Charging past the EV tipping point [Transcript]

Season 2, Episode 6 | Transcript

NOTE: This transcript has been lightly edited for content and clarity. 

Andrew: Welcome to The Next Great Thing. I'm Andrew Greenstein, CEO at SF AppWorks. Electric vehicles aren't a thing of the future. They're already here. Every auto manufacturer has announced plans to go all electric over the next two decades. But what’s not here -- yet -- is a vast and viable EV charging infrastructure to support the millions of new EVs that will hit American roads in the years ahead. 

My guest today is using the power of technology to solve this massive challenge. Zak Lefevre is the Co-Founder and CEO of ChargeLab. ChargeLab builds software that makes any EV charger smarter, easier to use, and more profitable. Their open software platform is hardware-agnostic and runs on 4 out of 5 of the world's most popular EV chargers. ChargeLab’s charging station management system and open APIs are used by EV fleets, building operators, and utilities to deploy large numbers of EV chargers and manage them as an intelligent network. Zak, welcome to the show. 

Zak: Thanks so much Andrew, excited to be here. 

Andrew: I want to start by establishing the EV charging landscape. Let's set the scene: where are we right now, and what are the major challenges that are being worked on?

Zak: It's a really dynamic time right now in electric vehicles and EV charging. The number of EVs being sold each year is doubling roughly every year or every eighteen months. So, we're really on this exponential ramp up where twice as many electric vehicles were sold in the U.S. in 2021 versus 2020. The reason I start here is because things are really dynamic. In parts of the country where there was sufficient EV infrastructure a few years ago, it's no longer sufficient because there are so many more EVs. And then at the same time you have parts of the country where there was no EV infrastructure and now people are buying electric vehicles. EVs are no longer just a pet project of California; you pretty much can find them in every state and every corner of the country.

Andrew: Where would you say we are in terms of the grand spectrum? Are we still in the beginning? Getting to the middle?

Zak: I think we're at a really exciting point which is what I would call the knee of the exponential curve. If you think about an exponential curve and you look at EV adoption -- if you go all the way back to 2011 when EVs first came to North America, .01% of all vehicles sold were electric. And then the next year it was .02%, then .05%. It's actually doubling every year. But while you’re under 1%, it's not really perceptible. The number of EVs coming on the road is doubling each year, but it's so small you don't notice it. Once you get to 1%, which we did in about 2018, that's when things get really exciting because in 2019 now 2% of vehicles are electric, and then in 2020 it was about 4%, and in 2021 it was 8%. We’re still really early on -- of all the vehicles sold in the U.S., only 8% to 10% are electric, and we're going to get to 100% within the next 10 or 15 years. But I think when we look back on 2022, we'll really think of it as the tipping point.

Andrew: The tipping point is now, or it's happened at that 1% level?

Zak: I would say it's happened at that 1%, and we're now kind of past the tipping point. In our business we help buildings and fleets deploy EV chargers. We went from a few years ago having condo buildings and apartment buildings and office buildings say, “Can you help us put in one or two EV chargers?” to now we have buildings that are like, “I want to put in 50 or 60 EV chargers.” We're out of the R&D phase, we're out of the early adopters, and we're into what I call the “early majority.” You can see this if you speak to your friend groups. Five years ago, you might have had one really techie friend who was interested in having an electric vehicle. Now you talk to any of your friends and they’re like, “We're thinking about an electric or hybrid for our next car.” 

The hallmark for me has always been the Super Bowl ads. Historically, Super Bowl ads are always for cars: the new Ram truck, the new Ford F-150. This year, in 2022, all of the Super Bowl vehicle ads -- at least all the ones I saw -- were electric. You know, it was the Ford electric, it was Hyundai. Everybody's promoting these electric vehicles.

Andrew: I do want to get into ChargeLab’s solution, but first let's talk about challenges for the industry. What are the big challenges that are being worked on right now?

Zak: I'm not the expert in the vehicle supply chain. I think there's lots of really interesting challenges there when it comes to building enough batteries, putting together these cars, do we want to build these cars in America or continue importing them from Asia and Europe. 

In the charging space, there's a lot of challenges. If you have a gasoline vehicle and you go to a gas station, you expect that it's just as easy as swiping your credit card and pumping the gas into your car. It's a lot more complicated with EVs today, and that's just kind of an immaturity thing. You have a lot of different hardware manufacturers, different people building different EV chargers. They have different kind of qualities, so you may have an EV charger that gets installed at your community center that lasts for 10 years and is great, or you may have an EV charger where the cable starts falling off after a year or two because we haven't really reached an equilibrium for quality of hardware products. 

But the biggest problem that we directly address is actually on the software layer. Right now, if you were to charge in public -- let's say around the Bay Area -- you would find all these different networks of EV chargers. Electrify America is a big one, but then you've got Blink and ChargePoint and SemaConnect and locally branded networks. Every one of these networks wants you to download a different app. So as an EV driver, I have, like, 15 different apps on my phone to use all these different networks, and when you pull up to them they're not very reliable. You'll pull up the app, you'll fill up your wallet, you'll hit “start charging” and for whatever reason it won't work: the charger got disconnected from the network, the app's malfunctioning. There's just a really, really low bar right now for the experience of being an EV driver and charging out in the world. So, we try to address that. We have a mobile app, but we also provide a web app where you can just pull up to the charger and scan a QR code, just like you would scan a menu at a restaurant during Covid. You can put in your credit card directly and you can do the whole transaction. 

Andrew: Let's talk about the charges themselves. They're not all made alike, right? There's different types -- I've heard of Level 1 charging, Level 2, the DC Fast Chargers. What’s the hardware we're working with here? 

Zak: The thing to keep in mind is charging an electric car is a lot more like charging a smartphone than refueling your gasoline vehicle. What I mean by that is, where do you charge your phone? You may go on a road trip a couple times a year and go to a Starbucks and charge there. You may be at a music festival and have to charge at a public charging station. But 99.9% of the time, you go to bed at night, you plug in your phone on your bedside table, you wake up in the morning, and that's given you enough charge to get through the day. That's how people charge their electric cars. 

What that means is, you actually don't need to charge that fast. If you're in a single family home or in a multifamily building, what we call Level 2 charging is sufficient. At the standard Level 2 charging rates, you'll get about 30 miles of range for every hour you spend plugged in. So, given that most people are only driving 20 miles a day, you can refuel in less than an hour a day. But then on the edge case, where you want to travel between cities or go on these long distance trips, obviously if you're driving between San Francisco and LA and you stop at a charger and it gives you 30 miles of range per hour plugged in, that's no good. Because you've got maybe a 300-mile range electric vehicle, and you've drained it down to basically zero. So it's going to be 10 hours to fill up and get back on the road. And that's where DC Fast Charging comes in. The fastest DC Fast Chargers can add 1,000 miles of range per hour, meaning if you have that 300-mile range battery, it's only going to take 20 minutes to go from zero to 80% or 100%.  

But I think the easy trap to fall into is thinking, “We need fast chargers everywhere, otherwise people aren't going to adopt EVs.” That's not true. Most fleets, most people who live in apartments and condos are going to plug in when they get home from work, they're going to have a full charge in the morning, and it's actually a better experience than a gasoline vehicle. I drive an EV and I haven't been to a gas station, other than traveling between cities, in 5 years. I wake up every morning with a full tank of gas, and it's great.

Andrew: So in your future, every house has a charger in it…

Zak: More or less. I think there's always going to be historic parts of different cities -- think about San Francisco -- where there are older buildings where there's no parking, let alone a charger. We're also going to have to do things like on-street charging, kind of like the way you have on-street parking. Also, putting charging posts along the highway for people who can't charge at home. Or, for people who live in a lower-income rental scenario -- those buildings may be less inclined to install infrastructure, but you might have chargers at work. So you drive to work and it's just the inverse: instead of plugging in while you sleep, you charge while you work, and then you have enough power to go do your errands and whatever you want to do on the weekend. I'm very bullish on the average EV driver having their own dedicated charger, either in their condo or apartment unit or in their single family home.

Andrew: Let's talk about ChargeLab. You’ve said you want to be “the Android of EV charging systems.” What does that mean to you?

Zak: If we look at other people who provide EV charging -- one is Tesla, they have a great public charging network called the Supercharger network. The analogy I use is Tesla is a lot like Apple. Apple makes great products and people love them, they come at a premium price point, and they're vertically integrated. The Tesla Supercharger network is really built just for Tesla users. I drive a Chevy Bolt, and I can't use the Tesla Supercharger network. Now, they say they're going to open up the network, and they will. But even then I think you're going to have, like, 20 stalls where 18 of them are going to be for Tesla and then 2 of them are going to be for folks like me. 

Then you've got a handful of other companies that build EV chargers and build the network management software. These are companies like ChargePoint and Blink. For me, that's kind of like Blackberry. I’m not saying that they're going to go away the way that Blackberry did, but Blackberry had their own hardware and software. They didn't have the benefit of vertically integrating like Tesla and Apple do. And they also didn't have the open ecosystem that Android has built. 

We want to go on the other end of the spectrum and have the fully open ecosystem. We don't build any EV chargers. We take equipment that's built by the biggest electronics manufacturers in the world -- ABB, Siemens, Delta, Phihong -- and we put our software on top of those chargers in the same way that you could take a Samsung, HTC, Xiaomi, or Motorola phone and put Android on it. We think that's a winning approach in the long run because it gives customers the flexibility to buy whatever hardware they want, and we add the same level of intelligence. That was the benefit of Android -- this stable intelligent layer that you could build apps on top of that runs on all devices except for the proprietary ecosystems.

Andrew: Walk us through some use cases. Who are your customers?

Zak: At ChargeLab, we're ultimately a technology provider. We sell our technology to groups that sell to the end sites where the EV chargers sit, so that’s big fleet operators, electrical contracting firms, or people who are building networks of EV chargers. Then, what these people do in turn is take our software plus their hardware of choice -- let’s say ABB or Siemens -- plus installation services, and they install EV chargers in a range of use cases. 

The most common for us are multifamily buildings because you need intelligent software to manage EV chargers in a multitenant setting. Think about, again, a condo or apartment building. You have all these different parking spaces. Let’s say you and I live in the same apartment building. If I drive my car every day and you only take yours out once a month, I need to be billed for using more electricity. That’s what our software handles. But beyond multifamily buildings, we also go into office buildings. We do a lot of fleet charging now because you're seeing school bus fleets, police fleets, all sorts of municipal service vehicles going electric and they all need a home to charge. We also do public charging, providing software where if you pull up at that fast charging station and you scan the QR code, we provide all the software to manage the payments layer.

Andrew: How do you communicate to customers that your software is not only the best but the only one that should be used?

Zak: It comes down to two aspects. One is, fundamentally what are we? We are an open software platform. We're hardware-agnostic. And so for customers who want flexibility to choose different hardware, they want to do things like white labeling, that's all built into our platform. 

The other comes down to product management. Can we as EV drivers ourselves be empathetic to people who are driving EVs and build a better experience? So for me as an EV driver, I didn't want to download an app every time I used a different charger just because it's maybe out of the network that I normally use. So we built this web app to be able to use your charger without downloading an app. As a site host, I would want a really easy and clean dashboard to manage all my chargers, understand where I'm making money, where I'm losing money. So we try to build these really excellent products that are going to add value. 

We have to make it really simple. If you're a condo HOA, your job is to manage your building and you might not be an expert on EV charging. It's really important that we do really technical and sophisticated things on the backend like managing the amount of power that comes out of chargers, making sure we don't exceed the grid capacity or the building capacity. But then on the other end we provide a really simple interface where buildings and site hosts can understand what's happening because we ultimately want to make this technology more accessible and more easy to adopt.

Andrew: From the outside you look like you're well-positioned; you've just raised $15 million, you're powering 4 out of the 5 main charging companies, and you're riding the wave of new technology that's past its tipping point and that's certainly growing. But I want to know how you got here and what were some of the milestones and challenges you faced. Go back a little bit and tell me about the early days…

Zak: We started this company in 2016, which is now 6 years ago. I would say it doesn't necessarily fit your prototypical “start a company, do YCombinator two months later, raise a seed round.” It took us until 2019 to raise our first VC funding -- we raised $350,000. In 2020, we raised $1 million, in 2021 we raised $4 million, and then this year we raised $15 million. So it’s been a slow growth for a number of years and then very fast in the last two years. 

Andrew: Much like the charging world. Much much like the EV landscape.

Zak: Exactly, and there’s a little bit of a link there. But if I think back to 2015 and 2016, I care a lot about sustainability and making the world a better place. I actually think that EVs should be a bipartisan issue. I don't like when EVs get politicized. Yes, they reduce carbon and help fight climate change and that's great. But everybody, Republican or Democrat, loves going to the lake and breathing the fresh, clean air. And it’s like, do you ever think about why is air in cities dirty? It’s because we're burning petrol and we're pumping it out. So, if everyone started driving an electric vehicle tomorrow, your city would be a lot cleaner. There wouldn't be soot and dust covering everything. It wouldn't smell as bad. It would be a lot quieter. I know people love the rev of their engine, but as someone living in a city, it gets really noisy when you're trying to go to sleep. 

EVs for me just seemed like such an obvious win. And then, there are bipartisan benefits. It's energy independence, right? Do you want to fill your vehicle with imported foreign oil, or do you want to generate power in your backyard, pump it through the grid, and put it into your vehicle? For me, it was just this win-win technology, but it was so early on. I just wanted to get involved in the industry as early as possible, and arguably too early in 2016. But it was only by being so early that we spotted the gap where Tesla was building up this big, intelligent network of charging stations, but what about everybody else? We've got hardware built by ABB, Siemens Delta, Phihong, but who's going to do the software layer? 

Andrew: I'm a big believer in product development that there’s a time for exploration, a time for building and growing, and then a time for extracting value. You said that 2016 to 2018 was a lot of learning, getting to know people in the industry, speaking to customers, testing different pitches. That sounds like a really important lesson to early stage companies. What was that process like?

Zak: The idea that we ended up pursuing, to some people it seems obvious now. If you've ever pulled up to a charger and used the app you're like, “This sucks, there's so much room for improvement.” But it was really not obvious at the time. We actually weren't building this Android for EV charging when we set out, we just wanted to get into the industry and understand EV charging. We actually started by buying and selling EV chargers, basically being a reseller, and then from talking to literally dozens of different customers we came to understand that there is this demand for this intelligent software layer. We came to understand the best way to build it, which is on the back of open protocols -- we one called the Open Charge Point Protocol, or OCPP. And we've continued to iterate since then.

Our business model has probably changed half a dozen times. But the lesson is that some of the best ideas are not obvious. You really have to dig in and get into the industry. If we hadn't started that non-scalable reselling business in 2016, we never would have found the scalable software business that we're building now.

Andrew: You also spent several years without a co-founder, and then found one in 2020. What was life like before co-founder, and after?

Zak: Like night and day. I was very lucky in that Ehsan Mokhtari, my co-founder who's our CTO, had sold his previous startup a couple years earlier. He, much like me, was looking at what was going to be the next big thing, and he landed on the same idea as me: electric vehicles. They’re going to need infrastructure and an intelligent software layer. 

I always wanted a co-founder. From 2016 until when Ehsan joined, it was about finding people who also believed in what we were building and EVs scaling up exponentially. But to the extent that other young founders can find a co-founder, I think it's great to be challenged on your own ideas. It's great to have people who compliment your skill sets. The only cautionary word is, you can't just pick anybody off the street or anyone from your network; they have to be people who are independently very entrepreneurial. Ideally if you're the CEO, you want to be working with co-founders who just as easily could be the CEO and you could switch roles with them. I think the best co-founder relationships are the ones where you're like, “You’re scrappy and entrepreneurial enough -- I would trust you to do my job, and vice versa.”

Andrew: I would add to that, from my experience, that you also want someone who thinks differently than you, or else you get this echo chamber. When someone has a different perspective on problems or a different way of solving problems, that’s when you can really explore great solutions to the hard problems that come up.

Zak: I think that tension is really important, but you also have to recognize when it's unhealthy. if you're disagreeing at every turn, that's not good. I think you should maybe spend 75% of your time with your co-founder marching forward and executing on a plan and then 25% of your time challenging each other and building a strategy and saying, “Hey, what if we did this a little bit differently?” But if you're spending 100% of your time just nodding at each other, then there's probably something wrong. Because I can also say, I thought we were right about many things with our product and our go-to market, and we were wrong. The sooner you can figure out where you think you're right but you're actually wrong the better.

Andrew: That's a good point. I feel like every business has ups and downs and milestones and potential points of failure. Do you have a couple milestones or crises that you went through or you weren't sure how things were going to go? 

Zak: In the early days, in the early fundraising rounds between the $350,000 and $1 million rounds, we almost ran out of money multiple times. My aspiration now is to never be in that position again. When you're spending $20,000 per month -- or let's go even smaller -- when you're burning $5,000 per month, you can max out your credit card or or go borrow money from your uncle and you can get an extra $10,000 to carry you through the next two months. But once you get to the point that you're spending hundreds of thousands of dollars per month, you don't really want to be cutting things that close. 

In startups we spend so much time on our pitch and our idea and our traction, but that's almost all secondary. Primary is you are a business, and the most important thing for a business is to stay above water. That was a huge lesson for me: make sure there's money in the bank at all costs. But other than that, we've lost deals, we've thought we won deals and then we didn't win them. I think you learn from every one of these incidents. 

I think the most helpful thing you can do as a startup founder is learn all of the tropes and then figure out which ones are actually true and which aren't. There’s one trope that I didn't believe for a long time which is: investors follow the herd, and all you need is a lead investor and then everyone else will pile on. In my experience, that's 100% true. You want to learn all of these stereotypes because there's a lot of truth behind all of them.

Andrew: What you’re saying is, sometimes you just have to win one person over, and then the rest will follow. And that might be the lead investor who other investors follow, but it also might be the junior investor who then is going to champion you to the lead investor. You really can change minds one person at a time, and that's probably a good lesson for people.

Zak: Yeah, and speaking of tropes and stereotypes, there's a lot of, “You should only pitch a partner.” I have a bit of a different view on that in the world of VC which is: a partner at a top-tier firm is going to meet with hundreds of companies per year, but they're only going to pick one associate every two or three years. So they have invested a lot more in that associate that you really want to brush off than they've invested in you. And so I think it can be pretty harmful to be like, “I don't speak to associates. I only want to speak to the partner.” There's a lot of these things that you learn by doing, but accelerators and podcasts like this one are a great resource for people who are just starting their company.

Andrew: Yeah, so one trope: cash is king. You found it to be true. Another one: investors following the herd. Sounds like you're also saying that generally rings true. How about this trope: first-time founders love product, second-time founders love distribution?

Zak: I am arguably a first-time founder. I did run some businesses before this, but they were not VC-backed tech, and I would say I spend all my time thinking about distribution!

Andrew: Well, you had a good mentor, then.

Zak: Yeah. So I would say that that’s true with the exception that, if you are a first-time founder, it's not too early to start thinking about distribution. I'll just give a quick example for our business. We want our software to be running in hundreds of thousands of buildings, and we aren't that good at knocking door-to-door. Going to your condo building, going to your office building one-by-one is not efficient. But by bundling our software with folks like ABB, who have these existing sales channels, that's how we're really getting into the market and what we see as our go-to-market strategy. 

Andrew: You want to tell us about that partnership? 

Zak: Yeah, so, the other trope is: strategic partnerships take a long time to execute. I would say that's also very true. I first met ABB when we started the business in 2016, and we were just reselling EV chargers. It literally took a 5-6 year relationship, but we got to this point where we had built a lot of trust with their team, they had built a lot of trust with us, they were looking for a software to complement some of the use cases they had in North America. They do have software for certain use cases already, but other use cases, like public paid charging, they don't have software for. 

ABB was a strategic investor in our Series A round, and now we're working together to bundle ChargeLab software with their Level 2 chargers that they're planning to bring to market later this year. It's going to be a brand new product launch for ABB in North America, and it's going to be a new distribution channel for us. If you think of the number of customers we could reach on our own versus through partnering with ABB, it's an entirely different level. It also goes to our ethos of being the Android for EV charging. At the end of the day, you didn't buy Android because you were looking for an Android phone, you bought it because you liked the specs of a Samsung Galaxy S22. 

There are so many people who have strong distribution. I always say, if I could choose between having the most delicious, best-formulated granola bar in the world or a granola bar that's on the shelves of every Walmart in America, I'd choose the granola bar that's on the shelves of every Walmart. 

Andrew: Because you can get it anywhere.

Zak: Yeah, I mean you’re just going to sell way more of it. It doesn't matter if it's the best granola bar in the whole world, if you only sell a thousand of them online every month versus selling a hundred thousand through Walmart. As startups, we want to always try to have great products. Great distribution can compensate for a mediocre product, but I don't think it goes the other way around. Just because you have the best product, you really need to solve the distribution part, too.

Andrew: It's a great point, and of course you need both. I think the takeaway is: don't forget to think about distribution, and it's never too early to think about it. Everyone knows to think about product, but distribution is where it's at.

Zak: It's also a virtuous cycle right? We want to sell our software through ABB with these chargers they're bringing to market. ABB is a market leader here. They have a fantastic reputation, and they're not going to take a subpar product, so they are going to push us to continually iterate and build a better and better product. You know, if you become the granola bars on the shelves of Walmart, you're going to have 100x the budget of everyone else and you're going to look into making them healthier and more delicious and things like that. So, it is a virtuous cycle, but if you can pick one, I would pick distribution and then iterate and make the product better and better.

Andrew: To your point, that leads into the next trope which is to talk to your customers. By forming partnerships you are, first of all, understanding a very large customer in that partner, but you're also getting to learn everything they've learned about their customers. So, a virtuous cycle. I’m gonna get you out of here on one more question: why is ChargeLab the next great thing? 

Zak: We're providing a critical software infrastructure for the future of refueling. I don't have to convince anyone to buy an electric vehicle. You're going to buy an electric vehicle in the next 10 years one way or another, whether it's because of cost, or style, or brand, you want a Tesla, you want a cool BMW. You want the toughest, hardest working truck? It’s going to be an electric truck. Already the F-150 electric has the most torque of any F-150 yet. So, you're going to buy an electric car. We want to make sure you can refuel it. We want to make sure it's easy. We want to make sure it's cost effective. 

At the end of the day, let's just be honest, building out infrastructure is not our strength in North America. If you look at China, they put high-speed rails in the ground and they run a thousand miles of track in, like, 18 months. It takes us 10 years to build a new slow rail between two stations in a city here. We're not great at running cable and pouring contract concrete, but we are great at software in North America. If we can use intelligent software to make it so that we have to pour less concrete and run less cable -- which is one of the things our software does, it allows you to install more EV chargers without upgrading your grid connection -- then that's a winning strategy for how to electrify America.

Andrew: Zak, this has been a great conversation. We're excited to see what you and ChargeLab do in the future, where you take us, and what that does for the world. Thanks for sharing your experience and your time with us today.

Zak: Awesome. Thanks a lot, Andrew.