SM: How do you view Serious Materials in the cleantech space?
KS: Going forward, cleantech probably means a lot more building energy savings than it does solar, wind, and bio fuels. That is because the cost of carbon mitigation is a positive cost with all the supply-side dynamics. With demand-side opportunities, it is all a negative cost. If someone puts in our super insulating windows, they save more over the life of those windows than they actually cost.
SM: How many products are you selling today?
KS: We are shipping 50 different products, including our energy-saving home products. Windows are our largest product line with 70% going to commercial, 30% to residential, and 0% to home builders. We have worked with over 40,000 architects and have over 200 employees. It is the best executive team I have ever had.
SM: You have been in software, hardware, networking and now materials science. Looking back, what is your guiding philosophy on team building?
KS: For the most part I could not hire people from the construction field. They were too slow. The gypsum process was invented in 1894. The guys who invented it were dead by 1920. That is the wrong industry to pull from.
I pull out of regular tech. I can teach them what I know about these marketplaces. What I did not want to do was bring in people who had spent 30 years in an industry and never brought a product to market. I learned my lesson when I brought in my first VP of Sales at Serious Materials. He had been in construction for 30+ years. I sent him to the first trade show, which was a tabletop with 800 dealers who carry drywall and wood. He came back with one business card.
I asked him what happened and he told me that nobody was interested in our drywall. I could not figure that out, because the phone was ringing off the hook and we could not keep up with the calls. He told me that dealers knew it was soundproof but that drywall sells for $10 a sheet, and that if we were selling at $10.10 or $10.20 then maybe we could sell it.
Contractors were already spending twice that amount to build the walls they were building because they had to use eight times as much material. We would save everyone who used it money, not to mention that it was more reliable and performed better. He told me that the dealers did not care about that, and he told me to get the price under $11. When he said that, I took the single business card he brought back and told him he was fired.
I hired two consultants from the drywall industry to look at QuietRock before I came out with it as a product. Both of them came back and said that there was no market for the product, nobody would buy it, and that it was way too expensive. I did not listen to them or to my VP of Sales and we ended up shipping 1.5 million panels.
You should listen to your people, and I do listen to mine, but at the same time you must have vision. As a CEO there are only a few things you must do right. In the early stages you better do everything, even if you don’t do it all right. You are the finance guy, the webmaster, and you answer the phones. Later, when the company is older and you have a great team, you have to listen to them, inspire them, and set the culture. The vision about where the company can be in five years comes from the CEO, and your employees are looking to you for it. Deliver the vision and then give your team the freedom to deliver.
SM: Your situation sounds familiar. I did one of my startups in the fashion industry. The technology we used was very sophisticated, but at the end of the day it was a personalized Saks Fifth Avenue. I sat down with hundreds of designers in their showrooms explaining the vision. The only reason I could get deals was because I was a technical entrepreneur who could bring innovation to market. The fashion industry had no idea how to leverage technology.
KS: The people in the construction materials industry still have no clue. VCs still ask me how I will compete with billion-dollar players. I tell them that I think they are asking the wrong question. It should be focused on how my sales force competes with their sales force, and how my R&D team competes with theirs. In almost every case, my R&D team is the only one because they shed their R&D teams decades ago. They viewed it as overhead in a commodities product marketplace. I am not competing against a billion-dollar company, I am competing against a company that has no R&D team.