This month, world leaders met in Dubai at the COP28 UN Climate Change Conference to discuss limiting global temperature rise to 1.5 degrees celsius. Sadly, it is a goal we are likely to miss, resulting in an escalating climate crisis and irreversible damage to our planet.
Yet, there is reason to be hopeful. The conference ended this week with a surprise to the upside: an agreement to transition away from fossil fuels. This outcome seemed unlikely given crowing from OPEC, and the conference President’s day job as CEO of one of the world’s largest oil producers. While the agreement is not legally binding, it is clear that the world is moving in the right direction — away from fossil fuels.
In recent years, the United States gives us even more reason to be optimistic. The 2022 Inflation Reduction Act (IRA) contains billions of dollars in incentives to accelerate the transition to a low carbon economy.
In the US, roughly 20% of carbon emissions come from powering, heating, and cooling homes. The burning of natural gas and fuel oil accounts for more than half of that. To stop climate change, we must change the way we heat and cool our homes.
Today, we are excited to announce our investment in Tetra, the home services company for the clean energy transformation, starting with heating, ventilation and air conditioning (HVAC).
The technology to decarbonize HVAC is not new. Invented in 1856 and popularized in Europe in recent decades, the heat pump is a safe, reliable, inexpensive choice. Heat pumps extract heat from the air, and then transfer it where it is needed. Because the heat is being moved, not generated, heat pumps are far more efficient than any other technology.
Heat pumps are not new to the United States either. Over 40% of homes in South Carolina, North Carolina and Alabama use them today. A common criticism of heat pumps is that they are ineffective in cold weather. This isn’t true. Today, two thirds of households in Norway, one of the coldest countries in the world, rely on heat pumps.
As if preserving life on our planet weren’t enough, heat pumps are also less expensive to operate and safer than fossil fuel systems. Replacing older systems can save the average household up to $1,000 a year, while eliminating the health risks associated with fossil fuels. 3% of all natural gas is leaked before reaching its destination, resulting in deadly explosions and poisoning.
The tide is turning. Last year, heat pump sales surpassed natural gas furnaces for the first time ever, with 4.3 million units sold. If every American home transitioned to a heat pump, it would be the equivalent of taking 32 million cars off the road.
The IRA is poised to give the heat pumps the moment they deserve. Historically, heat pumps have had a higher up-front cost than fossil fuel systems. This is changing. The IRA will provide incentives of up to $14,000 per household for heat pump installation and related expenses, making them cost competitive for the first time. As these incentives begin to roll out to states in 2024, we believe the United States will undergo a generational transformation to low carbon heating and cooling. We believe Tetra will lead the way.
We first met Max Veggeberg, Tetra’s Founder and CEO, two years ago through Ron Feldman, my former Head of Product at Managed by Q. We were struck by Max’s intensity, drive, and deep domain experience in HVAC.
Out of college, Max built his first company, HomeWorks Energy, into the largest provider of home energy assessments in Massachusetts, doing over $100M in revenue. Under his leadership, HomeWorks became the largest driver of consumer adoption of home energy efficiency initiatives in Massachusetts through Mass Save, an incentive program sponsored by MA utility companies.
In some ways Max has seen the future. His experience working with Mass Save gives him a unique lens to understand what to expect with the IRA. Max’s experience at HomeWorks Energy taught him that in order for incentive programs to be effective, consumers need to be educated and guided to make smart purchase decisions. He also learned how hard it can be for HVAC contractors to keep up with changing technologies and government programs. All of these learnings have informed the company Max is building at Tetra today.
In our October 2021 investment memo, we wrote that there was an opportunity to build “the home services business for the clean energy transformation.” We believe Tetra is that company. Two years into our investment, with the generational tailwind of the Inflation Reduction Act at our back, our conviction has never been stronger.
As with most startups, the road to today has been long and winding. At the time we invested, the company had a different name and a different team. Over the past two years, we’ve had the opportunity to partner with Max in building a world class founding team that is fit for the magnitude of the challenge and the scale of Max’s vision.
To lead operations, we introduced Max to Aamir Sarwar. Aamir was a management consultant before joining my first company, Managed by Q, where he led operations for over 4 years. Aamir scaled a profitable, national, facility services provider. He is a disciplined operator, principled leader, and has been a tremendous partner to Max over the past year.
To lead technology, we introduced Max to Eran Kalmanson. Prior to joining Tetra, Eran was CTO at YouNow and SVP Engineering at Domestika. Eran is an engineer’s engineer, combining a passion and talent for writing software with the experience and ability to scale and manage engineering organizations. His contributions to building a robust software platform and delightful digital experience will allow Tetra to efficiently reach millions of homes in the coming years.
Most recently, we introduced Max to Rita Razalan to lead Growth. Rita has tremendous experience in consumer marketing ranging from L’Oreal to My Little Pony. Most recently, Rita led Growth at Tend, a next generation dental clinic which raised a $125M Series C from Addition. Rita is driven by purpose and understands how to recast an old category in a new light for consumers. We are very excited to see her impact at Tetra.
Partnering with founders to build founding teams is always a high wire act. It is one part recruiting, two parts matchmaking, rebuilding the engine while the founder is flying the plane. It is a nail-biter, but when everything clicks, it is magic. I am grateful to my partner Richard for his tireless pursuit of excellence in building the Tetra team alongside Max.
We are fortunate to be joined by a great group of investors. Isabelle Phelps at Lerer Hippeau has been a wonderful partner from the very beginning. We are also excited to welcome John Elton from Greycroft to the Tetra Board of Directors in this most recent financing. I have known John for nearly a decade since he invested in Managed by Q, and I am excited to be working with him again in this capacity.
At Gutter Capital, we are not counting on oil company executives to solve the climate crisis. Instead, we are betting on entrepreneurs. Max and his team have the vision, experience and tenacity required to accelerate the decarbonization of the American home, a critical step to beating climate change. We are excited to support them on the road ahead.
