has come from U.S. companies and companies in Europe. So it's been driven by capex. I think solar will continue to get cheaper to deploy, and batteries will continue to get cheaper to deploy.

I think Texas is now the biggest deployer of solar. Is that correct?

Solar and wind.

And wind. It's interesting because I was looking at these cost curves and projections, and it looks like solar is now a couple of years ahead of where people thought it was from a deployment perspective. Do you know what percentage of the U.S. market is now solar in terms of actual energy production?

It varies a lot by state. Texas is about 20% right now in the fuel mix, and it's on the higher end. I think California is higher, closer to 30%, and you have states like New Mexico, Nevada, Utah, and Arizona that are up in that range.

If you look at the map of the U.S. and map solar penetration as a percentage of the fuel mix, it pretty closely maps where the sun is, right? There's a ton of solar in the Sun Belt, and you don't have a ton of solar in parts of the country where the sun is less prevalent.

As the cost to land solar and storage on the grid goes down, I think we'll turn on other geographies where solar used to not make sense and now does. But there's also tons of investment going into other forms of generation. Nuclear has obviously been a topic of conversation across the country, and I think there's a lot of great work happening there, but right now it's too expensive.

Do you think it will credibly take off? I looked into the cost structure for nuclear before, and there were 2 or 3 drivers. One is honestly just environmental delays and the cost of debt as you get delayed. You have these big project-financing efforts that you raise money for, and then if you're delayed a couple of years, the costs go up so dramatically that it makes the project uneconomical.

Because people are so used to these delays, they always build giant projects. We're like, if we're going to take the hit, we may as well take the hit big. People are now moving toward smaller, more modular reactor systems. Do you think that will actually credibly take off?

Nuclear was never an issue of safety. It was an issue of some aspects of cost. Again, it was almost like these imposed delays through environmental lobbying, NIMBYism, or other things that often seem manufactured. Do you think it's dead in the water going forward?

I don't think it's dead in the water. I hope it takes off. I think it has to get a lot cheaper and a lot faster. My opinion is that the rate of solar deployment will go up so fast as the costs continue to go down that it might not matter. It will be so easy and low-cost to deploy solar and storage that the economics of building nuclear reactors just won't make sense.

Is storage really the core component of it?

Yeah, because the sun is only shining for so many hours of the day, right? You need storage to—

That's because you can't transmit over long distances on the grid, right?

Well, you can, but there are transmission costs, right? What matters is the landed cost of the electron. Solar and storage are how you get that landed cost down.

I hope we're able to come up with breakthroughs in nuclear to drive down the landed cost of a nuclear-generated electron, but right now we're not in a world where it's really competitive with solar.

At Base, we're fans of all kinds of energy generation. We're really more competitive, so to speak, with poles and wires than we are with solar, wind, nuclear, geothermal, or hydroelectric. Batteries move energy through time, while poles and wires move energy through space.

If you're generating all your electrons via a nuclear reactor, you still need to move that power. Unless you have reactors everywhere in everyone's backyard, which I don't think is all that likely, you have to have a lot of these reactors everywhere. You need to move the power. You have to match up the generation of the power—the supply—with the demand, right? We think having storage on the demand side really helps you smooth that out.

So basically, you're moving from a centralized grid to a distributed grid. Correct? That's the core insight of what you're doing. To your point, solar is the best way to create that core insight for energy generation in general.

That's right. You'll see us over time come out with new products that are distributed in nature and technology-defined, helping us lower the cost of and increase the reliability of energy.

Sarah Guo

If you look at a lot of the things that people talk about as things that open up with lower energy or open up entirely new markets, one is just AI and data centers, where there's massive buildouts. We're going to need energy for them. There are things like desalination—you should be able to produce water anywhere where there's an ocean or anything else—green hydrogen, and electrolysis. The cost per megawatt, per kilowatt, is an input to all these processes.

As we drive that cost down, take desalination, for example. Right now, it's kind of an emergency-use-case, every-once-in-a-while thing. If it was 5 times cheaper, this would be something that we did all the time in lots of places. Now again, geographically defined: where do you have salt water, and where do you not have it? But we'll see a massive boom in large-scale infrastructure technology projects as we drive down the cost of electricity, and boring stuff too, like heavy industry and building refineries and things like that that really matter, that keep the economy going. We'll just see more of it as we drive down the cost of electricity.

And do you think those will all centralize next to cheap energy or cheap power?

It's nuanced. I think at the limit, yes, more of the highly capital-intensive, energy-dependent use cases will go toward the low-cost energy parts of the world. And I do think you'll have energy hubs where there's a ton of highly available, low-cost power and a bunch of heavy industry goes there.

But as you know, there's nuance in all of these things. There are geographic implications here where it's like, well, you need X, Y, or Z in X, Y, or Z place because of this other reason that does not have to do with the cost of electricity. So I think largely it will concentrate to low-cost electricity places, but—

What do you view as the low-cost electricity places of the globe today?

Right now, unfortunately, it's China, and we've got to make—

Is that because of solar? Is that because of nuclear?

It's supply and demand. It's because they built out a massive amount of supply, and it's all of the above, right? They built nuclear reactors, solar farms, wind farms, a ton of battery storage, and tons of high-voltage transmission.

Our hope, and really what we're working on, is stimulating this buildout in the U.S. I think Texas will be a low-cost place to build energy technology—all technology—due to the cost of energy. I think other parts of the country will pop up as energy hubs as different states, policymakers, and regulators really embrace that.

Okay. And then one thing that I've heard some people talking about increasingly is that, if you look at the cost of energy and then you look at the overlay of regulation, especially relative to AI, a lot of the big, at least, training-center buildouts—where you take a bunch of data and train a new model on it—are going to basically happen in the U.S. and the Gulf.

They're not going to happen in Europe because of rising energy costs, as well as some of the extra regulations. They're not going to happen in parts of Asia because of security or other concerns. Do you think that's a correct view of the future, in terms of most AI training just going to be in 2 parts of the world and effectively be a U.S. domain?

I think the highly energy-intensive workloads will converge around the low-cost electricity places. You'll see a lot of that go to the Gulf. You'll see a lot of that go to Texas. And you're seeing that now, right, with Stargate and Abilene and all the big projects that have been announced in the Gulf. So I do think that is likely to continue playing out in that way.

Yeah. And then what do you think are the biggest drivers of future energy adoption from a technology perspective? I'd love to get your perspective from a regulatory perspective.

You mean what will drive more buildout of energy technology?

What's lacking today? What technology is most promising? What do you think are the most interesting shifts happening?

Yeah. I mean, what you're doing is my bull case a little bit today. I think batteries are the key. Batteries are the unlock to the energy transition and will continue to drive down cost, both the hard cost and the soft cost.

You have the cells and the modules, the power electronics, the busbars, the current collectors, and all the things that go into a battery. But then you have the EPC: getting the battery in the ground, the logistics, the transportation, all the software that goes on top of it, and monetizing these assets. There are costs to attack in all parts of the stack.

I think that battery storage will define the next chapter of the energy transition. I'm super hopeful that new kinds of generation will break through as super-economic, and I hope that breakthroughs happen in nuclear. There are some interesting companies working on geothermal and hydroelectric, and I think that has a lot of promise.

But as we discussed, energy is a geographically defined problem. In the parts of the Pacific Northwest and Canada where there's tons of hydro, it makes a ton of sense to use that as a generation type. In Texas, you don't have a lot of that, but you do have a bunch of wind and a bunch of solar, and so I think it'll look a little different in different parts of the world.

Another way to think about this is: look at the cost of an electron. Basically, anywhere across the country, the cost is really made up of 2 components. One is the cost to make the electron. The second is the cost to move the electron.

The cost to make the electron has gone down really significantly over the last 20 years, largely driven by the buildout of solar. But the cost to move the electron has gone up very significantly because our infrastructure is aging, and utilities have this kind of perverse incentive structure to build instead of innovate, so costs are going up.

The generation technologies—solar, wind, nuclear, hydro, geothermal—are really attacking the cost to make it. We're really attacking the cost to move it. This one's going down already, and this one is going up. I think most of the opportunity is to innovate and drive out cost, because really, all that matters in the commodity industry, which energy is, are opportunities around transmission, distribution, and power, and driving those costs down.

Could you talk more about the incentives that exist for utilities and why the costs of transmission are actually going up versus down?

Yeah. Utilities are regulated monopolies. The way that regulated entities work is that they earn a predefined rate of return on the CapEx that they invest in.

And that's set through some regulation, right?

Yes, by the public utility commission, typically, in the given state. This is all governed by FERC, the Federal Energy Regulatory Commission, outside of Texas, which is not governed by FERC. So there's some complexity.

What is the reasoning behind regulating the rate of return that a utility can have? Like why don’t they want it to be higher?

Well, they do want it to be higher, and they often argue that it should be higher. There's a big history lesson here, which is how the grid was built in the early 1900s. Then, in World War II, the Feds basically asked all the grids—the Eastern Interconnection, the Western Interconnection, and Texas—to connect. Texas basically said, “No, we're going to have our own grid.”

Then ERCOT was born in the '70s. In the late '90s or early 2000s, Bush and Rick Perry and some other cowboys in Texas basically said, “Hey, we're going to have a competitive industry. We're going to have a competitive market. We're going to deregulate this thing. We're going to invite competition. We're going to open it up to price signals.”

That's why you saw so much investment in the early—

2000s that happened in Texas specifically. Yep. Why didn't that happen in the rest of the country?

Well, it started in California, actually, and then Enron happened. That put an end to that pretty quickly, but Texas carried the torch.

And so you had a massive buildout of solar and wind in Texas in the early 2000s, and I think that was really constructive for the industry. Will that happen in other parts of the country? I don't know. I think there is reason for regulation in some parts of this.

If you have neighborhoods, it doesn't make sense to have 7 different power lines running through the neighborhood, right? You should have shared infrastructure to some extent. But it's old and highly regulated. I mean, it's really the only part of the economy that is still regulated in this way. If you look at trucking, airlines, telecom—all these industries deregulated over the last 50 years except electricity.

What do you think prevented it?

I think there's some market fundamentals that we talked about, around not having more than 1 wire to a home, for example. Partially, it's just the difficulty of building out this infrastructure. The grid is the most complicated engineering machine ever built. It is a wild, wild system.

Maintaining it and expanding it is really hard, so I can see why it makes sense to do that in a concentrated, or at least regulated, centralized way.

But there are other parts of the country that have some amount of retail competition in the Northeast, and you are seeing more innovation happen in those areas. What do you think are the regulations that are most prohibitive in terms of our energy future? If you were able to remove 2 or 3 regulations, what would they

I think we’ve got to make it way easier to permit building energy technology. We talked about demand going up; we need more supply, right? What’s holding back supply? A lot of it is permitting. Interconnection queues need to be shorter, and permits need to go faster. That, I think, is one of the biggest things.

The broader point I’d make is exposure to price signals: more competition. Markets are reasonably efficient at giving market participants access to price signals so that they can monetize flexibility. What I mean by that is, if you’re able to move when you consume power to when power is available, you should be compensated for that, right? That’s not really the way the industry works today, and I think it will hopefully move in that direction.

What are you most optimistic about, or thinking about from a positive perspective, for the energy future?

I’m a pretty optimistic guy by nature, and I really am inspired by and believe in human ingenuity. Over the last 50 years, the electricity industry has not been the place that the most talented engineers and operators have gone after school or when breaking into their careers. It’s not like, “I’m going to go work in electricity. I’m going to go work at a utility.”

I have a ton of optimism that comes from this idea that the nation and our really talented young people will wake up to the idea that this is an incredibly important problem, and we need to send our best and brightest to go work on it. I hope a lot of them come work at Base, but I hope other companies get started in this space to attract the best and the brightest to solve these really hard engineering problems in the energy space, to help drive costs down and reliability up.

I’ve visited your office a few times now, and one of the things that really stood out to me is the energy that you feel—as no pun intended—as you walk around. Everybody seems very motivated, very driven, very on it. It’s kind of a buzzy space and culture. How did you guys do that? Was it purposeful? Did that just happen through the people that you hire? How did you approach it?

A bit of both. Culture largely is the people that you hire, and those people define the early culture. Then you can tend to the culture and make sure it gets better and moves in the direction you want it to. It’s a bit of nature and nurture.

The first thing that comes to mind is working with urgency and focus. I think it’s really easy to have urgency without focus, and companies often get themselves into trouble by just doing the whole 996 thing and the like. We do 996; we probably do more than 996, but we don’t really talk about it in that way. It’s just natural to how we operate.

We have an extreme focus, and we ruthlessly prioritize the most important things. Everyone at the company knows what the North Stars of the business are. They know how the thing they’re working on ladders up to the North Stars. We talk about our business very openly, so the team has lunch and dinner together. Lunch and dinner table conversations are really about our long-term vision: Where are we going? What kinds of new things should we be thinking about?

You walk around the office, and the place looks like a Best Buy because there are just TVs everywhere, as you’ve seen. There are metrics everywhere. All the stuff that matters at the company is visible for everyone to see. That gives you a level of focus where it’s like, if it’s on a TV, it must matter, and if it’s not on a TV, it probably doesn’t matter. That really helps people prioritize.

Then I think we try to be an organization—actually, I say the word “organization,” and that kind of makes my skin crawl. We try to be small, lean, and nimble, but as a group, we seek and give feedback to each other. We’re really open with each other, and it’s a very flat structure. I sit next to and work with interns all the time. There’s not a manager-manager-manager kind of concept where people aren’t open with each other.

We really invest in young talent and try to train them directly with very quick, open, direct feedback. That has helped a lot of us, including myself, level up in a very short amount of time. A lot of us are young and largely inexperienced, so we learn from each other in real time.

We think about our business as a competitive endeavor. We are competitors, and we are here to win. We frame a lot of the things we’re doing in terms of competition, and we’re not afraid to say that. We’re very proud of it, and I think that’s a very unique part of our culture.

The last thing I’ll say is that we like to have fun. We like to laugh and smile and high-five and make jokes. We take our work very seriously, but we don’t take ourselves too seriously, and I think people love being a part of that. They want to have fun at work, right? If you’re going to be there 5, 6, 7 days a week, you better be having fun.

Over the last 18 months, you’ve raised $1.3 billion, I think—$1 billion just now that you’re announcing—and it was from a real who’s who list: Thrive, Valor, Addition, Lightspeed, Altimeter, a16z. My firm and I are lucky enough to be involved. I think the fact that you have this private equity and investment background means that you view capitalization—how you raise money for a company—very differently. It’s not only traditional venture money, where you sell shares in the company in exchange for cash, but also debt or other more complex structures. I’d love to hear more about how you think about that.

We’re in a highly capital-intensive industry, and our ability to access low-cost capital is a real competitive advantage. Said differently, if you and I are building a thing to go sell to someone else, and you have to pay 10% interest on the capital to build the thing while I only have to pay 5%, I’m going to have more money left over. I can charge less for the product, and I can outcompete you, right? In this endeavor, we have to figure out a way to access really low-cost capital over time.

There are different kinds of capital. When we make investments, we invest in operating expenses, OpEx, which is the cost to run the business day to day: pay the engineers, pay the rent, buy the snacks, that kind of thing. Then we have capital expenditures, CapEx, which are the large investments we make in batteries, inverters, manufacturing lines, and all the inputs that go into those things.

On the OpEx side, we have a pretty clear path to operating profitability and actually a near-term timeline, because the business generates a lot of cash and revenue, our operating base is low, and we’re quite efficient. That part of the business can be profitable quite quickly.

On the CapEx side, our ability to raise and deploy low-cost capital here is just a massive competitive advantage. One thing I’ve said to the team is that this billion dollars is necessary but not sufficient to achieve our mission. In the game that we’re playing, which is to build a global energy technology market leader, a billion dollars is the ante to sit at the poker table, right?

We’re competing against the biggest and most well-capitalized companies on the planet. We have to run down that cost-of-capital curve very quickly and raise billions of dollars in a short timeline to be able to compete with them. Over time, as we prove out the predictability, strength, and value of our cash flows, we’ll be able to access those lower-cost pools of capital, which are typically the largest pools of capital in the world. The largest pools have the lowest cost, right?

As we access those, we’ll continue to invest in CapEx while getting to operating profitability on the OpEx side, and we’ll be in a position to really control our destiny in the capital markets.

Yeah, it’s amazing. There are a lot of businesses that people talk about as having scale effects: the bigger the scale, the better the economics get. You mentioned one example. Steelmaking has some aspects of this, depending on the model you’re using. Payments, actually—

Yep.

—has this model. The more payments you have, the lower your interchange fees go on the back end. If you’re Stripe or someone else, you get a real advantage from having real scale. It’s interesting to see how you folks are really using that to your advantage.

Totally. I think you see this mostly in commodity industries, where cost is the source of competitive advantage. What we sell is a commodity. Electricity—there are no sexy electrons, right? Electricity is a commodity.

I think so.

Right. It depends on who you ask, right?

Our whole strategy is built around driving the cost down for the customer. As we get to more scale, our cost structure goes down—scale economies. As our cost structure goes down, our returns go up. As our returns go up, we pass those returns on to the customer in the form of lower prices.

When you have lower prices and you're selling a commodity product, you get more demand, you get more scale, and as you get more scale, your costs go down. That's the flywheel that you create. So why raise $1.3 billion in 18 months? Well, because we need to get that flywheel going really fast, because we've got to compete with these really large, well-capitalized companies.

We're doing a ton of stuff with technology, obviously, to come down the cost curve in a way that they can't. That's really how we win.

That's the real advantage to your business, then: the technology development and innovation versus just the money basis, which—

Ninety percent of the cost reduction comes from technology and innovation, and 10% comes from cost of capital. But you really want that 10%, too. If you can't get the billion dollars, and you can't really go compete on a global scale, you're just not going to be relevant.

Zach, thanks so much for joining me on No Priors.

Thank you for having me. I really enjoyed it.