Why we invested in Dandelion
We are pleased to announce our seed investment in Dandelion and are excited to support the team in their mission to provide earth-powered heating for every home.
The Team: Founder-Market Fit
As we have written before, as investors that invest prior to Product-Market fit, what we look for in an investment opportunity is Founder-Market fit. Led by the inimitable Kathy Hannun, the Dandelion team possesses the multi-disciplinary expertise that is necessary to execute on its bold vision.
Prior to founding Dandelion, Kathy spent 8 years at Alphabet, most recently as a Product Manager on the Rapid Evaluation team at Google X. At X, Alphabet’s secretive lab responsible for identifying moonshot opportunities outside of Google’s core business, the Rapid Evaluation team make the ultimate determination on which moonshots to pursue:
[The Rapid Evaluation team] is a team of diverse experts, a kind of Justice League of nerds, to process hundreds of proposals quickly and promote only those with the right balance of audacity and achievability (source).
X has a three-part formula for an ideal moonshot project: an important question, a radical solution, and a feasible path to get there. Dandelion met all three criteria so a team was built and the company was spun out from X.
Dandelion’s CTO James Quazi has 13 years of experience in the field of residential energy efficiency, having co-founded a company that was acquired by SolarCity. At SolarCity James was the Senior Director of Energy Efficiency before leaving to join X as a Technical Product Manager.
They are joined by a rockstar team hailing from SolarCity, Tesla and Sungevity with significant expertise in building and bringing to market solutions for residential energy efficiency.
Using technology to change the equation of a historically unfavorable value proposition: environmentalism isn’t enough
Geothermal heating is not new. In a 1993 study titled “Space Conditioning: The Next Frontier”, the U.S. Environmental Protection Agency found that geothermal heat pumps are the most energy efficient, environmentally clean, and cost-effective space-conditioning systems available. So why then after 25 years has geothermal still not become the standard?
Geothermal heating and other forms of renewable energy are obviously a more environmentally favorable option than fossil fuels. Yet there are 70 million homes in the US that are still heated by burning fossil fuels. This discrepancy is reminiscent of the hybrid and electric vehicle market, where environmental benefits without a clear return on investment have not been enough to drive mass adoption. Hybrids/EVs have only about 3% combined market share, and their popularity has clear links to financial incentive: when gas prices fell from 2014–2016 there was a corresponding decline in the sales of hybrids/evs as a percentage of total US car sales due to the diminished return on investment from owning a non-gas car.
Similarly, the financial return on investment of switching to geothermal heat pumps has not been compelling enough for it to become the standard, despite its environmental benefits.
Dandelion is changing this equation. Through innovations to the hardware and software involved in the installation and operation/monitoring of geothermal systems, Dandelion has made geothermal installation 2x more cost effective than traditional geothermal.
Not only does Dandelion provide lower cost energy to its customers, but they also make switching easy. Following the integrated approach of SolarCity and others in the residential solar energy domain, Dandelion provides its customers with the option to finance their system so that they can pay for it over time with the money they save.
The improved return on investment that Dandelion enables was further enhanced last month when Congress voted to extend the geothermal tax credit through 2021 that allows homeowners to get back 30 percent of the cost of their home geothermal installation.
“Geothermal heat pumps are the most energy efficient, environmentally clean, and cost-effective space-conditioning systems available.” (U.S. EPA)
New York and Beyond
Dandelion’s solution is resonating strongly with customers in upstate New York where the company first launched a little more than half a year ago. But they are just getting started. We look forward to seeing Dandelion popularize geothermal in many more geographies in the years to come and prove that sometimes the fastest way to the moon is to dig beneath the surface of the earth.
