Sealed’s mission and culture

In the last post we gave you more information than you probably wanted about the team behind Sealed.

Today, we’re going to talk about Sealed’s mission and culture, two concepts that are intertwined. 

Here at Sealed, we believe first and foremost in the mission of scaling energy efficiency. Nobody we work with wavers from the belief that energy efficiency can and will scale to help meet our society’s intertwined environmental and economic challenges. And they are all frustrated as hell that the no-brainer of energy efficiency remains a small market.

It is Sealed’s strongly held belief that mission-driven organizations outperform similar organizations without a positive, defining mission. On the other hand, however, organizations that aim to generate significant returns from invested capital outperform similar organizations that rely on non-profit donations. 

By combining a mission-driven culture with a strong profit motive, Sealed will scale energy efficiency by working hard in open collaboration with employees, partners and investors.

This is an ethos that is the hallmark of almost all successful start-up companies. What makes cleantech companies like Sealed special is the ability to do this beyond the initial excitement of high-growth. And while Sealed has not yet reached this phase yet, it is important to codify these core company tenets at an early company age, as growth tends to amplify pre-existing tendencies.

With Sealed’s mission as its core cultural guide, there are three building blocks that will enable Sealed to succeed and grow. These are listening, analysis and transparency.

Listening

Sealed believes and practices Lean Start-Up practices as best we can. First and foremost among this is good customer development, which is generally defined as listening closely to your actual and prospective customers. 

Listening to customers means going beyond surface answers and speculation. It means acting like a five year old and asking “why” and “what if” until you get the heart of the matter. Good listening is not in opposition to quantitative analysis (we’ll talk about that next), but rather provides the context to ask the right questions that can then be quantified.

And while listening in the context of customer development is now considered a best practice of good start-ups, Sealed believes this principle should apply to all other partners in the company eco-system, including contractor partners and investors. Only by understanding what each stakeholder will and will not buy into can Sealed truly scale. 

Sealed believes listening is better than talking (not always easy), and is incorporating tools like Uberconference where you can track the amount of time you versus others talk.  

Analysis

Listening is always the first step, but good quantitative analysis must confirm any hypothesis gleaned talking to customers or others. 

Analysis means defining a test that can be proved or disproved with some level of statistical significance. Nothing is “real” until it passes the same level of rigor as a peer-reviewed science paper.

To meet this level of rigor, however, you need a lot of data. Sealed loves data (the more the better). We also understand you can’t always get the data you want, however, and therefore are patient in the acquisition of data to demonstrate real results.

Some data sets we are using so far include RECS, NYSERDA home performance results and weather data.  

Transparency

Perhaps the most difficult and controversial cultural value is transparency. While most companies give at least lip-service to transparency, many either won’t or can’t be truly transparent. 

Sealed believes true transparency comes the following principles:

  1. Nobody is going to steal your stupid idea
  2. The benefits of getting feedback far outweighs any costs of others copying
  3. You have to actively promote transparency

The only place this line is drawn is at personal information, which is sacrosanct and is never shared without permission.

To promote internal transparency, Sealed uses Google Docs, Asana and Streak, among other tools. This blog, Twitter and Facebook are some initial tools to promote external transparency, but many more will be built natively as Sealed grows. 

Have any ideas on improving Sealed’s culture? Let us know!

Who is Sealed?

So far, we’ve talked a lot about what Sealed does and why we do it

However, sort of embarrassingly, we haven’t talked about “Who” Sealed is. So here goes…

Sealed was founded in December 2012 by me, Andy Frank. And while I have been lucky to have a number of amazing partners (more about them later) helping out on different aspects of the business, right now I’m the only full-time employee. 

About me:

– Today is my 30th Birthday (the existential crisis that prompted this post).

– I got married about a year and half ago to my wonderful wife Angie (pictured below raising the average attractiveness of our marriage significantly) who currently works at Fitch Ratings, focusing on the credit of non-profit institutions like universities and charter schools. We have a cat, Sifma, named after the Securities Industry and Financial Markets Association (that was Angie’s idea).

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– I have a brother, Patrick, who is a political organizer (he’s the “traveling sophist”), and a sister, Shannon, who graduated college last year and works in hospital administration (she’s the “cool” one). My dad is a program director with the government. My mom, Kathleen, is currently writing a book about our family’s Irish history (hint: full of murder and intrigue!), and has previously worked as a teacher and as a lobbyist for the United Way.

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– I live in Astoria, Queens, famous for its beer gardens, greek food and being cheaper than Brooklyn.

– Prior to founding Sealed, I ran Business Development (e.g. everything except the real work of coding and designing) for four years at Efficiency 2.0, an energy efficiency start-up that sold white-labeled software and program services to large utilities across the country. In April 2012 we were acquired by C3 Energy, an energy management software company founded and run by Tom Siebel

– Prior to Efficiency 2.0, I spent about a year each at GreenOrder (management consulting firm focused on corporate sustainability), the New York City Economic Development Corporation (what it sounds like) and MBI (selling collectibles and paying off student debt).

– I went to Glenbard West High School in a suburb of Chicago where I twice ran a sub-five minute mile, then went to Harvard for undergrad where I concentrated in Environmental Science and Public Policy, nerded it out as President of the Harvard College Democrats and Professional Loiterer at the Institute of Politics, and destroyed any claims to comedic timing as part of the improv group On Thin Ice.

My motivation:

It may sounds cheesy, but my main motivation for starting Sealed is to scale energy efficiency to meet our interlocking climate and economic challenges. I get really frustrated when a solvable problem isn’t solved, and in my mind there is no problem more solvable and important than energy efficiency. I am a big student of history, and societies can and do collapse when they overuse resources, whereas they grow and prosper when they find alternatives. 

And so if I can help solve this problem, make money and have a lot of fun in the meantime, why the heck would I do anything else?

Sealed’s partners:

So far I’ve been able to work with some great partners. Below are a few:

  • Matt Golden, founder of Recurve, and a national energy efficiency pioneer. Matt recently came on as a formal advisor to Sealed, and is providing invaluable insight and advice during these early stages.. 
  • Dan Kartzman and his team at Powersmith, arguably the best home performance team in the country. Dan worked with Matt at Recurve and took many of the same best practices to Long Island, where he has grown Powersmith from five to over forty employees in three short years.
  • Barnum Design, a leading NYC-based design firm that provides holistic business design for companies large and small. Sealed is part of Barnum’s burgeoning Sweat Ventures initiative that invests their services in entrepreneurial ventures.
  • Natara Feller and Jon Norling of Cleantech Law Partners, who have drafted Sealed’s legal contracts based on extensive experience with New York energy law and renewable energy contracts. 
  • Reitler, Kailas & Rosenblatt  who have prepared and arranged all of Sealed’s corporate papers.
  • Patrick McNamara, former Efficiency 2.0 colleague building the analytic backbone of the Sealed Energy Bill while maintaing a level of beer snobbery matched by few. 

In addition to these core partners, I’ve also received help and advice from former colleagues like Adam Gerson (Director of Client Engagements at Efficiency 2.0, now running NYC operations for Hailo), former bosses like Andrew Shapiro (former Founder/Partner at GreenOrder, now the same for the Broadscale Group) and industry experts like Peter Troast (Founder/CEO of Energy Circle). And many more that are too long to list.

Now that you hopefully know more than you would ever want to know about me and the Sealed team, the next blog post will focus on the core cultural values that guide Sealed towards building a large, sustainable and profitable company that helps solve the problem of scaling energy efficiency.

How Sealed fixes home efficiency (3/3)

In the last few posts, we talked about about home efficiency problems related to savings uncertainty and confusion, and how Sealed helps solve these problems. 

Today, we talk about the last, and potentially most difficult issue: complexity. 

This complexity translates into the frustrations, difficulties and long waits associated with most major energy efficient improvements.

As we’ve discussed, one of the most significant barriers to increased adoption of energy efficiency is the upfront cost. Even if homeowners believe in (or are guaranteed) the savings, they are reluctant to pay upfront for benefits that will accrue in the future. The table below from a great new report out of Vermont by GDS Associates breaks down the different ways people don’t like to pay money for efficiency :).

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And while some people (largely upper income) pay cash, most homeowners will either finance efficiency or not do it at all. Unfortunately, this financing process it typically so cumbersome, lengthy and frustrating that a large number of homeowners abandon the process somewhere in the middle, if they ever get started in the first place 

Here is what a typical process looks like here in New York:

1. Fill out a financing qualification form(s), looking up old tax returns, income statements, etc.

2. Wait 2-3 weeks

3. If credit or debt to income ratios not perfect (most of us), send bill payment and/or mortgage payment information

4. Wait 2-3 weeks

5. Receive credit approval

6. Wait another 2-5 weeks for construction to commence

7. Sign paperwork at the end

It is even worse for the contractors that have to manage the process with the finance administrators (some still have to fax documents). There is so much paperwork that many contractors abandon the financing programs altogether, and only do jobs that pay cash.

Why is this so hard??

Ultimately, it comes down to the terms and processes demanded by the institutions providing the financing. While there is some private finance available, most financing is done through states and utilities. This Resources for the Future (RFF) report summarizes the challenges of financing energy efficiency:

  • Energy-efficiency loans are typically unsecured and thus inherently risky, leading to relatively high interest rates and lending that is mainly based on the credit-worthiness of the borrower—not the value of the investment. 
  • Obtaining these loans often involves significant transaction costs for borrowers and contractors who perform the retrofit work. Energy audits often are required before applying for a loan; the amount of paperwork can be substantial; there can be delays in getting loan approval; and repayment usually involves a new monthly bill for property owners. These extra transaction and administrative costs limit borrowers’ interest in financing. 
  • In the residential and small business sectors, the value of energy-efficiency loans is low relative to the origination and processing costs. The small margins on these loans make them of limited interest to many lenders. 
  • Without a standardized energy-efficiency loan product, lenders are limited in their ability to take loans to a secondary market. Without access to secondary markets, there is no ability to recapitalize loan programs and increase the amount of money available. For government and utility loan programs, this inability to recapitalize has been a matter of some concern. 
  • Asymmetric information may lead to an adverse selection problem that contributes to credit rationing, although the extent to which this problem exists in energy-efficiency markets is an open question. The one factor that suggests it may exist to some extent is the lack of good information about the energy savings payoff from the investment. This lack of information may be contributing to a credit market failure.

In other words, loaning money for energy efficiency today is risky, small, and data poor. In response, financing programs offer some combination of poor terms (high interest rates, short loan lengths) and onerous credit requirements (high FICO score, low debt to income ratio, proof of on-time payments). 

Even in states that substantially subsidize the financing to provide attractive terms for lower-income households, credit requirements are oftentimes too high. For example, New York offers energy efficiency loans at a 3.49% interest rate for up to 15 years. However, despite large subsidies from federal stimulus money and a state law that allows the utility company to shut off power if the homeowner doesn’t pay, the private market still requires credit scores and other metrics that lead to large numbers of middle class and lower-income homes from being disqualified

Of course, we can blame the greedy, stupid banks all we want, but the market is the market. From the banks’ perspective, they are lending to unsecured creditors with no data to back up the claims that the lower operating costs from energy efficiency investments will pay back the investments.

This all this sounds pretty bad. So how do you fix it? 

First of all, you have to deal with the underlying issue of data availability. Fundamentally, banks lend money because they have enough data to support the notion that any losses will be offset by the amount they receive in interest. The lower that risk loss, the lower the interest rate and credit requirements. Right now banks don’t have the data they need to make intelligent decisions so they simply lend at rates / terms similar to regular unsecured credit (e.g. close to credit card rates). 

The Investor Confident Project (ICP) is one prominent organization trying to unlock the data needed to improve private sector lending. Unfortunately, this is a long process because it involves working with utilities, regulators and government to release data that is not publicly available today (more on why this is so difficult in later posts).

Given that situation, how can Sealed help?

Unfortunately we can only do so much today, but by collecting data on customers with the explicit purpose of optimizing the most amount of energy savings, Sealed provides market pressures to enforce quality of work and real, persistent energy savings. As Sealed grows, the amount of data we collect from contractors and homeowners will provide the seed for the data sets required to dramatically improve financing terms. 

Because Sealed is small and has a higher risk tolerance than banks, we can test real-world strategies to optimize the financial benefits of energy efficiency. And while we can’t always help with credit approvals, we can give more confidence to homeowners in the energy savings, no matter how they pay for the work.

More than issue, however, the issue of complexity is one that must be undertaken by many stakeholders, and here at Sealed we are committed to doing our part!