Episode 6: Power2Switch
May 20, 2021
As a Black founder, Seyi Fabode, MBA ’10, has experienced the challenge of investors taking him seriously.
Fabode, an immigrant from Nigeria, recalls an investor calling him and his African-American partner in his first venture, Power2Switch, “boys.” It happened again 10 years later, after Fabode had founded the clean water company Varuna Tech.
“I have two kids, I’m a grown man,” Fabode said. “And you can tell there’s this, I’ll say, discount and disregard and disrespect that is just embedded in some of these conversations that I can’t imagine some of my White counterparts experience.”
In this podcast episode, Fabode speaks about his entrepreneurship journey with Ellen Rudnick, a senior advisor on entrepreneurship at Chicago Booth and the first executive director of the Polsky Center.
He took Power2Switch, an online marketplace to help people choose electricity suppliers, through the New Venture Challenge in 2009. And while it was not selected to advance to the finals, the experience was pivotal in helping to make the business a success, he said.
The entrepreneurial peers Fabode met through the program continue to serve as mentors and investors. The early mistakes he made in his haste to assemble a team taught him the value of hiring slowly. And Michael Polsky himself, the namesake of the Polsky Center and CEO of Invenergy, served as chairman of his board.
Power2Switch was acquired by Choose Energy in 2013, and five years later Fabode launched Varuna Tech, which uses sensors to measure water health in municipal water systems and alerts the proper authorities if something is wrong. The company is drawing interest as the world comes to grips with the dangers of water contamination.
“I feel we’ve timed this right,” Fabode said.
In his interview, Fabode discussed what makes a good hire, the need for more mental health support for entrepreneurs, and the challenges that continue to face minority and women founders.
Listen now on Apple, Spotify, Overcast, or wherever you get your podcasts.
Transcript
Seyi Fabode, MBA ’10
Seyi Fabode:
Taking the time will reveal so much about the people you bring on, but also about yourself because one of my insecurities back then that made me hire a lot of people quickly was, can I even do this? Can I build a solid business and bringing people on was in my mind? Evidence of, “Oh, I can attract talent and build a business,” when fundamentally you just need to take your time.
Colin Keeley:
Hello, and welcome to the Polsky Center, Where Are They Now podcast. I’m Colin Keeley, and we catch up with founders from Chicago Booth’s New Venture Challenge on the show. Join us as we dive into their entrepreneurial journeys, get a look at the stories and struggles behind their success. This week we have Seyi Fabode interviewed by Ellen Rudnick. Seyi is the CEO and cofounder of Varuna, which is the leading water distribution system monitoring company, providing real-time visibility, awareness and insights to water utilities. Before that, Seyi was the CEO and co-founder of Power2Switch, which enabled residential consumers to make responsible decisions about their energy usage and expenses. Ellen Rudnick is a senior advisor at the Polsky Center and professor at Chicago Booth. Ellen also previously served as the executive director of the Polsky Center. Without further ado, here’s Seyi Fabode and Ellen Rudnick.
Ellen Rudnick:
Good morning, Seyi.
Seyi Fabode:
Good morning, Ellen.
Ellen Rudnick:
Thank you so much for joining us for this celebration of NVC at 25 and participating in our podcast.
Seyi Fabode:
Thanks for having me.
Ellen Rudnick:
I’d like to start off before we get into your entrepreneurial ventures, I’d like you to tell us a little bit about yourself before you came to Booth. Where were you born? Where did you live and what were you doing before you came to Booth?
Seyi Fabode:
Yes. So, I am Nigerian. I grew up in Lagos, Nigeria and ended up in the UK for post-grad. I’d done my undergrad in Nigeria in metallurgical and materials engineering, moved to the UK to pursue a post-grad, and I really wanted to get into the auto industry. I went to Warwick University for Manufacturing Systems Engineering, but then this was around when all of the auto industry moved to China. And I found myself needing to transfer my skills to another industry because I wasn’t ready to move to China. Maybe I should have, but I wasn’t ready to move to China at that point.
Seyi Fabode:
So, I ended up at a power plant in the UK. I served about half a million residents in the London area, and the electricity markets in the UK are a bit further ahead than the US. And while working at the plant is when I actually came up with the idea that I ran through the NVC, but we’ll get to that. So, I was working in the UK, met my wife now Michelle, who is from Dallas, but was working in the UK as well. She moved to the US and I decided we’re going to spend the rest of our lives together, so I moved to the US.
Ellen Rudnick:
Wow. So, in moving to the US, is that when you decided to think about applying to business school or did you come here and work somewhere else first?
Seyi Fabode:
Yeah. So, as I just shared, I moved from Nigeria to the UK, attended school. And my dad always had this piece of advice because he traveled a lot for school growing up as well, and he’d suggested: when you move to a new country, immerse yourself in the educational structures because you get to meet people, you get to learn, acquire a skill while meeting people because those two things will absolutely enable you to thrive in whatever place you move to. So, once I decided I was going to move to the US, I started applying to business school and we decided we would live in Chicago. So, I applied to Booth and to Northwestern and ended up at Booth.
Ellen Rudnick:
So, you mentioned that you were thinking about your idea before you came to Booth and in fact, you told me earlier that you included it in your application to Booth.
Seyi Fabode:
I did. Yeah, I did.
Ellen Rudnick:
Did you know about the NVC at the time?
Seyi Fabode:
I actually did. So, a good friend of mine, she had moved from the UK to come to Booth and she would come to the UK during the breaks and we’d catch up and she had so much good stuff to share about Booth. And she knew about my entrepreneurial desires and would mention the NVC, I think her year during her time at Booth was when Braintree was going through. So anyway, yes, the short answer there is, I did know about the NVC before coming to Booth. That was in my application. I mentioned a few of the professors. I ended up taking the classes in my application as well. Pretty intentional about most things around that experience for me.
Ellen Rudnick:
So, the Power2Switch company that eventually evolved after the NVC, is that very similar to the idea? Did your idea evolve at all over the process of the NVC, from the application?
Seyi Fabode:
Oh, absolutely, yes. I’m sure you’ve all seen in the 25 years of the NVC, a great idea on paper meets the reality of actually implementing it and running through the rigor of the NVC and it very quickly changes and morphs into something that addresses a need. I had ideas before coming in, but even during the NVC in doing some of the customer discovery we had to do for the class, I quickly realized there were a few wrong assumptions that I’d made there including even the team I selected during the NVC. I remember the night before our second in-class pitch, instead of practicing the pitch, we were arguing in a room because we’d found out some things from interviewing prospective customers that wouldn’t have fit this tight nice narrative we’re trying to put out for the NVC. So, yes, the summary is, it changed a lot during the experience.
Ellen Rudnick:
So, actually, backing up a little bit here. Moving to a new country, moving to a new city like Chicago, starting in a new school, and certainly thinking about launching your own business, must suggest that you’re not risk averse.
Seyi Fabode:
It’s a great one. My wife likes to frame it this way: that I approach most things with the required level of naivete to keep me moving forward. And I’d say, not sure I’m risk averse. I gather as much information as I can to support the decision my gut has made.
Ellen Rudnick:
Some sort of a calculated risk, right?
Seyi Fabode:
Yes. Yes. Yes. But yeah. It was tough, I won’t pretend here, it was as you mentioned, a ton of new things and I’ll suggest the comfort of a community of founders at Booth. Some of them I’m still really good friends with actually was helpful in those early days as I embarked on all these new things.
Ellen Rudnick:
So maybe we could just start by you sharing with our listeners, what was the idea for Power2Switch?
Seyi Fabode:
Yeah. So, Power2Switch was the first retail electricity marketplace for consumers and small commercial businesses. We allowed customers, users to shop around for electricity options to either reduce how much they spent on electricity or buy clean energy. We also connected them with energy efficiency products and the tagline I remember using during the NVC was Expedia for retail electricity.
Ellen Rudnick:
So in 2021, that sounds pretty reasonable, but in 20, I think it was what 2009, was it?
Seyi Fabode:
2009, yeah.
Ellen Rudnick:
2009 when you had this idea and you decided to enter into a New Venture Challenge, this was quite a novel idea.
Seyi Fabode:
It was.
Ellen Rudnick:
Nobody was doing this. So, and you talked a little bit earlier about customer discovery, but how do you go about validating this idea and knowing this was something that had potential?
Seyi Fabode:
Yeah. So, a big part of it was having lived through it in the UK. Remember I mentioned earlier that the UK markets on the energy and electricity side, a few years ahead of the US market. And right after the stint at the power station, and right before I moved to the US, I worked for a company that was exactly what I just described as the idea, but they were focused on big-box retailers, buying electricity and green energy for big-box retailers, so this auction like marketplace. So, I’d seen that happen in the UK and even while I was at that company, knowing I was about to move to the US, I started digging around the regulations here in the US, found out there were about 15 states that had adopted the same regulatory structure as the UK, even though the consumer adoption hadn’t picked up, I knew there was a gap between what customers knew and what was available, and it was this age of Priceline, Expedia, these marketplaces and aggregation platforms that allowed consumers to make a choice.
Seyi Fabode:
So, even while I was in the UK, before starting at Booth and before applying for the NVC, I had called a few of the electricity suppliers to say, “Do you guys offer retail electricity?” They’re like, “Yes.” And then when I moved to Chicago, did the same thing, try to switch my home to an alternative provider and I realized there was no one place to do that. So, I started working on the MVP. I would walk the streets of the West Loop, asking people in stores if they knew they could switch their electricity. They’re like, “I don’t think so. Is this true?” And I would ask them to give me the electricity bill and come back to the Polsky Center, where we’d gotten a space, and just call the five or so electricity suppliers to ask them for rates, put it on a spreadsheet, put it on a piece of paper, print that out with the Polsky Center printer, and then take that book of options to the customers.
Seyi Fabode:
There was laundromat, there was hummus store, I believe, and I gave them the book. They’d select one, sign that piece of paper and I’d scan it and send it to the supplier. So, that was the first few months of the experience. And it was part of the evidence I put in the pitch for the NVC.
Ellen Rudnick:
That’s great. I love this very rudimentary MVP that you developed because we’ve seen this with a lot of our students’ applications. Just having some proof that there’s some interest here. So, let’s talk a little bit about the NVC process. So, you got into the NVC, which is a very competitive process, and you had a team, I believe you had a cofounder too. Can you talk a little bit about how that evolved?
Seyi Fabode:
Yeah. So, first off, the NVC, it was super competitive to get in, but I think, to your point, what allowed us to get in was the fact that we’ve done a lot of that proving out the opportunity. That being said, just to clarify, we didn’t make the final 10, and a lot of it was, I think I mentioned on our initial call, one of the judges during the pitch in class was adamant that this was not a possibility, that there was nothing like retail electricity. And I remember thinking, he was the first person to comment after our pitch, and it went downhill from there for us.. But I’d pick the team of a few other folks who had ideas that they wanted to run to the NVC, but they didn’t get selected, I did, pulled them together. And that was one of the big mistakes I made because I hadn’t really vetted the team. I was just, “Let me get some bodies to help us do stuff.”
Seyi Fabode:
So, we learned a ton during that NVC, just about team building, clarity of purpose, what are we trying to achieve here — is this for the NVC, is this for the business, and where do those things converge so that we can do the right thing, the next thing. And we were assigned a few mentors through the NVC who were amazingly helpful. I guess, they’d either done the NVC before — Sean Harper was one of the people that I was talking to back then and I still talk to him now because he’d run a similar company, Feefighters, through the NVC a year before we did. And Waverly Deutsch connected me to him during the NVC and that was pivotal for us just in thinking through and doing the necessary work to keep building the business.
Ellen Rudnick:
So, going back to this issue related to the members of your team and selecting the members of your team, when you think about that, and you also think about that as you’ve moved forward with other projects, other ventures, what lessons in terms of, what criteria would you now be thinking about if you were to add members to your team?
Seyi Fabode:
You probably experienced this having done this for 25 years, there are some team members for the NVC who are interested in the NVC for what it means, and there are some who truly want to build a business. And what you are looking for during the NVC, and really in building a business, people who actually want to build a business. And I love the rigor we experienced during the NVC. It wasn’t just a business plan competition, it was how many people have you spoken to, to validate that this is an opportunity that exists and can be a big business — as evidenced by the number of big businesses that have come out of the NVC including us. And it was very much, just being clear about what the goal is, what the interest and the desire is in selecting a team. I’ll broaden it out and say shared values was one of the underlying points there for me.
Seyi Fabode:
Do we see this the same way? Do you care about helping people make better decisions about their energy usage like I do? If you don’t, maybe this NVC experience isn’t for you, maybe this company isn’t the one you should work in. There are other ideas you could work on, but considering how tough it is to build a business, you absolutely have to share intentions and goals and values.
Ellen Rudnick:
Yeah, totally agree. If you don’t have a passion for the business given how many hours you put into this effort, if you don’t have passion for the business, it’s just not going to work.
Seyi Fabode:
Exactly.
Ellen Rudnick:
Phil joined your team.
Seyi Fabode:
Yes, he did.
Ellen Rudnick:
And stayed with your team, right?
Seyi Fabode:
Yes, he did, until the acquisition. There’s a fantastic story there actually. So Phil had a different idea during the NVC. His was what ended up becoming a really big business as well. His idea was a quirky, this collaborative online space for product design. That was his idea for the NVC while I had Power2Switch. And the thing that ended up becoming the core reason why Phil and I worked together, his second pitch during the NVC — they also didn’t make the final 10 companies — but during the second pitch for the NVC, he stood there, pitched the company, and the judges were ripping — as they do, they ask you questions that cut to the core of whether your proposition and assumptions are valid and you’ve proven them out.
Seyi Fabode:
And the thing that really attracted me to Phil was, while the other members of his team just totally crumbled under the pressure of those questions, started blaming other members of the team for not doing something or doing something wrong. Phil just kept it straight, answered the questions, admitted where he didn’t know, promised to go find that information. And he was just this phenomenal example of this is someone I’d love to work with, I’d love to go to battle with this guy every day for however many years it takes us to build this business. And so, we connected after that experience, he went to work at Inkling I believe for the summer, we kept in touch, and when he came back in the second year, we started working together on Power2Switch.
Ellen Rudnick:
So, you’ve been mentioning a little bit about the rigor of the process and the feedback that you get in these classroom sessions with the judges and the coaches and so forth. And as you said, you did not make it to the final 10 that year, but as we know from experience that oftentimes the faculty and the judges can be wrong. Sometimes we don’t always select all the best companies that should move to the final 10. And we have had many companies that don’t make it to the finals, just because they aren’t enough along, that have gone on to be really successful companies.
Seyi Fabode:
Absolutely yes.
Ellen Rudnick:
And so, you’re certainly not alone in that.
Seyi Fabode:
Yeah. But we still continue to get help from the Polsky Center and that is what I always point out to people about that experience. We got office space over the summer at the Polsky Center, which is normally reserved for, I think, the finalists. But Starr and the team decided to give us some space. I know that’s part of, I think standard now, but back then the space was limited. I remember we got a desk right outside Avi Stopper’s company, CaptainU, and Avi was amazingly helpful during that summer as well, because there was just a lot of, “Avi, what do you think about this? What’s your experience in trying to generate traffic for your site? How much time do you spend on contents?” Just this very peer mentorship type experience that we ended up having from a cohort and a community of NVC companies that, they didn’t care we didn’t make the finals. We didn’t care we didn’t make the finals. It was really just, we’re all building businesses, how can we as a community build great businesses.
Ellen Rudnick:
So, you did NVC your first year, right?
Seyi Fabode:
I did. Yes.
Ellen Rudnick:
And you spent the summer working at the Polsky Center building this thing and then you come back for your second year where you, while you were working, taking classes and so forth your second year, were you continuing to work on the business?
Seyi Fabode:
Work on the business, yeah. It made for a grueling second year. I’d probably do it exactly the same way because one of the things I chose to do was take the idea through a bunch of classes. I took Waverly’s class in my second year, Building a New Venture I believe. I took it through that class, I did some experiential strategy classes that I’m forgetting the names now. But it was front and center of how I crafted the second year, which made for just, by the time we finished at Booth, I had this foundation, is how I’ll frame it, that had been bolstered by crafting an experience that helped me answer a ton of questions about the viability of the business.
Ellen Rudnick:
That’s great and it’s great to be able to apply the things you’re learning in your classes at the same time that you’re trying to build a business. It becomes far less theoretical when you can actually apply it.
Seyi Fabode:
Exactly. Building spreadsheets to determine what the financial viability would be. I could just do that in the classes and back it up with what was actually happening in real life.
Ellen Rudnick:
So, after the graduation you launched the business, maybe you launched it before graduation. When did you officially launch it?
Seyi Fabode:
I launched it during second year. I registered it as an LLC during second year and actually hired a dev shop in Chicago to help build it in second year. So, by the time I was done, we had a graduation ceremony on I think the 22nd of June or something, and on the 23rd, I was back in front of my computer having to respond to some customer inquiries and stuff.
Ellen Rudnick:
So, obviously to launch this business, you needed the capital, right?
Seyi Fabode:
Yes.
Ellen Rudnick:
And I do know that you were able to raise capital, close on a round.
Seyi Fabode:
We did.
Ellen Rudnick:
I’d love for you to talk and share your experience in that process because, it is not an easy process for any entrepreneur.
Seyi Fabode:
Yes. It was grueling and so, it took us about a year and a half to raise funding after finishing at Booth. We bootstrapped for the first two and a half years which I’d suggest was good for us in the sense that we didn’t have the pressure of outside funding when we hadn’t fully validated a lot of assumptions. So, we had a few things going right for us. We ended up making it into Techstars Chicago, again Sean Harper was super helpful with that because he’d gone through that same process the year before. He’d continued working on FeeFighters after business school, it wasn’t called Techstars back then in Chicago.
Ellen Rudnick:
I think it was called, was it Accelerate Labs?
Seyi Fabode:
Accelerate. It was Accelerate Labs, he did a year before us. And so, we had a lot of his learnings to rely on that in the next year and then raise money in Q4 of 2011. Yeah. We raised about a $1.5 million in 2011 Q4.
Ellen Rudnick:
And I know one of the investors at Accelerate Labs was Hyde Park Angels.
Seyi Fabode:
Yes.
Ellen Rudnick:
And I know that they also were involved in your first round of funding.
Seyi Fabode:
Yes.
Ellen Rudnick:
Is that how you got connected to HPA, because they also have an association with the University of Chicago.
Seyi Fabode:
Yeah. So, and I failed to mention this, while working out of the Polsky Center, Professor Linda Darragh was also someone I would pop into her office a lot, I’d be walking out, she’d be there and I’d have some questions. I’m like, “Can I spend five minutes or 10 minutes?” And that access was phenomenal because as we were doing the rounds to raise money, she had essentially seen us “grow up” and connected us with a couple of the associates at Hyde Park Angels who did the diligence process almost in parallel to the Accelerate Labs process. She was, I believe our champion when we pitched HPA at Hyde Park Angels and ended up being part of the investment group from Hyde Park Angels, that was part of that $1.5 million round that I mentioned.
Ellen Rudnick:
So, there’s a lot of data that has shows that women founders and people of color have had a harder time accessing private capital. So, maybe you could share what your thoughts are on that. I mean, you were successful in raising your first round of capital, but I’m sure you have some thoughts on this.
Seyi Fabode:
I do. A lot of thoughts. So, I’ll share one anecdote. It’s happened a couple of times, but I’ll share one anecdote that underlies this whole conversation about access to capital for Black and women and minority founders. I remember one of the investors calling to Phil, my co-founder and I, Black. Phil African-American, African and now American at that point. And I remember him calling us boys. We’re grown men. I remember him calling us boys and I’m thinking, you do understand the historical context of you, a White man, calling two Black men, boys. Phil had two kids at this point, we were about to have our first kid and we never really had a good relationship with that person for that reason. But the crazy thing is, so now I’m running another company, Varuna, and it’s happened again during this experience. Ten years apart, being called a boy. I have two kids, I’m a grown man. And you can tell there’s this, I’ll say discount and disregard and disrespect that is just embedded in some of these conversations that I can’t imagine some of my White counterparts experience.
Seyi Fabode:
So, I’ll put that in the bucket there. That being said, I’ve managed to raise money twice now, grueling experience, it’s grueling for everybody, but add that layer of just this baggage that we haven’t fully addressed as a society. And so, yes, there is a big issue with the industry not recognizing the patterns they need to recognize that, “Oh, these guys can make us money as well.” Because fundamentally it’s about returns. “Can they give us the returns we want?” I haven’t seen too many people like him give me the returns I want. And that continues to perpetrate unwillingness of the ecosystem to change and fund Black women and minority founders.
Seyi Fabode:
That being said, that’s changing a bit. Even though it’s changing a bit, one thing I’m still seeing, and I have a lot of data points around this, but mainly personal, just a lot of founders of color coming to me saying, “You’ve done this, what am I doing wrong? What can I do better?” And then they eventually get someone giving them a term sheet, and I see the term sheet and I realize, “Well, even in your giving these guys money, one, you’re not writing a big check. This is not a real bet for you. This is a, let me do this so that I can say I’ve done this.” And you say you want to lead a Black female founder’s round, you’re calling yourself the lead investor and you give them a term sheet for a hundred grand in a million dollar round.
Seyi Fabode:
That’s not a great signal. And then you put a 2.5 post-money valuation on it. I’m like thinking, really? At the pre-seed round you are essentially converting this founder to an employee, this isn’t right. So, there’s the aggressions and the microaggressions, there’s the not really believing they can provide— they being Black and female and minority founders. And then the third part of it is just the need to empower Black investors as well. That fund managers, that the total amount of funding for Black minority and women founders in decision-making positions and funds is not as much as Andreessen Horowitz’s last fund, one fund. So, anyway, I could go on, but my point is, there are problems, we’re starting to have conversations around them, some things are being done, but fundamentally it’s a societal problem that we just need to address.
Ellen Rudnick:
Well, it sounds like in some cases it might just people just trying to check a box, right?
Seyi Fabode:
Performative. Yeah.
Ellen Rudnick:
But from where I sit, I’ve seen some progress in terms of actual funds that are now being launched with a particular focus on minority communities, female founders, and so forth. I think there’s hope-
Seyi Fabode:
There is.
Ellen Rudnick:
That things will get better and hopefully those funds will have more people managing them that look like the people they want to invest in.
Seyi Fabode:
Absolutely. Absolutely. I think just in the past week, about three funds, two in particular that come to mind immediately, over a $100 million with the funds raised by Black and female GP. So, I’m pretty excited about the future and we’re having the conversation and doing the work as well.
Ellen Rudnick:
So, let’s return to building Power2Switch. So, you’ve gotten your first round of capital and you guys are off and running. Perhaps you could talk about some of the issues you faced in terms of getting customers, building the team and so forth.
Seyi Fabode:
Yeah. So, we addressed the funding problem to a certain extent by raising the round. The talent problem or the talent issue — one of the things that I’m making sure we don’t do this time with my current company is, rushing through just hiring. Because we had all this good stuff going on, we started bringing on people without the rigor that I’d realized we needed to, we’re trying to grow fast, just trying to get things going. And so, had a lot of bumps with hiring, bringing people on and then very quickly realizing, oh, this isn’t working out. One quick example, one of the guys we brought on the sales side was just a toxic dude. But he was our best sales guy. And eventually toxic to everybody else on the team. And we eventually had to fire him. And I remember the morning, I had a conversation with a few advisors who are still investors in my current company right now actually, and they’re like, “You need to get rid of him. What’s your decision?” I was like, “I’ll get rid of him on a Monday morning.”
Seyi Fabode:
I walk in on Monday, call him into the conference room and he knew. Immediately he goes, “Are you about to fire me?” And before I could even respond, he stands up and walks out. And that’s the last I’ve seen him since 2011. But he stood up, walked out, and then I called the rest of the team into the conference room, about eight of us, and I go, “Just had to let X go.” And one of the members of the team was like, “You should have done this about four months ago.” And stories start popping up about just some of the toxicity. And I apologize to the team, but it really set the stage for us to just be more intentional and careful for the last few years of the company about hiring people and being conscious that that defines the culture of the company, especially at that smaller size.
Seyi Fabode:
So, a lot of bumps that were, I learned a lot of things not to do on that front. The product was fantastic. We put a lot of work into it, to the point that we were acquired in 2014. And if you still pull up the product today at the acquiring company — then got acquired by Red Ventures — they still maintain the user experience we built. It was that ahead of its time, that phenomenal. And it’s because that was where we were intentional, the best user experience for the product. And I just needed to learn a lot more about building the team and growing to scale.
Ellen Rudnick:
So, I know when I was pursuing my own entrepreneurial venture somebody told me, you should be slow to hire and quick to fire. That many entrepreneurs do exactly what you do. They’re so overwhelmed that they bring on people. It’s so expensive to bring on people and invest in people and then find out that they don’t work out.
Seyi Fabode:
Yes. Taking the time will reveal so much about the people you bring on, but also about yourself. Because one of my insecurities back then that made me hire a lot of people quickly was, can I even do this? Can I build a solid business? And bringing people on was, in my mind, evidence of, “Oh, I can attract talent and build a business,” when fundamentally you just need to take your time.
Ellen Rudnick:
Okay. Right. So, in 2013, you made the decision to sell the company to Choose Energy.
Seyi Fabode:
Yes.
Ellen Rudnick:
And I know from my own experience selling your company can be a very, very difficult decision to make. So, perhaps you could talk about that whole process.
Seyi Fabode:
Yeah. So, again, I think I’ve shared this with a lot of people. I didn’t think it was time to sell frankly. But in hindsight it was. We sold around when we were going out to raise a Series A because a couple of competitors in the market had gone out and raised, one had raised about 20 something million dollars, one had raised about $15 million with an$ 8 million line of credit. But we couldn’t convince the market that we were able to — I don’t think anyone saw me and thought, “If I give this dude $10 million, he’ll know what to do with it.” And that’s fair. I probably didn’t.
Seyi Fabode:
But we had these other two companies that were now well-funded and they both came with offers. We ended up selling to one of them. They both came with offers, about half the team went with Choose Energy. And I remember having, Sam Yagan was one of our angel investors back then, his fund is now the lead investor in my current company. But I remember after that acquisition, sitting with Sam and having this conversation about how, even the process of making sure the acquisition works out is grueling.
Seyi Fabode:
It’s some of the hardest periods of my life that I’ve worked. You have lawyers coming at you, you have the business of running the business going on at the same time, you have the acquisition process going on. So that was an extremely emotional, but also difficult time. And it happened and I was grabbing coffee with Sam early one morning and he goes, “Look, what you’re feeling is typical. Regardless of the outcome, you just sold your baby, you’ve spent the last six years or so working on this, you just sold your baby, give yourself time to recover and grieve because it is a loss. Whether you made money or not, it is a loss.”
Seyi Fabode:
He’d sold a few businesses at that point and he was like, “Look, even when we’ve gone public with stuff, it’s still a grieving process because it’s now just not that idea and baby you had.” And so, that was a tough period for about, and we also had my first kid right around then. So it was made for a few months of just trying to figure out what to do next. And I’ve helped a lot of other founders go into acquisitions just to manage what was a wild period for sure.
Ellen Rudnick:
So, what was next for Seyi after selling Power2Switch? Did you take some time off just to-
Seyi Fabode:
I did. I spent about four months with a, he was around a year old then. We would just sit at home binging Breaking Bad for days on end. I hope he’s not influenced by what he was watching with me back then, but spent a few months doing that. I love to read and I write a lot, so I did a lot of that during the five, six months. And then I ended up at the Clean Energy Trust in Chicago. Amy Francetic who was running the Clean Energy Trust the, she was about to launch a fund, a seed stage fund for companies at the intersection of climate and technology. So, she brought me on to help with just developing her thesis around that, investing in a few companies, and I did that for a couple of years before moving down to Austin, Texas.
Ellen Rudnick:
I want to ask another question which is somewhat related to Power2Switch and also to the Clean Energy Trust. Michael Polsky is in the energy business and in the alternative energy business. And I believe he actually, he was an investor, he may have been an investor at Power2Switch, to HPA.
Seyi Fabode:
He was.
Ellen Rudnick:
And he also helped launch Clean Energy Trust. So, did you have any interactions with him during this time?
Seyi Fabode:
I did. So, Michael was actually the chairman of our board at my Power2Switch. And he’s just phenomenally helpful. He’s built amazingly successful businesses, so it was this phenomenal experience of building Power2Switch and learning from him as he built Invenergy, and he started the Clean Energy Trust. And I’ll confess that the first big break for us at Power2Switch was pitching at the Clean Energy Trust event. We pitched and a few months after it was when we got into, this was shortly after leaving Booth, then we got into Accelerate Labs, then we got funding and Michael Polsky was the second largest check in Power2Switch back then.
Ellen Rudnick:
How did you get him to be chairman of your board? That’s fabulous.
Seyi Fabode:
Yeah, it was. I remember meeting with him when we were doing the round. I believe it was Amy Francetic who set up the meeting, I believe so. And we sat there and talked about the future of the electricity industry which is of utilities generally, climate tech and renewable energy. And I’d written a few things that I shared with him before meeting with him and the conversation was really around where do we see this industry going? What are your thoughts? I’d been one of the co-chairs of the energy group at Booth, and I’d invited Michael Polsky to present at our conference, so we met a few times, but then we eventually sat down for about an hour or so. And at the end he goes, “I’m in.” And I asked him, “Will you be on the board? I’d really love for you to lend us credibility, but also get the opportunity to really sit with you and learn from you.” And it was phenomenal for me here.
Ellen Rudnick:
That’s great to hear. And you guys share a bond which is both the industry and you’re both successful immigrant entrepreneurs.
Seyi Fabode:
Yeah. Not in the same cadence of success, but I’ll take any affiliations that I can get. He really was amazingly helpful for us just to think through the dynamics of the industry and the grit required to build a business in this space.
Ellen Rudnick:
Great. So, now you’ve moved to Austin, Texas?
Seyi Fabode:
Yes.
Ellen Rudnick:
What inspired you to move to Austin, Texas? And tell us a little bit about your inspiration for Varuna Tech.
Seyi Fabode:
Yes. So, we moved to Texas, as I mentioned we had a kid, we’re about to have our second kid. My wife is from Dallas and we were just ready for two things: to be closer to family with our kids, and just new adventures for both of us.
Ellen Rudnick:
It wasn’t warmer weather?
Seyi Fabode:
There’s a story there. We would always come to Austin by South by Southwest and also visit her family down here. And that year when we moved 2015, we came for South by in March and then went back to Chicago and the Monday morning after we got back to Chicago, it snowed. And this was Saturday, we’d been in shorts, Monday it snowed and she called me on the way to work and she’s like, “I can’t do this anymore.” By June, we’d moved to Austin.
Seyi Fabode:
And so, we got down here and I joined a startup down here, but realized there are bigger problems I’d like to solve. And the Flint tragedy had happened a few years before that, and while working with a few utilities and traveling, I did a lot of traveling around the world and I just realized, it’s the same thing. There’s this water problem across the world that we’re not paying attention to. And it reminded me of some of the issues the electricity industry had had before, and I realized that there’s a solution here that I can build. And then it hit home. It hit home. We had some water contamination issues here in Austin and by day six or seven, you couldn’t get water on the shelves in supermarkets. And I realized, “Wow, this is a bigger tragedy than we’re giving credence to.” And I realized it was what I was going to spend the next 10 years of my life working on.
Ellen Rudnick:
So, could you describe a little bit about what Varuna Tech actually does?
Seyi Fabode:
Yeah. So, I’ll talk about the problem quickly. When we have contamination issues in our water systems across the US and across the world, it’s because the utility doesn’t know the constituents of the water at that point in those locations. They have to wait for a customer to say, “My water smells funny or tastes funny.” What we do at Varuna is, we drop sensors at critical points within a city in their water distribution system, and we pull the data into simple, intuitive dashboards that alert the utility of any issues that might exist. And as we gather more data, we can start to predict possible contamination shocks so that Flint doesn’t happen again, so that the Austin situation doesn’t happen again. We like to think of ourselves as Varuna, as the one source of truth for water quality data across, we hope to be across the world. But that’s what we do.
Ellen Rudnick:
So, are utilities your major customers? Is it corporations, buildings?
Seyi Fabode:
Yes. So, I’ll frame it this way. We will put our sensors in commercial buildings, in the utilities distribution system and the data and the recommendations and the insights are useful for utilities. They would pay for the product. And then for commercial buildings, they are regulations that require them to monitor the quality of the water in their commercial buildings. And so, they also pay for the access to the data to generate the report. So, utilities on one hand, commercial buildings on the other, excuse me, yes.
Ellen Rudnick:
This is obviously a very visible and growing problem in the US and therefore I expect it’s going to be a pretty large market. So, maybe you can talk a little bit about, this time around, as you’re building Varuna, maybe talk about the fundraising process that you’ve been able to go through. Is this something where there’s more sensitivity to this as you try and raise money than there was when you’re trying to raise money for Power2Switch?
Seyi Fabode:
I wish I could say it’s easier. It’s not. So, there’s this folk think I’m masochistic in that way for hard industries. Because water and power are hard industries in the sense that I’ve had investors tell me, “I don’t see a huge exit here, and I don’t see a huge exit.” And my response is always, “It’s because we don’t pay attention to this industry.” There are hundreds of billion dollar companies in power and water, but we only focus on the Googles of the world because we know they’re more visible. So, fundraising has been interesting in the sense that we had our early believers who were investors in Power2Switch to a certain extent, angel investors in Power2Switch, and two of those angel investors in Varuna were actually classmates from Booth.
Seyi Fabode:
One, Rohini, she had a company in the same year in the NVC as I did. Masala Wala, I believe the name of the company was. Rohini is doing phenomenal work in product in the Bay Area now and she was one of our early investors. Mike Duffy, who has a public company that sells to utilities and cities and was a classmate at Booth. He’s also an angel investor. So, we had that initial core of believers. And then as we continue to make progress as the information about the problem that exists in water in the US and the world, has started to gain a lot more visibility, we’ve been able to attract a few more investors. We got some money from Google. I mentioned Sam Yagan earlier. Sam and Steve Farsht had Corazon are our largest check, they let our round which we did this past October, seed round.
Seyi Fabode:
So, hasn’t been easy but as we hit milestones and the world realizes how big a problem this is, something we’ve known all along, we’re starting to see a lot more support on the funding side and interests from just phenomenal talent in the market. So, we’re catching timing and interest and increasing visibility of the problem seem to be working in our favor. But our goal fundamentally is to ensure everyone drinks clean water. And whether we get money from folks to do that or not, we’re clear the problem exists and we’ll do what it takes to address it.
Ellen Rudnick:
That’s great. We all want to drink clean water.
Seyi Fabode:
Exactly.
Ellen Rudnick:
So, you’re thinking back to Power2Switch and now with Varuna, are there any specific leadership lessons that you learned that you’re applying now as you are building Varuna?
Seyi Fabode:
Oh, yes. The first one I mentioned already about just being slow to hire. Slow to hire and recognizing that talent is everywhere, that’s really my take on it. Talent is everywhere. It’s do you see the value of what we’re doing, and do you want to be a part of what we’re doing of achieving the goals, the vision we have? Because once you do that, as an employee that we bring on, if you do that, if you see that, we will be able to weather the tough times together because there will be tough times. That’s really just fundamental. So, that’s a lesson that I learned during the NVC experience because that was a tough one with just misalignment on a bunch of things. Then the first few rushed employees at Power2Switch. And we’re really trying not to do the same thing here at Varuna.
Seyi Fabode:
There’s a lot of work ahead of us, but we make offers to the people who are experts in the areas we need. In some cases even don’t know much about water, but they know their work, unlike most of the people we come in contact with. But, critically, do they care about what we’re doing? I’d say that’s the biggest learning for me that I’m taking from that experience. There’s the saying that, a broken clock is right twice a day. And a big part of the Power2Switch experience was that we were early, earlier than most to this market, and the timing was a little off. I feel we’ve timed this right, but it’s also from learning about the importance of timing with Power2Switch. So, those are the two big ones for me.
Ellen Rudnick:
I think in prior conversations, you also mentioned to me the ability to scale geographically is different too.
Seyi Fabode:
Oh yes, yeah. Thanks for the nudge there. With Power2Switch, the regulatory structures hadn’t covered or changed in all the US states. So, in pitching, in conversations, investors would say, “But this doesn’t cover the US,” and I’d say, “But it will.” And they’re like, “Well, it’s not a big enough market.” I’m like, “Nah, it actually is. It actually is.” But it was also the timing thing then. We’ve made sure that is not the case with Varuna. Our solution, and I’ll dive a little bit deep in here — contamination across the US tends to vary depending on where you are. On the East coast of the country, you have metallic contaminants from pipes in buildings mainly. On the West coast of the country, it’s more organic contamination. And in Texas, it’s a mix of both and in the midlands, it’s a mix of both as well.
Seyi Fabode:
So, what we decided to do is, we don’t measure specific contaminants. We’ve built a product that measures water health. And that also comes from my experience in the power side. And so our solution serves across the US, across the world frankly, we’ve gotten interest from, we have an agreement with a Mexican company, the largest water provider in Mexico. We just haven’t been able to finalize things because of COVID, but the same solution works in all of Mexico, all of the US. And so, market size is much bigger by virtue of a product matching the problem, but also non-geographic constraints. That was a big part of the pushback we had back then with Power2Switch. Yeah. That’s another big lesson.
Ellen Rudnick:
Do you think the infrastructure bill that the administration is talking about could be a real boon to your business?
Seyi Fabode:
Absolutely. Another pushback, everyone’s like, “Oh, there’s no money in water.” I was like, “It’s because you don’t know, one, there are billion dollar companies in this industry.” And we have to do the work of improving our infrastructure on the water side because I’ve been to places in the US where, if you knew, you would think they were the third world countries that we refer to. The infrastructure is poor. But now, between the Infrastructure bill, the availability of new technologies, and the never ending desire of clean water, those things will all converge to ensure this industry as a whole moves forward. And the bill will play a big part of it. When there’s money going somewhere, people will pay attention. That’s what I’ve learned.
Ellen Rudnick:
Well, it certainly sounds like you’re at the right place at the right time, this time around.
Seyi Fabode:
We believe so. We ended up as Google’s World Water Day feature company about a few weeks ago. We did a video with Google and one of our customers in Louisiana. And interest we’ve gotten since that came out is just overwhelming. I’ve been telling folk it’s been about a month of being positively overwhelmed, but it’s what we signed up for.
Ellen Rudnick:
Great. So, you’ve mentioned throughout our conversation about this informal Booth network that you’ve taken advantage of, either as investors or coaches and so forth. I was really pleasantly surprised when you shared that with me, in terms of how close many of you and NVC participants have stayed in touch.
Seyi Fabode:
Yes. I’d say as much as the learnings from the NVC and the rigor of working through, it’s that community that will be a lasting legacy as well for me. Folk that went through the NVC that weren’t even at Booth in the two years I was at Booth — and I’ve mentioned Sean Harper, Rohini, Mike Duffy. I remember around when we were trying to raise money for Power2Switch back then, and Mike at Grubhub, who was building a marketplace as well, a few people introduced me to him and Steve Sanger and they would respond to my emails with questions about building the business. I was still in touch with Steve Sanger about three, four months ago or so with some questions, he had some questions about some stuff. Charisse Conanan who had a company during the same NVC class, I was still on a call with her a few weeks ago. It’s just the community has been phenomenal.
Seyi Fabode:
I joke that around them, while Polsky Center and the NVC provided a community for entrepreneurs —because it wasn’t a sexy thing back the. It’s super sexy to be an entrepreneur right now, but back then we were, I’d say this band of outsiders that the Polsky Center brought all under this family roof.
Ellen Rudnick:
That’s great to hear. So, as you think about students who might be entering NVC now or launching their businesses, or any other future founders who are listening to this podcast, do you have any advice you’d like to share with them?
Seyi Fabode:
Yeah. I’d say, it’ll be the two things I’ve already said. The rigor you get from going through the experience, and the community you’ll build because they’ve shared in that rigorous experience and the shared desire to build industry changing, life-changing businesses. Be intentional about giving to that community, learning from the community and maintaining the community because it’s phenomenal to see some of these folks that I’ve mentioned, just doing amazing things in the world that knowing, wow, I met them through the NVC and we are a cohort of just like-minded people that came together because of the NVC. So, I’m eternally grateful for the experience.
Ellen Rudnick:
Are there any experiences or stories or challenges that we didn’t address that you’d like to share? Have you thought of any other things that we should have asked you about?
Seyi Fabode:
I guess, one of the things I’ll touch on again, and I mentioned it in the story about Phil, is the loneliness of the journey of building businesses. A part that I think is getting a lot more attention that everyone needs to pay a lot more attention to as it’s gaining more attention. We all still need to pay attention to, is just the mental health side of this. And I’ll say, it’s almost this recognition amongst all of these founders that I’ve mentioned that we’re all going through the same thing, that’s what deepens the bond. And I’d suggest there’s room for programs like the NVC, the internal ecosystem generally, to find ways to provide support in that way as well. We all knew we needed support, which is why we sought each other out. And there might be room to put a lot more structure around that because, as I’m sure you’ve seen and heard from doing this for 25 years at the NVC and the Polsky Center.
Seyi Fabode:
There’s a lot that needs to go into supporting founders that – It’s wild because someone still said this on a call to me yesterday. I was like, I wonder sometimes, am I crazy? And he stopped me and he goes, “Look, the fact that you thought it made sense to even start a business means you’re crazy. Take that as given and then find ways to support yourself as you go.” And he was joking, but it highlights a need that I know a lot of entrepreneurs have to get mental health support. So, that’s the last part of this hour I’ll touch on.
Ellen Rudnick:
I’m actually going to ask another question, going back to some of your comments about Accelerate Labs and Techstars is, today there are lots and lots and lots of accelerator programs and incubators and co-location spaces and a whole bunch of stuff that didn’t exist when you were going through Power2Switch. I think at the time Accelerate Labs was the only game in town in Chicago.
Seyi Fabode:
Yeah. It was.
Ellen Rudnick:
What do you think about the value of entrepreneurs participating in these types of programs? Do you think it’s worth the effort?
Seyi Fabode:
You need to be intentional about it. As an entrepreneur, you need to be intentional about it. So, the great thing about availability of options is that you can decide what you want from it and get it from it. So I’ll use a quick example. When we started Varuna, we knew we needed to build hardware. And so we applied to a hardware-focused accelerator. And in the, however many months we spent with that accelerator, we did three design sprints of our hardware. That normally takes about two, three years to go from design, prototyping, testing to redesigning. It probably takes two years to even do it once in some cases. We managed to do it in a few months, three times, because we knew this was what we would gain from the accelerator, was phenomenal. We took that experience and then we went into this water-focused accelerator. They work with all the utilities, all the players in the water ecosystem, and because we are these outsiders into the ecosystem, we knew the relationships we could build with this already designed product that we tested through customer development.
Seyi Fabode:
We spent the time with that accelerator solely focused on water, and now we can email the CEOs of the largest investor owned utilities because of that experience of that accelerator. And we’re super intentional about our goals. And that’s yielded a ton of fruit for us. We are a known entity in the ecosystem and we have a product that is three years ahead of the competition because we took those two decisions. So, I’m super excited at the availability of options, but there are a ton of time wasting accelerators and incubators out there as well. So be intentional about what you want to get from it. And the good thing about the NVC, to tie it in, is just the intentionality of the NVC to surface real business opportunities and give them some money to get going with stuff. I’d say that is absolutely how founders should think about accelerators and incubators. Because it’s there doesn’t mean you should do it, really.
Ellen Rudnick:
Right. But it sounds too that having that time constraint in the New Venture Challenge, you have a limited period of time, some of these accelerators are a limited period of time, so you’ve got to get things done very quickly.
Seyi Fabode:
Exactly. Exactly. And some are, if you want to signal something to the market, then you go to some of those and the signal is set by you being accepted at that accelerator. But you have to be intentional about why you’re doing these things.
Colin Keeley:
All right. That is it for this episode. If you could do me a huge favor really quick, please go to your favorite podcasting app, often Apple podcasts, and rate and review our show. This gets the show recommended to more folks and also it also helps us get bigger and better guests for you to listen to. Take care.