In this episode of Hardware to Save a Planet, Dylan is joined by Paul Lambert, Founder and CEO of Quilt, a company making ductless heating systems that use electric heat pumps that don’t burn fossil fuels and cut CO2 emissions by up to 50%.
Join us as we delve into home heating and cooling with ductless heat pumps with zero carbon emissions. Discover how Quilt’s heat pumps can reduce CO2 emissions and significantly impact the environment. Explore how Quilt addresses efficiency and emission issues by creating a distributed system with individual room temperature control. Gain insights into how everyday choices can have a positive impact on sustainability.
Paul’s career has evolved at the intersection of product, technology, and sustainability. Before founding Quilt, he was a partner and director at Google’s in-house incubator, Area 120, where he led the company’s sustainability drive. Paul has also worked as a product manager for Twitter and Google, and early in his career, he was the founder and CEO of Learn Dot, a learning management system acquired in 2014.
To learn more about sustainable heat pumps and carbon-neutral HVAC systems, check the key takeaways of this episode or the transcript below.
- 08:37 – 12:12 – Innovation processes behind Quilt – Paul mentions that the sustainability challenge stems from the sheer size of the problem. The guiding principle behind Quilt was to build a world-class team to identify a high-impact area and then develop a solution for the specific problem. For the impact side, electric heat pumps with mini splits could cut carbon emissions by 17 and 20%. The emissions from HVAC systems today are more than that from all the cars on the road. Using electric heat pumps to generate heat is four times more efficient than traditional HVAC systems. Hence, even though electricity is more expensive than conventional carbon fuels, the efficiency drives a net saving for the consumer.
- 18:45 – 21:00 – A pivot towards heat pumps – Paul mentions that heat pumps are now out-selling furnaces for the first time. The transition drivers are largely policy initiatives and economic incentives. This trend will likely accelerate with a consumer pivot towards sustainable choices and behavior. This will be an added layer over the policy and incentives.
- 21:46 – 23:54 – The nuts and bolts of how the system works and consumer impact – From a user experience perspective, heat pumps deliver the best of both worlds: granular control, efficiency, and comfort with all the power you get from a central system. Further, the AI-enabled system also learns each room’s occupancy patterns and thermal models. And both of these drive efficiency and comfort. Over time, the system gets good at understanding when a room is unoccupied and even predicting when a room is going to be unoccupied or occupied.
- 29:41 – 31:23 – The economic incentive for efficient heating – For a start, the IRA offers a $ 2,000 tax rebate already in effect. Next, two separate programs further incentivize the shift: the Home Efficiency Program and the Home Energy Upgrade Program. Both add another $4000 in point-of-sale rebates. The $4000 is also per compressor, so a multi-compressor unit like Quilt will save over $10,000.
Dylan: Hardware to Save a Planet explores the technical innovations that are giving us hope in the fight against climate change. Each episode focuses on a specific climate challenge and explores an emerging physical technology solution with the person bringing it into reality. I’m your host, Dylan Garrett. Hello and welcome to Hardware to Save a Planet. I’m here with Paul Lambert, the Co-Founder and CEO of Quilt. And I’ve been really looking forward to our conversation today because it’s on a topic I’ve taken a deep personal interest in, which is home heating and cooling. A few years ago, I had to replace the HVAC system in my house and I found there were really no great options. Quilt looks to be fixing that with a new take on heat pumps and I’m excited to learn more about their solution. And this is really important. The International Energy Agency estimates heat pumps globally have the potential to reduce CO2 emissions by 500 million tons in 2030. That’s equal to the annual emissions of all cars in Europe today. On an individual level, home heating and cooling alone makes up 17% of an average American’s carbon footprint. To introduce Paul quickly, before founding Quilt, he was a partner leading sustainability investments at Google’s in-house incubator, Area 120. He’s also worked as a Product Manager for Twitter and Google. And early in his career, he was the Founder and CEO of Learndot, a learning management system that was acquired in 2014. I’m just getting no Paul, but I think it takes a lot of courage to take on such a long-standing, established product category like heat pumps and that’s really inspiring to me. So Paul, I’m honored to have you on the show. Thanks a lot for joining.
Paul: Thank you for having me. What a nice intro. I’m likewise excited to be here.
Dylan: Before we get into heat pumps and stuff, I think being a partner at Area 120 at Google sounds like a super fun job. I was curious to hear a little bit from you about that. Can you explain maybe even just what Area 120 is and what was that like?
Paul: Yeah, and I think it may have changed a bit in the last few months. There’s been some restrictions at Google, but when I joined, it was almost like a seed stage to fund within Google, but with the goal of building new businesses that would ultimately graduate back into Google. So it was a source of innovation. It was one of the many strategies to combat innovators dilemma. And it was really cool. We basically got to fund some of the most talented entrepreneurial people in all of the Google. And we’d get applications for across the company in the form of pitch decks and bring them in for a very, very sort of VC style process. But then once they were in the program, they’re still part of the Google ecosystem and had access to all those resources and assets. And that was our competitive advantage is that you could build a startup with the access to Google’s assets. People now using Bard, well, people could use that at everyone 20 a lot earlier than that. I want to say was because it may still exist, but certainly when it was when I was there, it was a very cool place.
Dylan: And you were leading sustainability investments. Can you say anything about the kinds of projects that were going on in sustainability?
Paul: Yeah. And I will say that that was sort of the end half of my tenure. Cause I had my second child almost two years ago and I went on paternity leave. And during that paternity leave, I decided I want to pivot my career to climate in a strong way, but I hadn’t yet decided that I needed to start another company. And my default was maybe I could do this within Area 120. And so I came back and I spoke with a manager and said, I want to focus on sustainability investments. And that was already an area that we’d started to take a harder look at. Sort of made that my focus. Google being Google, we invested in a lot of things that were data AI-based solutions. There was one that I’m actually not sure the state of it right now, but it was really promising that basically track the carbon footprint of the supply chain for everything going to data centers. And it’d be quite complex. And one of the advantages we had as Google is that you have a lot of purchasing powers. You can actually exert a lot of influence on some of your suppliers. It might be harder if you were a smaller company that to sort of require data sheets, things like this. So you’re able to aggregate a lot of that. And the idea was to once we have that data, critical massive data, share that as a tool with other people so they can also lower the carbon footprint of their data data centers and related IT type tooling. It didn’t have to be data centers.
Dylan: I’m curious about that decision to make a pivot. What has climate been on your mind for a long time before that? Or I understand how kids can change your perspective on stuff. Were there other things leading to that?
Paul: Yeah, and I think some of it was subconscious for a while. Sometimes things bubble in the back of your mind for decades before you finally resolve them. And one of them was, for me, so I’ve always identified as an entrepreneur. And after my last company, I realized that when you’re starting a company, you’re getting into something for a really long time. And I was sort of six years into this, SaaS started building learning management. It was fine, but it kind of pivoted in an area that frankly I wasn’t as interested in anymore. It was corporate education. And I had started while I was in university, so kind of how I ended up on the education side. And I promised myself I was only going to start another company if I was going to commit at least a decade of my life to it. And I think that whether a CEO realizes it or not, that’s what they’re signing up for when they’re founding a company. And that’s a really big commitment, especially in the middle of your career. I had actually been playing with some ideas that were unrelated to climate, and I’d kind of play out how that was going to play out. And I’d find myself in a situation I was before. Like I was going to be running a software company and that was fine, but what I was missing was this deeper level of purpose. So this is the surface way I got to it. I said, the solution here is that I have to work on something that I genuinely believe is the most important problem for my children’s generation. And if I could channel this incredible feeling of parental care that I was feeling for this new child that had just been brought into the world, if I could channel that into the work, then that was the solution. Because the worst case scenario was I’d worked for 10 years on something that I truly believed would make life better for the next generation of humans to come, and I’d fail. And that was fine. You could put that on my gravestone, and that was the unlock. And then so the question was like, well, what is that problem? And it’s pretty clearly climate change in terms of if you look at magnitude of the problem and our confidence bars around what that impact will be, you can pick other problems like massive meteorite hitting the planet, but we don’t have very good confidence bars that could destroy us, that’d be bad. So that was the first layer of the onion, but there’s a few other layers of the onion that might even be a little more interesting. So I grew up in a place where the only industry is all spills basically. Everyone in my family works for an oil company. My uncles all worked on the rigs. My dad was primarily a lawyer for the oil industry, but then I was actually the CEO of an energy company, turning coal into natural gas, all things. So I’ve just been surrounded by the energy industry my whole life and had a very unresolved relationship with it and I just really want to give that story a positive ending or a loosely change. Not that it’s not, I don’t want to say that it didn’t have a positive. Sorry, it’s just that we didn’t know everything we know now. So I think knowing what we know now, I want to take responsibility for the small portion of that, that like selling oil put food on the table when I was a kid. So that’s a big part of it. And I think this also comes up with a lot of other people, but I’m genuinely an environmentalist. Like I’ve always been a very, very much an outdoorsy person and grew up skiing in the mountains of Canada. And that was just sort of like my formative years. So all these things combined together and it became incredibly clear to me that I had to spend the rest of my career working on climate change, or at least we were going to until we were able to fix it.
Dylan: That’s a great answer. So you grew up in Canada, where was this that it was?
Paul: Yeah, so Calgary. So the province of Alberta, it’s home to the famous tar sands. By some calculations, it’s the world’s third largest reserve of oil. So it’s like Saudi Arabia is number one, Venezuela I think might be number two, and Alberta, basically Canada, it’s almost all Alberta is number two, is number three.
Dylan: How does your family feel about what you’re doing now?
Paul: I think they’re happy. I think they’re proud of me. I can’t generalize. It’s a bunch of different people, right?
Paul: Actually someone like my sister is even more of an environmentalist than I am. But yeah, like I said, I think also on the sort of supply side of the energy equation, so the people producing energy, that’s one side of the equation. And then obviously if everyone was in driving cars and having furnaces in their home, there wouldn’t be anything to sell to people. And what people in Alberta aren’t producing the oils, people in Saudi Arabia are going to do something like as long as there’s a buyer, somebody’s going to supply it. So I’m not trying to absolve anyone of guilt, but I’m trying to say that this is a communal responsibility and we as a society have to take responsibility for economic decisions and change them and come up with better products so we can maintain our status, the life that we need to live, but in a more sustainable way.
Dylan: I also really like that thinking of if I’m going to start a company, I’d better be willing to spend the next decade on it. It’s true. And it’s a really helpful way to think about it because you only have so many decades to give.
Paul: Yeah, exactly.
Dylan: So you knew you wanted to do something about climate change. What was the process to get to where you’re focused on Quilt?
Paul: So I think one of the daunting things about climate is that it’s so big. The entire economic system in some way plays into it. So I started off by trying to find some subset that I felt like I could have some unique angle on. That I kind of, another sort of guiding principle was I only wanted to start a company if I felt like I could build a world-class team, like truly world-class team. And it’s not just about me and my skillset, so that’s a part of it, but it’s kind of network have I built over the course of my career that I could build that team with. And starting from the basics, I started thinking about energy production. And I was like, well, I better start learning about nuclear and start learning about fusion and fission systems and all those. And I kind of realized I was way out of my depth. I wasn’t going to start, or this is the amount of, it was unlikely that I was going to start the world-class team in nuclear. And I saw a tweet about heat pumps. Then I’d never even heard of a heat pump before, to be totally frank. And I started reading about it. And it just blew my mind. The impact side of it for once, I think you mentioned the strategy between 17 and 20% of all emissions are from home energy use. And that’s bigger than vehicles, right? It’s bigger than cars. It’s the largest source of emissions for consumers. That’s a massive chunk of the problem, right? A fifth of the problem. And the largest fossil fuel consumer by far in the home is the HVAC system. And heat pumps are these things that sound like magic, right? They’re more than 100 % efficient. And yes, that sounds like a lie to anyone, any engineer on this podcast listening will think, but what we’re really talking about is moving heat, not creating it. But the net effect is that in almost all operating conditions that people are installing these in, you get more than 100% of the heat if you convert electricity. It’s actually closer to 400 for most modern heat pumps. And because of that, even though the energy cost of electricity is still higher than natural gas on site at the home, it’s actually saves people money. So it’s one of these areas where it’s like a negative green premium, right? People talk about the green premium, it’s actually negative when it comes to heat pumps. So it was this incredible intersection of massive impact, technology has matured in this really compelling economic argument. And then that combined with this other go back, where could I build a world-class team? I’ve been really into like home stuff my whole life. I think we just talked about how we used to live in the same part of California. I bought this old house in Redwood city and my wife and I fully renovated it. And I just like love that stuff. Like we, both my in-laws are architects, like we’re talking about doing another project. And so I could wrap my head around home and HVAC. It was just very intuitive, that nuclear felt like this like really abstract, crazy sci-fi thing to me, but HVAC felt incredibly familiar. And the other thing that I’ve been basically built my whole career trying to learn how to do well is build consumer technology. And how can I build a great product using really great technology? I mean, that was my job at Google as a product manager. You have all these brilliant engineers, but how can you turn that into a great product? Something that people really want. And when I started diving into heat pumps, it occurred to me that it was exactly at that point in the adoption curve or the maturity curve of the technology where the technology had matured to the point where it was incredibly compelling on paper, but the products sucked and they still do. And what I mean by that is the actual experience of purchasing and living with the solutions on the market is high friction. That’s, I used the word sex before, maybe that’s a little bit extreme, but the heat pumps that you buy, you can either get, you can get two form factors. You basically two ways you can adopt them. One, you can have a central system that works like a traditional central HVAC system that most Americans are familiar with. And the other one are these ductless heat pumps that they, they’re sort of these white plastic boxes that are usually mounted near the ceiling.
Dylan: It’s like what you would see in a lot of hotel rooms or something.
Paul: Yeah, and they’re very common outside of North America. Listeners in Asia or Europe will be very familiar with these. It’s the most common HVAC system in the world by far, because it’s like 80, 90 % of the Asian market and most other continents as well. But just sort of using the American mindset here, you have two options. If you go with the ductless system, these mini split systems, or they’re also called, you now have this white plastic box in every room of your house, where you used to only have a vent. It’s aesthetically pretty unappealing. You’ve also lost the ability to just set your temperature and your thermostat. People are used to setting my house to 72. You can’t do that anymore. You have to walk around a room, find the remote, turn it on. It’s just like that, it is a step backwards in terms of the user experience. And consumers don’t like making sacrifices as a general rule. And then the other side of the equation, you have the central systems. And those are nice because they’re compatible with sort of a mental model people are used to, right? They can use their Nest thermostat and they can have vents in their house. But the problem is when people are upgrading at home to heat pumps, they find that they often need to redo their ducting. And this is a bit of a technical point, but it’s an important one. The heat that comes out of a heat pump is much cooler than the heat that comes out of our furnace. The furnace typically supercharges the air. And it was made in this sort of lossy worldview where it’s okay because it loses 20 to 30 % of the energy in the ducting. So when it comes out into the home, it’s at a comfortable level. It’s about 110 Fahrenheit. It comes out of the heat pump at 110 Fahrenheit. So by the time it gets to the house in a ducted system, it’s like 80 or 90. So if you have a ductless system, it’s coming out of the temperature you want and super comfortable. If you have a central system, it’s now coming out cooler and you get all these fire remorse issues where people say, my house is not hot anymore. I can’t heat up. It takes five times as long to get the temperature. It’s not responsive. Or they just can’t get it to temperature because you need to move so many more BTUs and there’s just not enough volume. So then they have to redo all their ducting. And that’s very, for many people, just almost impossible to do because you have to open up all the walls and ceilings.
Dylan: And that’s redoing the ducting to improve the insulation and air tightness of the ducting.
Paul: And widen it. Often it’s just widen it. You just need to have a larger volume of air that you can move through. And then you also need a larger blower, which also is a big source of energy draining. And then there’s this other part of it that towards the idea of efficiency, if you could make ductless systems work, it’s not like a little bit better than a central. It is dramatically better than a central system in terms of energy efficiency, for the reasons I’ve been talking about. So I’m just talking about a central heat pump versus a ductless heat pump. You have a central heat pump. You now need to move these large volumes of air through these large ducts. These blowers are not free in terms of energy. They’re still losing a lot of energy in the ducts. Even if they’re well insulated, they’re usually losing about 20% of the energy. But the biggest driver of all is that they treat the whole home as a single volume, when in reality, most of a home, most of time is unoccupied. And so the worst case of all is the winter. So think of what’s the coldest time of the entire year. So when we’re going to use the most energy to heat. It’s the winter, the nighttime of the winter. And what happens in nighttime of the winter? People are sleeping in their bedrooms and their living rooms in the kitchen, the largest rooms in their houses with the most windows are being heated. It’s completely wasteful. We’re just completely, we can do a lot better than that.
Dylan: It’s horrible. Yeah.
Paul: Right? And if you actually get right back to it, like why do these central systems even exist? It’s because fire is dangerous, right? Like you wouldn’t put a fire in your baby’s bedroom. You would not put a fire in that. You would be crazy. You social services would come to see it. But you can totally put a heat pump in a baby’s bedroom because they’re safe. And because fire is dangerous, we had to put them in a box and put a fire wall around it and heat up the air and then pull the air around the home. But moving heat pumps is a fundamentally different architecture. We’re moving past fire so we can reevaluate how we’re developing these systems. Just like how EVs aren’t just electric cars, right? We didn’t remove the engine block and dropped in an electric motor. We can put the battery low so we get better handling. You can make, you get more space for storage. So you can reevaluate the fundamentals. And when you have this new fundamentals, you’re not dealing with fire anymore. Now you can create a distributed system where you have these point solutions in every room. And what that gives you is much, much better efficiency because you can heat and cool where people are as opposed to the whole home. You’re comforting the people as opposed to the home. And the other thing you can do is you can get a more comfortable home. Because the other thing about central systems and anyone who’s had a house knows this. It’s not even, right? A thermostat in the hallway will pick up a totally different temperature than the baby’s room or the parent’s bedroom upstairs. And people are constantly fighting over this. You’re trying to make the kids comfortable so you’re freezing or sweating in your bed. Right? This is very common. And when you have point solution in every room, that basically goes away because you can individually condition every room. That was maybe a long way of explaining why Quilt is what Quilt is, which is a distributed system that works together in an intelligent way to heat and cool at home in a much, much, much more efficient way than really anything that exists in the market, Duckless or Ducted today.
Dylan: You’ve made it really clear why the Ductless and why Heat Pump, why those are good solutions. And then we touched on this a little bit, but I think it’s worth just talking about how bad the user experience is. Because I tried to do this. I tried to go to a duckless system in my house. And like you said, aesthetically, it’s my wife did not approve the idea of a white plastic box in every room on the wall. But also, I think maybe you said this, but you have to have a dedicated, at least what I found when I was trying to figure this out was you have to ship with a dedicated remote control for every heat pump.
Paul: That looks like it was made in 1987.
Dylan: Exactly. Yeah. So you’ve got to keep track of this remote control for every single room. I don’t know what happens if they like end up in different rooms. You know, I’ve got kids who love remote controls. The concept of this just didn’t make any sense to me. And I just, yeah, I think that’s interesting. Where I stopped was, well, this is a bad product. I’m going to do something else. And I went for a central system like you just described. It’s not nearly as efficient. And it’s been like eating away at me. But I’m happy that you saw that and said, I’m going to go make it better.
Paul: Yeah, I am too. It was one of these things that when I came across it and it all came into clarity, it was just like this overwhelming clarity that this is what I had to do. And I’d started off saying, I’m going to find, I’m going to explore all of these different areas of climate. I just want to work on climate change and start my next company around that. Cause that’s how I’m going to unlock this decade commitment. I never got past heat pumps. So I like, I started, I dabbled in, in energy production on the nuclear side. I saw a tweet about heat pumps and a year and a half later I’m building. I haven’t stopped. I’ve gone down that rabbit hole and I’m still down that rabbit hole. Cause it was just such a great fit.
Dylan: I saw a chart recently that showed that heat pumps are now outselling furnaces generally in the US you’re clearly creating a better experience for people. Do you think we have an adoption problem? Are people looking at the options and choosing not to go with heat pumps at all because of some of these issues we’ve called out or at a bigger scale? What is the problem you’re solving there?
Paul: Yeah. Heat pumps are now outselling furnaces. This is the first year that that has happened. We want to accelerate that transition because I don’t think it is happening half half fast enough. And we do know at the margin, a lot of people are either not choosing to go with the heat pump because of some of the issues we called out, or they’re making them more, the less energy efficient decision, frankly, like you did because of these issues that are holding them back from ductless, which would be much still much better. And so it’s a question of accelerating the transition. So the things driving the transition right now are largely policy and economic in a way they’re sort of sticks, not carrots. There’s not a lot of consumer excitement, aspiration for these, like the way that there are around EVs. And if you look around, if you look at the history of EVs, there’s been a lot of policy helping it for a while, but there was an inflection point in that adoption curve and it was really the release of the Model S that was the first EV that was just a better car. It was as fast as a Ferrari and you could have more, you put your kids in it. Prior to that, EVs are sold as these dorky things that you were supposed to get because they’re good for the climate and people were buying them, but not at the rate. And then of course, after the Model S started to sell well and every other car company had to respond and now GM’s not making motors anymore. Like it’s crazy. And I think that we were trying to try to effectuate that same change on the home side by creating a really, like we’re trying to elevate heat pumps into a coveted product category. And so we think with, if you layer on consumer demand, like in organic demand on top of policy and economic incentives, you’re going to really supercharge that adoption. So that’s what we’re trying to make happen. And then also when people are making the change, we want more of them to choose ductless systems because they are dramatically more efficient than the central systems. And these are decisions that you’re locked into for 15 to 20 years, right? Someone puts a furnace in their house today, they’re going to be emitting carbon from burning fossil fuels for at least another decade. And even if the central heat pump now, certainly much better than if they gave it a furnace, but they’ll still have this inefficient system for quite a long time.
Dylan: Yeah, I think part of the point is even if everybody went to heat pumps, if everyone went, there’s a much better option than everybody going to central whole house heat pumps. If we can get everybody to go to decentralized heat pumps, that’s even better.
Paul: Yeah, and I think we can get everyone to heat pumps faster.
Dylan: And you can do it faster.
Paul: Like, instead of it taking 15 years, can we do it in 10? And when it comes to this, everything to do with climate change, like minutes matter, every single day matters. And so those few years, if we can pull them in, it’s going to make a big difference.
Dylan: Yeah, the way I heard somebody describe it is that it’s an area under the curve problem. So the earlier we can make any progress, the better. It’ll all kind of compound. Yeah. Okay. That makes sense. So we’ve gotten into it and I know you’re not describing a lot of details about the product yet because you’re still, you haven’t fully released all your product details, but can you describe a bit more about how the system works and what the experience of having one is like as a consumer?
Paul: Absolutely. So I can describe the system even if I don’t show you visuals. We’re more concerned about that side of it. And of course, this is a podcast, so-
Dylan: Right. That’s easy.
Paul: -No problem there. That’s easy. So we’re trying to get from a user experience perspective the best of both worlds, which is the granular control and efficiency and comfort that you get from a Declan system with all the power that you get from a central system and familiarity. And then on top of that, layering a bunch of new value proposition. But the Quilt systems, as they’re added to your home, they become aware of each other. They network before mesh network in the home. And these allow them all to be controlled at any granularity. So you can control the whole home. You can set your whole house to 72 and just every unit will go to 72. And that’s what people expect, this sort of having a thermostat that’s user experience they’re used to. But what it does above and beyond that is it also learns both occupancy patterns and thermal models of each room it’s in. And both of these drive efficiency and comfort. So occupancy patterns are super key because, like I said before, most of the home most of the time is unoccupied. So if we can get pretty good at understanding when a room is occupied or even predicting when a room is going to be unoccupied, we can do better things with the energy being put into it when nobody’s there. And the reason I say better things is it’s not as simple as turning it off. The first approximation people say is, well, someone’s on a room, just turn it off. The issue there is that as soon as someone gets into the room, they want it to be comfortable quickly. Keep up running or any system like this running at full blast is it’s nonlinear the amount of energy it takes as it goes up. So if you have it a full blast, it’s using a lot of energy. You spend all this energy to get back to temperature and you might undo all the gains you had by turning it off. So this question of what you let it drift to, it’s kind of like a hot tub, right? You never want a hot tub to be so totally cold. You have to choose to set back temperature. And that’s a function of the thermal characteristics of the room because you’ve got to know how quickly you can get it back to temperature and your confidence effectively that the room is going to get reoccupied. Because someone’s going to walk right back in, you don’t want to let it go too far. So it’s actually a pretty complex problem. And it plays well to some of the strengths we have on the team around data and AI and algorithms. And we’re a bunch of people mostly coming from Google. And that’s why it makes sense that we would be building an HVAC system, even though on the first pass it might not. So that’s really the IP we’re generating is largely around that. It’s around occupancy and thermal modeling. Thermal modeling can do a lot of cool things. Like you can start to know that the sun is going to hit that window in five minutes and you’re going to get a bunch of free BTUs through the window. So I don’t need to run the heat pumps hot. Or that the room below it is going to transfer some of that energy to the room above it because heat rises. And until all these things get brought into our algorithms that allow for a really efficient system, that’s how Quilt works. And so you can imagine these units. And that’s part of why we’re called Quilt is we have all these small units and they kind of patch together, work together to create a really nice unified system. And so you can imagine it as a small, very attractive, we’ve written it out. But I think we’ve accomplished this. A very attractive unit that would actually be installed in every room. It’s smaller than what you’ve seen today for Douglas Mini Split type. The only way it’s more aesthetically pleasing. They sort of come to life and become aware of any other Quilt unit in your home and just work as an integrated system.
Dylan: And then just to complete the picture, so there’s a unit in the rooms and then a compressor. Is there, my experience with Mini Splits was there is a compressor for each unit in each room. I don’t know if that’s always the case, but…
Paul: No, it isn’t. That’s variable.
Paul: Without getting too jargony, they’re called, we call them IDUs and ODUs, indoor units and outdoor units. And there’s, in the industry, they sometimes call them single zones as well when it’s just one-to-one, when you have one out, compressor outdoors for one indoors. On one end of the spectrum, you could have a single compressor powering seven IDUs, seven heads. Or you could have seven compressors, each with their own. There’s trade-offs to that. You’re more efficient, the closer, the more granular you get. The one-to-one, so you know, seven compressors, seven heads is going to be the most efficient. But it also takes up the most real estate outdoors. These things aren’t always the most aesthetically pleasing outdoors. We’re trying to improve that as well, but there’s sort of a physical space for the compressor. And component to that, there’s also more installation labor, because each one of these has to be installed and the installation labor is not trivial. So it’s actually an interesting knob to turn on what that, we have one partner, contractor, an installation partner in upstate New York, he’s doing really, really well. And he’s incredibly simplified his business. And I just love it. He sells one, basically one unit and he only does single zones. And every installation does, no matter what home it is, he’s thinking, selling a single zone, one compressor to one head. You might have nine of them in your home, but they’re all individual. And he swears by it and allows him to get more predictable pricing. And his operations are a lot simpler. And so, yeah, it’s working for him.
Dylan: But your system isn’t necessarily one-to-one or one to many the way you’re doing it.
Paul: We’ll probably have a few sizes. So Mitsubishi does this too. Like all the big producers, they’ll have different sizes of compressors. So you’ll have a compressor that matches with one and maybe is rated for 12,000 BTUs or 9,000 BTUs. And then you might have one that you can do seven and is 86,000 BTUs.
Dylan: I’m curious to learn more about the machine learning, AI side of it. I don’t go deep in that area technically, but my understanding is to have a system like that, you need a lot of training data. It needs something to learn from. What is your process of developing those algorithms and training the systems as you’re getting off the ground? What does that look like?
Paul: Yeah, so that’s a very good question. And yes, in a pure machine learning, supervised learning model, you have a bunch of data, you have an objective and it trains a network to get there. That is a component of what we’re doing. And we are able to get some ground truth data, both from our beta testers, but also people donating data. So we’ve got a lot of people to donate. You can export your data from your Nest, you can export your data from your Ecobee thermostat. So we’ve gotten people to give us data there. But there’s also a lot we can get to by, it’s more like control algorithm engineering. So if you know the sort of the energy output of a system as it scales with the compressor speed and the fan speed, the energy you’re producing, and we have certain characteristics of the room that we’re looking at. For example, like what is the rate of energy dissipation given certain environmental characteristics? Those can be a little bit more encoded like traditional algorithms. And that gets us pretty far. And the reason we’re able to do that at the software level is because we’re vertically integrated. So this is another sort of interesting aspect of Quilt is that we’re a software and hardware company very much all integrated. So there are some companies out there that are an intelligent layer on top of mini splits, but they don’t have insight into what’s happening at the compressor level because there’s just no data transfer there or there’s no API for them. But we can implement a lot of algorithms that you could only do if you had that deep vertical integration on the product side. So I’d say it’s not a pure AI system. It’s sort of an algorithm based system as well. And as we get more training over time, of course, we’ll build more models.
Dylan: I’m thinking back to my experience and certainly the experience of having a heat pump in my home or having a Douglas Mini Split system in my home was a barrier for me, like we just talked about the user experience of that. But also even just going back to the purchasing experience and the research and the whole journey to even getting to the point where I could actually use one in my home, the installation. I’m curious, what’s the scope of what you’re tackling to reinvent with Quilt? Are you thinking just about once this thing is in the home, how to improve that experience? Or are you looking before that as well?
Paul: Definitely the latter. If you look at how the Internet has transformed industries, what usually happens on the distribution side on the marketing side is middlemen get cut out because consumers can more directly establish a relationship with manufacturers. So travel agents don’t really exist anymore because now we can book things directly with airlines. I talked about the Model S before. That it being the best product was only one leg of the stool. There’s sort of three legs of that stool. It was also sold directly over the Internet. You didn’t have to go to it. People don’t like going to car dealerships and negotiating with car salesmen. They would much rather know a price and buy it and have that car delivered to their home. And then the other part of that stool is the supercharging network, which is sort of like the other back end of the ownership journey. And so we have an analogy for three of those. Today it is basically impossible to just go online and buy a heat pump for your house. If you go to a Mitsubishi website, you can put your zip code in and they’ll tell you a bunch of dealers. And if you give them your contact info, they will blast that info to a bunch of dealers who you don’t know anything about. You’re going to get spammed by a whole bunch of people if you don’t know anything about who all want to sell you a heat pump. It’s not a very good experience. And if you go to a contractor website, you’re now looking at, you don’t know what the pricing is. You probably don’t know much about them. They often don’t even talk about what products they sell. And they’ll come on site. They’ll do an assessment. They’ll get a quote. You don’t know if that quote is fair or not until you’ve gotten three other people to come on site. And the whole process takes weeks. So it’s really a poor buying experience. But I don’t think it’s hard to imagine what a better experience would be. It’s you know the product you’re buying. You know what it costs. You get a fair estimate of that cost. And the people you’re buying it from also do the installation and their neck is on the line. I think as a consumer, I want to have that one relationship. I don’t want to know if this breaks. Do I have to go talk to my contractor or Mitsubishi or whoever it was in the middle? So for our customers, if something breaks, Quilt is responsible. If it’s the installation, it’s the product, whatever. We’re the throat to choke. And we’re providing that value to our customers. So that’s a big part of the strategy as well.
Dylan: I love that. Yeah, my experience was I couldn’t buy it anywhere because I didn’t have a contractor’s license, which was really infuriating.
Paul: That’s only technique. That’s actually you can get around that. So if there’s like, if listeners want to try, there’s HVAC Direct as a website. They’ll sell you the same stuff that they’ll sell the contractors. But you can’t legally install it unless you have an EPA license.
Dylan: Yeah, so I missed that. And then when I tried to get it from a contractor, my impression of it was they were incentivized to never get a call back from me. They really tried to push me to get a much bigger system that I needed so that I would never feel like there was no risk that I would ever feel like I wasn’t getting enough heat from it. And maybe they didn’t know what my ducting looked like. So they were trying to overcompensate for that. And I’m sure there were a lot of factors to that. But I can just imagine if that’s the process everybody’s adopting heat pumps through, we’re going to have a lot of really less efficient systems than we could otherwise have if the selection and purchasing process was different.
Paul: Yeah, and this goes back to this idea of accelerating the adoption. So like it’s cool. I’m glad that it’s increasing, but we can rapidly increase the slope of that curve. We do it by just pulling away friction. Pretty simple model. If something’s trying to get somewhere and you’re removing the friction, it’s going to go there quicker and it’s pretty clear to anyone who’s bought a heat pump for the last few years, there’s still a lot of friction in that process. And it spans the product to the installation experience.
Dylan: You mentioned some of the regulations before. How has the IRA changed things? I know there’s tax rebates and tax credits for heat pumps. Is that a significant boost for your business?
Paul: Yeah, definitely. And I think it’s a boost at two levels on the actual financial side. Like we’re not in market yet. We’re not actually generating revenue yet. I haven’t actually directly seen the movement in sales, but it’s been huge for the narrative with both consumers and investors and I think all stakeholders. And yeah, so tactically, the IRA has a few components that apply to heat pumps. It has a $2,000 tax rebate that’s already in effect. That’s both files for your tax return. Then there’s two separate programs. There’s a home efficiency program and home energy upgrade program, and they’re both about $4,000 point of sale rebates. Those are being implemented at the state levels. We’re still waiting on guidance on how to do that. But all in all, we can be looking at about $10,000 because the $4,000 will be like per compressor, per heat pump. So you can have multiple in a home. $10,000 in one year as a centralized subsidy for consumers is massive. But it’s not just the IRA, it’s not just federal. A lot of state and even more regional programs are really, really great. It’s like in the Bay Area, there’s Bayrend, there’s Peninsula Clean Energy, some of the individual cities have it. It does create a bit of a, again, to the friction side, it is a bit of a complicated thing to navigate for consumer. And that’s another way to create value, but there is a lot of money on the table and various incentives. We recently calculated it for both Boston and Redwood City, which is where we are in California. And they’re both summed to low 20,000. So it was like 22,000 here, 23,000 in it just outside Boston of essentially money available to subsidize a purchase or a whole home upgrade. So if you’re looking at say a $25,000 system and you can get 22K back, that’s incredible.
Dylan: That’s awesome. I did want to talk about the physical hardware and the development process there. So you just said you’re not selling units yet. Where are you in the hardware development process?
Paul: We had a very exciting week last week. We had our first units that were fully functional from our factory arrive, installed and using them. They’re now in our office. Our conference room is much more comfortable than it was a few weeks ago, because here we are in the middle of July. Yeah, so it was great. So we have now officially started our beta program and we’re using that to terminate beta just sort of encompassing all the field testing we’ll be doing between now and full retail launch. And every few weeks we have a cohort or a build with a build coming out and then we have a cohort associated with it of folks who will be getting those units installed in their home. So that’s sort of where we are in the life cycle. We’re producing units. We know they work. We’re just working through the bucks. We’re working through all the fine tuning. We’re trying to make, we have a very, very high bar for the quality product we’re trying to put out. We’re trying to be the, what the Model S was to the car, what the iPhone was to the mobile phone. Like we’re trying to produce a really, really quality product. And so we’re going to, if need to take the time to get there, but people are already using Quilt to stay cool now in July. So that’s pretty cool to see.
Dylan: Very cool. When do you think people will be able to see it? When do you plan to go public with what it looks like?
Paul: Next year for sure. So 2024, hopefully the first half of that year, around where we are, it’s pretty clear that summer is the hot buying season. It’s mostly cooling driven purchases right now. But as I mentioned before, we’re not going to sacrifice the product quality. And that’s our whole thing, right? Is that we’re trying to elevate heat pumps into a covered category. And this is also why we’re not sharing images yet. And we are giving firm timelines because we are still working on it. Things are still developing and we need to have that optionality. And also, I really care about trust with our customers, our consumers. Like when we say a date, we’re going to do everything to hit that date and we’re going to hit that date. I’m going to make sure that we have a really, really high confidence before we commit to anything.
Dylan: I’m on the waitlist and I’m excited. I don’t know where I sit on the wait list, but I’m excited to see how that goes.
Paul: I can look it up after the, after this call.
Dylan: This was all just a ploy to see if I could get bumped up the waitlist a little bit. Cool. Do you have a vision for the future of Quilt? What does the company look like as you evolve? Where do you want it to go?
Paul: Yeah, so the bedrock of this company, and at least my drive to start it, was passing on a better world to future generations. And I think that that is, people like what company missions and purpose, I think a lot about this stuff. And I think that there’s a particular relationship between those where purpose is truly always. Like it will always be true. As long as humans exist, you can always pass on a better world to future generations. So that’s sort of our purpose. Our mission right now is to get humanity off fossil fuel heating, initially in the home. That’s a multi-decade mission, but it’s not always true. I’m really hoping a hundred years from now, that mission will be completed, right? People are not going to be dependent on fire anymore. And so what we’re trying to effectuate is, we talked about this on our website, but it’s a species level transition, meaning that we have been using fire to heat our homes, since we were Homo Erectus. The first fires that were captured by people, used to warm caves, was around a million years ago. There’s this particular cave in South Africa, called the Wonderwerk Cave, and it’s the earliest evidence of fire. But the point being, that for the entire history of Homo Sapiens being Homo Sapiens, fire was the way we’ve kept our homes warm. And so we want to move to a fundamentally different system, that’s a much more sustainable way of living. That is something I’d be very, very happy to be, the legacy of this company, even if that was it. So what does that look like? Well, after HVAC, of course, there are other ways that we’re using fire to heat our homes to water. Water is the most obvious one. But another big part of passing on a better world to future generations and our focus on the climate and energy side is of course helping people just be more efficient in the energy they’re using even if it is electric. And in the state we’re in right now, we can’t forget the electricity. Not all electricity is clean. There’s still a lot of carbon output from the grid and there probably will be for a while. And so this is, for example, the points I made around the ductless improvements over the central heat pumps. Central heat pumps are just as electric. But the reason we think that that is important is because there are still costs associated with every watt. As you think of future product categories we can expand into, I think, sort of assuming getting off fire is a pretty safe one and then ways that we can get into other large energy consumers and just drive efficiency using what we’re great at, which is product design, data, algorithms, AI. That’s going to be the guiding principle for the type of products we’re going to launch in the future.
Dylan: Okay. I have three last questions for you. How optimistic or pessimistic are you about the future of the planet and why?
Paul: So I’m naturally a very optimistic person. I think you probably hear that a lot from entrepreneurs. And I’m going to give you a little bit of a backward answer. I’m very optimistic because I think things are going to get a lot worse. And the reason for that is that people as humans, what drives action tends to be suffering more than high concepts. What I mean is like people are going to buy a Quilt system when they’re sweating in their bed in July more than when they’re sort of hearing a podcast about climate change. As a general rule, that is true. And that’s just human nature and we can’t fight human nature. And I think a lot of the frustration around climate inaction has been this sort of gap between our cerebral cortex and our lizard brain. We know these things intellectually that we have to do. But when it comes down to it, that wait, I have to, my house be cool, not as comfortable. My car is going to be slower. I can’t travel to visit my family because I’m not supposed to fly. People actually just don’t want to make sacrifices that way. So I think feeling the pain is going to be what it’s going to take. And I think we’re starting to see that a lot. Like a lot, the sort of climate denialism that I think was a bigger part of the media narrative five years ago has ground out because you don’t really need to convince people anymore that the world’s heating up. Does that make me optimistic? No, because I think that humans are also, or pessimistic, I think that humans, when we set our minds to things, can really do incredible things, right? Incredibly adaptable. We have an incredible amount of energy to make progress when we feel like we have to do it. And if we all start to truly feel like we need to do it, we’re going to make progress quickly. So I’m hoping what’s happening here is like, we’re going to, things are going to get a little worse. And then we’re going to tip the scale where most of our economic activity is going to be in some way directed towards solving the problem. And then we’ll get there. And it’s going to be a mix of all the solutions, right? We’re going to start living more sustainably. We’re going to pull carbon out of the atmosphere. We might start pulling methane out of the atmosphere. We’re going to just start doing all the things. It’s going to be like humanity’s moonshot. And we’re not quite there yet, but I think it will be in five to 10 years.
Dylan: Who is another company or individual doing something to address climate change that’s inspiring you?
Paul: So I’m going to give an answer that hopefully sounds like I’m not pandering, but I really respect all the investors out there. The reason I say that is that I feel like I’m a lieutenant trying to march, fight my battle, but climate is so big that we need, I just mentioned all these solutions need to be funded and coordinated. And sometimes people ask me like, okay, what’s the most exciting stuff happening in climate? And I have to be honest that like, I don’t really know. Because I am so focused on just trying to make Quilt successful and I’m confident that if I can get heat pump adoption faster and make homes more efficient, that I’m trying to fight the battle I’m on. But there’s many battles in this war. And these investors have a really cool perspective where they get to look across that, they’re more of a general position and get to try to fill the gaps where there are, where there might be gaps in the solutions and make sure that all the lieutenants are working in coordination in some way, but also just like props to the people whose money’s on the line. And behind every investor is an LP. And there’s a lot of people out there who historically coming up as a tech entrepreneur, there was this point of the industry where it was all about making the best sort of social media app and that just was empty inside. Like we’re just trying to make people money for ads, for like, it just didn’t feel good. It feels like now people are really putting their capital behind purpose and realizing there will be real businesses to be built here, but Quilt wouldn’t be able to be what we’re doing without investor backing. And that’s true for the vast majority of the companies in the space, because they tend to be more capital intensive. So some people out there are just choosing to put their money into this and just like a huge amount of respect to them.
Dylan: Yeah, and I actually was going to ask about it earlier, but you have some impressive investors, Lower Carbon Capital, Gradient Ventures, right? I saw MCJ is an investor, right?
Paul: That’s correct. Yeah.
Dylan: Big fans of them. That’s awesome. Yeah, we could talk about that. My sense is people are doing it for purpose, but also it feels like there’s a sense that there’s a lot of money there too. There’s a big opportunity.
Paul: Both these things are true. And what I find, part of what I love about what I’m doing at Quilt is I get to be ambitious on the business side without the Quilt I maybe used to feel with that, because I am confident that if I sell more heat pumps, I’m doing good things to the world. And of course, the only way I can sell more heat pumps is if I build a building that can like to reach climate scale impact. Quilt has to become a large company, an investor scale company, because we just can’t deliver to millions of homes and produce hundreds of millions of units unless we’re a very large company. Yeah, it’s been very satisfying that business and mission objectives are basically in perfect alignment.
Dylan: What advice do you have for someone not working in the climate today who wants to do something to help?
Paul: There is no shortage of opportunity. I think there’s a ton of companies out there. As I just mentioned, a bunch of companies getting funded in every different nook and cranny of climate. So I think they should just do it. I know that sounds trite, but I think if someone wants to get into climate, they will be able to. And then I would advise them to do the journey that I went on that worked out so far for me. So I would recommend it to others is try to find where the intersection of climate is and your genuine interest and skill sets. Most people who want to get into climate are already in something else, meaning they have some skill set. And so for me, it was consumer technology. Maybe for someone else, it is fusion, or maybe it’s law. And they want to get regulation better or whatever your skill set is. You’ve built some muscles in your life. So what’s the nook of climate where that muscle will have the biggest impact? This is probably an obvious answer, but I think if someone really wants to, they can do it.
Dylan: Well, Paul, that was really fun and inspiring. I loved hearing your story and your thought process for getting to Quilt. I hope and believe that it’s your passion for the next decade, at least.
Paul: I hope this is the last job I have, frankly.
Dylan: Yeah, it seems like a good one. And I’m excited to watch myself move up the wait list too. Thanks for your time.
Paul: Yeah, thank you for having me. This has been like really fun. Yeah, just really appreciate you inviting me on.
Dylan: Hardware to Save A Planet is brought to you by Synapse. To find out more about us and how we develop hardware solutions for the world’s most ambitious companies, head to synapse.com. And then make sure to search for Hardware to Save a Planet in Apple Podcasts, Spotify, and Google Podcasts, or anywhere you like to listen. Make sure to click subscribe so you don’t miss any future episodes. On behalf of the team here at Synapse, thanks for listening.