Arcadia COO, Kate Hennigsen, on Clean Tech and Disrupting the Energy Market, Non-Traditional Backgrounds for Working in Tech (and Ops!), Energy Regulation, M&A, Board, Risk, and Cash Management, & the Power of a Well Written Cold Emai

Transcript by Descript.
 

Michael Koenig: [00:00:00] Hello, and welcome to Between Two COOs, where phenomenal chief operating officers come to share their knowledge, advice, and at the very end, a crazy story. I'm your host, Michael Koenig, and one of my favorite things to do is bring in execs from companies that I'm a customer of. We're getting into clean tech today with Kate Henningsen, co founder and COO of Arcadia Power, of which I've been a customer since 2015. 
 

Michael Koenig: Prior to Arcadia, Kate was a corporate litigator, which makes her well suited to tackle the highly regulated energy industry. We also have a similar background, holding degrees in philosophy, though her academic credentials are much more impressive than mine with her degree. From the university of Oxford. 
 

Michael Koenig: And in case you don't know, Arcadia is a climate technology company, enabling a zero [00:01:00] carbon economy through their B2B data platform, Arc, along with managing the nation's largest community solar portfolio with more than 1. 6 gigawatts of solar under management, they've raised 300 million in venture funding. 
 

Michael Koenig: Most recently at a 1. 5 billion valuation. Kate, welcome.  
 

Kate Henningsen: Excited to have you. Thank you. As always. It's great to get to know you in a chat and we're going to have fun.  
 

Michael Koenig: Fantastic. I love it. Give us the energy 1 0 1. We were just talking about it. Yes. You're the pro. Yes. So give us the background here so we all know what we're talking about. 
 

Kate Henningsen: I will say, lawyers don't really feel qualified to be in startups a lot of the time, but when you go to the regulated land of energy, you are like the instant expert in this crazy market that doesn't exist anywhere else. Here's my Energy 1 0 1. It's the only market in the world that's still monopoly. 
 

Kate Henningsen: So energy, unlike any other thing, is a regulated monopoly that is, means, states have come together and said, you utility can get any [00:02:00] customer you want. So you just live on a street, you're going to get this customer, it's guaranteed. We're actually going to give you a guaranteed rate of return on what you invest in that customer to build power lines. 
 

Kate Henningsen: And that's the social contract we've made is this monopoly system in what is really the largest, one of the largest markets in the world, the energy market is, trillions and trillions of dollars, and yet it operates just really uniquely and individually. And I think Arcadia sees a lot of amazing opportunities to bring some of. 
 

Kate Henningsen: The digitization opportunities that have happened the last 20 years to this really big market and why that's so exciting is because we have to change a lot in our energy system. To really stop climate change, to stop, get off fossil fuels, to decarbonize, to electrify, we have to innovate and we have to move quickly. 
 

Kate Henningsen: And Arcadia believes that if you bring energy data to innovative companies, other businesses, that they're going to make solutions faster. And easier and more consumer friendly to drive. All the things we need to happen [00:03:00] in order to decarbonize and get off fossil fuel.  
 

Michael Koenig: Not all that complicated then. 
 

Michael Koenig: Not,  
 

Kate Henningsen: Nothing to see here. Nothing, no problems,  
 

Michael Koenig: one of the things I love about this is, and I've been in the same boat, taking on an industry where it's heavily regulated. It was like a no no with startups, especially if you want to get that early funding, especially if you're going to try and challenge that regulation. 
 

Michael Koenig: Why? what gave you, the guts?  
 

Kate Henningsen: So it's I actually think, you look back on startup journeys and it seems so A to Z when you're eight years in and hundreds of millions of dollars capital raise. It's never that A to Z and when you're making decisions in the moment. 
 

Kate Henningsen: As I'm sure many of your listeners have thought about, it doesn't seem clear. It doesn't seem that unique. But in retrospect now so I was a litigator and a lawyer. Kieran, my co founder, was a, chief policy person on the Hill. So I think we both came with a really appreciation of what policy can do, what law can do, what regulation can do. 
 

Kate Henningsen: And I think it [00:04:00] gave us the confidence, actually, and the unique confidence because Why haven't more people innovated in what is such a huge market? People take on markets that are so much, much smaller than energy. And yet here we are, no one, it's taken a long time for people to really get excited about disrupting the energy market. 
 

Kate Henningsen: And so I think that was actually our secret sauce of two people with sort of policy and legal backgrounds that both understood how policy can make markets. We're going to talk about community solar. That was a market that really, when we started in that was one of our second products. We started that in 2018. 
 

Kate Henningsen: That didn't exist as a market. And we've, through lobbying and just boots on the ground and passing laws and talking to lawmakers, we've expanded that market along with partners to the fastest growing segment of solar in the country, growing faster than residential rooftop. And so I think that we both intuitively understood that regulation can be scary, but if you know how to use it, it can also mean, when else can you go knock on a door of what is essentially [00:05:00] the industry you're trying to disrupt, and then they have to tell a utility to do something, right? 
 

Kate Henningsen: So in most private, the gift of regulation is you actually have a channel. To which to force action or to, make a market open. And I think that here and I with our backgrounds saw that as exciting an opportunity. And I think that was the unique wedge and perspective we brought that other founders just would take on a problem. 
 

Kate Henningsen: They could just simply solve a software. I think that's actually allowed us to. Get into the market and to innovate in a way that others just were unwilling to do. Two  
 

Michael Koenig: people from DC, one in regulation as an attorney, one on the policy side. Where does the energy experience come  
 

Kate Henningsen: from? So Kieran had started he had a Company before this. 
 

Kate Henningsen: And so he did. It was a smaller company at the time, but he was doing a company called American Efficient. So he had started to get into energy. He was actually in energy policy on the Hill. So I think he brought the energy background. I brought the legal background and we did some really, [00:06:00] law, not only open markets for us, but another innovative thing we did was we used our contract in our terms of service to actually allow people to. 
 

Kate Henningsen: Easily switch on and off from products, and that's really been an innovation. It's a legal innovation that's happened. So I'll give you the example of community solar. Community solar is very complicated in the back end. You have to, other people are building projects. You have to match people to projects. 
 

Kate Henningsen: We've been able to make it very seamless for the customer because they sign up for Arcadia. We're going to optimize things in the background and just give them a great product. They don't have to re sign the contract or wait for their project. And I think it's just an example of we made an opt out structure for some of our terms of service that is a legal construct, but it was actually a really big innovation because it allowed us to provide a seamless customer experience in a way that is just a unique example of how you can use, I think, law to actually impact the consumer experience. 
 

Michael Koenig: That's wild. You mentioned community solar twice. I was going to get to it. Yeah. [00:07:00] What is it? Just the real quick thing.  
 

Kate Henningsen: Yeah. Yeah. So community solar is, it's a shared solar that's implemented by the state. So most people think of solar, obviously it's on your rooftop, it's in a field. States have incentivized third party developers. 
 

Kate Henningsen: Because they want to decarbonize our state faster. They want to meet what's called RPS standards or renewable power standards that have been passed in the state. And so they have passed laws that say, hey, go developer, go build some more solar in our in our state. And then we're going to let the rate payers. 
 

Kate Henningsen: Basically split the savings. And so Community Solar is a direct to consumer product that the state basement creates and then Arcadia signs up people to a guaranteed savings rate. So you're going to save about 10 percent off your power bill. You're going to, you signing up means you're creating local solar. 
 

Kate Henningsen: And, Arcadia then is acquiring the customer and then managing that customer through their billing relationship and credit allocation and all the kind of complicated backend stuff. For as long as the customer [00:08:00] stays with us. And so it's really a shared solar experience. Sorry, shared solar savings. 
 

Kate Henningsen: That is a guaranteed. Win for the customer and then local,  
 

Michael Koenig: local solar on shared solar savings. Shared solar savings. Try and say that 10 times. I know seashells, seashells by the shore with a shared sort of solar. See you can't do it. You got it. You got it. But let's talk about community solar. 
 

Michael Koenig: Two questions. The first, and this is more just in general of renewables. How does it work? In terms of, I'm with, in Michigan, DTE Energy. I know we don't have community solar in the state. However, let's just assume we did. I sign up for Arcadia to get that community solar. My power provider isn't actually changing. 
 

Michael Koenig: My energy isn't changing. So how does that community solar actually get to me,  
 

Kate Henningsen: the customer? Yep. So now we're into like Energy 301, right? So if we talk to Energy 101, now we're going to go advanced level energy. We're into a lot of one when we missed to a [00:09:00] one. No, I don't know. 
 

Kate Henningsen: That's probably a transmission or something. So electrons yes, you cannot, unless the solar panels on your roof, you don't, you take whatever electron is basically given to you. You can't say I want, there's no magic way that you can take a solar panel that's in a field two miles from your house and make sure that you like, get the electron science. 
 

Kate Henningsen: It's never going to happen. But what you're doing is you're basically displacing dirty electrons with a clean electron. And so even individual user, let's say you saw you plug into that DTE grid. And right now it's 98 percent fossil. It's actually that's not true. It's probably Okay. It's probably 70 percent fossil, 60 percent fossil. 
 

Kate Henningsen: The more we build, so Arcadia itself has helped build nearly two gigawatts of solar. Community solar in general is going to be about a 10 gigawatt market this year. So all those gigawatts are replacing clean green electrons with the dirty electrons. forcing off the coal plants, they're replacing, solar with gas. 
 

Kate Henningsen: And so now DTE's grid, and this is an example, [00:10:00] cause Michigan doesn't have it, you're right. Now as an example, when you plug in, it might be 52 percent fossil rather than 60 percent fossil. And so it really is the, the local displacement of dirty electrons with  
 

Michael Koenig: clean. Yeah. So in the aggregate and the community solar. 
 

Michael Koenig: You just acquired one of Oregon's leading community solar companies, Oregon Shines. So why? You mentioned that you have essentially built two gigawatts. By the way, how much  
 

Kate Henningsen: is a gigawatt? How much is a gigawatt? You're powering about, so we have about 300, 000 customers. 300, it's about 300, 000 homes worth of power basically. 
 

Kate Henningsen: So it's not nothing.  
 

Michael Koenig: No. Yeah. It's three Ann Arbor's. Yeah. Yeah. There you go. Which is much better than Ohio State. I'm sorry, Columbus. Anyways. That's the second time. Thank you for not  
 

Kate Henningsen: saying Wisconsin. Thank you for not  
 

Michael Koenig: saying Wisconsin. Well, the Badgers, we're still going to destroy you this year in football. 
 

Michael Koenig: Anyways. I digress. So community solar. It is [00:11:00] a community project where people are essentially saying, Hey, I'm going to pay for the solar, but that solar has to end up with the energy companies. So the energy companies now have to make a decision between, all right, do we go with that fossil fuel energy or do we pay perhaps a premium for community solar? 
 

Michael Koenig: How does that  
 

Kate Henningsen: work? So this is actually why it is we call it the best energy market, best energy product on the market. It's actually. It's a guaranteed savings for the customer. So their bill becomes cheaper. They actually save 10%. Here's the wonderful thing about renewable energy, which is why I firmly believe this is going to be a market movement that drives renewables, not solely a subsidy movement. 
 

Kate Henningsen: Once you plug in that solar panel. The sunshines, there's no marginal cost other than a little bit of, operating, cleaning them. People put goats now to eat the grass around the solar panels. There's really not a large, unlike sort of coal plants where you have to keep harvesting the energy. 
 

Kate Henningsen: The marginal cost of [00:12:00] renewables goes to zero, right? So I actually think. Now, we're, we're continuing our energy knowledge journey, but the more renewables you get it's the marginal cost tends towards zero because the sun shines, the wind blows, things like that. So community solar is also, it's a guaranteed savings product for the consumer. 
 

Kate Henningsen: And why it's a regulated product is because the state is basically telling a utility, you're going to, we're building this, you're going to take the power. That's the choice that's where the regulation makes. It's not huge. Just to be clear, community solar is maybe going to be 2 percent at the most of a state's what we call load, which is how they create power. 
 

Kate Henningsen: And but it's still going to be, we think our projections are you're going to have millions of people on these products within the next 5 years building gigawatts and gigawatts. And does it solve climate crisis itself? Of course not. Does it start to show innovation where you're getting consumers involved? 
 

Kate Henningsen: You're showing how you can make different business models. Billions of dollars of value will be [00:13:00] created off this market. Yes. Is there more to do? Yes.  
 

Michael Koenig: We hear about green premiums all the time, which is the cost difference between the current practices and clean tech practices. 
 

Michael Koenig: Basically, those price tags are much higher. That doesn't sound to be the case with Arcadia.  
 

Kate Henningsen: There's been a debate for a long time about whether green can exist without tax subsidies. I think now the costs have come down so much. The government was really instrumental. In the 2000s and a lot of innovation, the cost of solar wind have come down up 90%. 
 

Kate Henningsen: And I think you have a market moment where, and certainly the IRA, 4 billion of investment or more, depending how many individuals take the tax credit. Those are going to be incentives to push people to renewables, to make renewables cheaper. It's 102 degrees in DC and so I'm okay if the government is subsidizing a little bit of this market making to get us going the rate we need to go. 
 

Michael Koenig: Sure. That makes sense. Let's give it some numbers. I know there are a ton of numbers floating out there in terms of how many [00:14:00] tons of greenhouse gases. I'm pulling mine from a book I love, which is Bill Gates how to avert a climate disaster. in it, he says, all right, 51 billion tons of greenhouse gases are emitted every year. 
 

Michael Koenig: Plugging in or rather electricity accounts for, according to Bill, who I tend to, trust. Probably  
 

Kate Henningsen: had a research assistant to help. Yeah. Yeah. Yeah.  
 

Michael Koenig: He can pay for that. That accounts for about 27 percent or 14 billion tons of greenhouse gases emitted annually just for electricity. How do we need to think about, and we talked about community solar, we talked about wind energy, the proliferation of it, there are a lot of challenges whether it's, fighting a fossil fuel industry, whether it's upgrading a power grid, how do we need to think about getting emissions generated by electricity to net zero, quickly, too? 
 

Kate Henningsen: That's the, and you're right. I, I think of it usually as a third, a third, a third, where you have [00:15:00] agriculture, transportation, and then, home building electrification, roughly. Those are your three problems you have to solve. And some of those are gonna be easier to solve than others. 
 

Kate Henningsen: I think the good news is electrification, or sorry, electricity usage, and that might be the easiest one of the three to solve. So the first thing we have to do is to get everyone to electrify. There's a great nonprofit called Rewired America that's come out recently with some stats about, we have about four billion devices in the U. 
 

Kate Henningsen: S. that we have to electrify in order to hit our targets. And their message is one of, actually hope in a road map of great, we've quantified it. They know down to the county how much you have to actually electrify. And so those are a lot of household appliance decisions, right? Next time you change your HVAC, next time you change your car, next time you change your stove. 
 

Kate Henningsen: And so can we collectively, and this is what the IRA was designed to do, can we collectively Be incentivized to retrofit those 4 billion machines as fast as possible, because if we don't do that, you can't then do the next thing, which is to make sure all the electrons are green. [00:16:00] The debate, and I think it's a simplistic debate of oh, EVs is, if you live in 100 percent coal grid and you plug in your EV, you're just actually causing more harm to the environment because you're using more coal. 
 

Kate Henningsen: Yes, that is true. But if we can all get electrified, then we have the hope to then decarbonize. It's I'm really actually excited about the stories that are going to come out in the next decade, because I think HVAC repairman might be the heroes of, the climate crisis, because they're going to be in the homes with individuals. 
 

Kate Henningsen: telling them, Hey, use a heat pump. Hey, switch out your gas stove to an electric stove. And like those micro decisions and how fast we can do them, that is like the most critical, exciting potential that if it takes 20 years, it's too long. If it takes five, we're going to be in a really good spot. I bet much better spot than it would be. 
 

Kate Henningsen: You have to electrify and then you have to get as much. Renewable on the grid. The good news is over 90 percent of new electrons produced in the U. S. Are now renewable. We have shifted to no one is building coal plants [00:17:00] anymore. Natural gas is still around, but really the bulk of your electrons being placed in service today. 
 

Kate Henningsen: Vast majority are renewable. And so I only see that continuing through, even incentives like the IRA, but just the market has moved so much the last 15 years that new electrons are green. So that's hopeful. And then individual decisions to electrify. I think you're going to be a big. 
 

Kate Henningsen: Big sort of movement that we have to do.  
 

Michael Koenig: Okay, fantastic. Everyone who's listening to this is wait a second. I thought this was about operations. , what are we doing here? But I wanted to establish the base knowledge so that we all have at least a cursory understanding now. I think we made it through three L one. 
 

Michael Koenig: Should that be sufficient? Well, good.  
 

Kate Henningsen: Yes. All right. Now, and we have to still talk about the data platform at Arcadia because that's where I'm going.  
 

Michael Koenig: That's the next thing. Stop it. Good. All right. Where does Arcadia fit into this in terms of the data platform  
 

Kate Henningsen: arc? We built Community Solar. The, you've been a wonderful customer of our D2C program, which was originally wind energy. 
 

Kate Henningsen: We did Community Solar also as a direct to consumer product starting in 2018. And then what [00:18:00] happened in about 2020, which is also why I. I'm fundamentally an optimistic, hopeful person is so to manage 300, 000 customers. And, we have 600 developer projects, a couple thousand solar projects, like the scale of which we're moving people around is quite vast. 
 

Kate Henningsen: And so we built a lot of technology in order to manage that ourselves. And in about 2020, we started to have really a market pull from EV manufacturers, solar developers saying, Hey, you have, you can get data, right? You can get utility data, you can get rate data. Tariff rate data. We are interested in that data. 
 

Kate Henningsen: Can we also have access for our customers? And so in 2020, we started to add on to Community Solar and made the platform, which is a, horizontal data platform. And what that is doing is giving other companies. So if you're an EV manufacturer and want to make an app for your customer that tells them, Hey, when should I charge my car? 
 

Kate Henningsen: When's the optimal time? Because How much is it going to cost to charge my car? Should I switch to a different rate [00:19:00] to charge my car because I'm an EV owner now? We have a whole set of use cases around EVs. We have a whole set of use cases for solar developers who want to give proposals to people to get solar on the rooftop. 
 

Kate Henningsen: There's tons of crazy stuff and good stuff happening. With corporate measurement of electricity and energy. So all the, ESG buzzwords you have really come back to a lot of fundamental accuracies around energy data and how much you're using and then all the way to innovation of, there's some really cool, electrification. 
 

Kate Henningsen: If I'm a HVAC repairman and I want to say, hey, if you switch to a heat pump, it's going to save you this much money. I need to know how much you use. I need to know what your rates are. And so those types of calculations we really are able to insert across, we're up to about 11 different verticals across. 
 

Kate Henningsen: It's the decarbonization life cycle, and that's really giving other companies the ability to then grow faster, make innovative business models. All in the service of electrification, decarbonization and getting us to a more stable [00:20:00] climate. And  
 

Michael Koenig: you said in 2020, so you're three years into ARC? Yep. 
 

Michael Koenig: Yep. I love products that get spun out that were critical to the success of the Initial product. You've already proven the use case. I love that.  
 

Kate Henningsen: It's a, this again goes back to the nothing's A to Z, right? We were happy as clams doing our community solar stuff and then all of a sudden, Oh, this might be the bigger thing and wow, this could be transformational. 
 

Kate Henningsen: And it's just really neat how it happened, with a couple EV manufacturers started to call and it was like putting the dots together Oh, we could make this into something.  
 

Michael Koenig: Now, let's talk about the operation and the culture. This is a B two C company. It is a mission that is easy to get behind, easy to enter, get energized about. 
 

Michael Koenig: Now you're switching to serve enterprises, not just with a completely different product, but likely a bit of a [00:21:00] shift in mission. A bit of a shift in focus. Let's talk about that. What was that like just from a people perspective? Hey. We're going to do this now. What does that look like? 
 

Kate Henningsen: So it's still ongoing, right? I think one of the things you learn about culture, which I'm sure, your other guests have talked about too it's a, you're, it's a constant garden you have to tend to the culture and the mission and all that. I think where we find commonality and like where we start this conversation with people is. 
 

Kate Henningsen: What's so great about a data platform because to your point, it's a different client, different sales cycle, different sort of direct impacts. Like when we can tell our employees, we put 1. 6 gigawatts of solar panels into the ground. That is clear as day. Amazing. Now it's okay we're helping a company. 
 

Kate Henningsen: There's still a lot of mission impact. We measure it, but it is more attenuated. So how do you tell that story? Where we really started is, it feels like such, we know that a thousand, a million things has to happen in order to avert climate change. Whereas before Arcadia got to [00:22:00] pick its products, I'm going to do community solar or wind energy. 
 

Kate Henningsen: Now the power is, we don't have to, we don't have to get it right. We can get everybody going. We can get a thousand different companies innovating and that's the scale of impact we need is. Everybody should be playing this game. Everybody should be thinking how we do energy differently. And so I think that's the story that's resonating with our employees is the scale and the impact that a platform brings, even if harder to quantify on a daily basis, I think intuitively people understand that it's going to be a bigger impact. 
 

Kate Henningsen: I think for us, the cultural differences were, I think, two things. So we acquired five companies in the last three years, Two of them were really large acquisitions. And one of them was a global company. And so really, I think for us the mission story we can sell and, I can tile the dots for people, but bringing different companies together, it's a real challenge, especially since we did it all post COVID. 
 

Kate Henningsen: And, my leadership style is I prided myself in having the office by the bathroom in our office. Cause I would [00:23:00] ever, I'd get everybody. Bring them in. Bring them in. And so I would have 85, 100 touch points a day with people gauging culture, gauging engagement. And it's just so different in the remote world where it's, you have to be so much more intentional. 
 

Kate Henningsen: You have to, make space for people. And so I think that the cultural differences to us is bringing companies together. We're now a global company, not just a U. S. company. And how do you weave those things together is still something that we're. Figuring out. Fortunately, everybody's an energy nerd, right? 
 

Kate Henningsen: So I got that. We all have energy backgrounds. And so I think you can get people excited about that. You can get people bought into the idea that a platform is going to do more at scale. And then you still have to send them t shirts and water bottles to make sure that they, feel excited and  
 

Michael Koenig: proud. 
 

Michael Koenig: It's incredible what a water bottle does.  
 

Kate Henningsen: The best thing is a water  
 

Michael Koenig: bottle. Absolutely. Let's talk about acquisitions. As I mentioned, you just made one with the solar company in Oregon. How do you all think about acquisitions? You talked about five. [00:24:00] It was two or three, I think, were substantial. 
 

Michael Koenig: What kind of drives it? What's the  
 

Kate Henningsen: strategy you always want to accelerate in your road map, right? I think that's where you start the conversation Is this really something that can accelerate your road map? Which means you do have to have a clear idea of the next three to five years of you know Where do we want our road map to go? 
 

Kate Henningsen: and so each of them was unique and so we One of the acquisitions we did was a we bought a sales channel for community solar. It was just one of the largest Best producing sales channels out there in the markets. We acquired that, we bought basically two products in between. And now Oregon shines is a market expansion. 
 

Kate Henningsen: So I think for each of them, they're actually each different. They weren't a, the same flavor, but the thinking was always the same, which is, it is obviously growth you passed on. Maybe I should talk about, we've passed on acquisitions too. And I think why those, Don't work is because you want the acquisition to not also you want to accelerate your road map, but you don't want to slow you down. 
 

Kate Henningsen: And I think that's obviously the real risk of acquisitions is can you fit [00:25:00] this peg into the car so that it goes faster rather than. Okay, then I have to rebuild the peg and, change all the parts of the car because it's going to have this peg in it. And so I think where we've really had the big debates about acquisition is like, okay, this gets us a new capability. 
 

Kate Henningsen: This gets us something new. And we think that it won't take three years to bring the culture together, to bring people together, to get people producing faster. And I think those are actually the hard way because it's hard to know, right? Like it's, there's nothing on a piece of paper that tells you that. 
 

Kate Henningsen: And so it's really just knowing, obviously the business fundamentals. The problem you're trying to solve. And then I think there's a bit of a gut of, okay, I think this is the call that it's right people, the right business model, the right talent for the direction we want to go that's, those are how we've made the actual decisions in  
 

Michael Koenig: the room. 
 

Michael Koenig: So it's not just necessarily aqua hires. We've got market expansion as you talked about, but also product integration that can be slow. How do you all go about the integration process?  
 

Kate Henningsen: Yeah, it can be slow. And I think we what I found so interesting about [00:26:00] acquisitions is you. You think you know the company when you buy it, but you never know the company until you're there. 
 

Kate Henningsen: And you never really know it until you're like there for a year. It depends on how big the company is. But, I think there is a certain humility of getting up to speed as fast as you can. So knowing that the best laid plans are going to be 70 percent right. Like the things you think you can plan for an acquisition, you can get in there, but there's always going to be something that you didn't know about the company or was less rosy than was pitched to you. 
 

Kate Henningsen: So one of the things I love is. We do a counter deck when we acquire companies of basically let's scrub out all of the puffery, as they say in the legal world, right? Let's just take down all their models, can their tech and then see what we have. And I think you really have to go in there with that objective this is the See scenario and see if you're still excited about it. 
 

Kate Henningsen: See how it fits into your tech stack. But yes, I think you should assume with M& A that you're presented a rosy picture and you want the realistic picture. And I guess speaking to clients, my second thing, if you're thinking about product integration, like what does the market [00:27:00] actually want from this combination and trying to find clients where you can test the cross sell the, the new product ideas and do that as fast as possible to learn. 
 

Kate Henningsen: How much you want to actually invest in combining the two products, because you could, we talked to one of our board directors while we were doing this and he had been acquired and the acquiring company of his took a totally different tact where they never decided to integrate, just kept them completely separate. 
 

Kate Henningsen: You can make that decision too. You can acquire a company and decide it's best as a, parallel entity or a sidecar and I think talking through all those options and having the plan, but knowing you have to discount your plan and it's never going to be.  
 

Michael Koenig: You mentioned the board. Let's talk about it. 
 

Michael Koenig: As a co founder, you've taken on funding, you've started to have proper governance. How did you go about composing your board? How has it changed? And what do you think it looks like five years from now?  
 

Kate Henningsen: Composing your board is more important. We've been fortunate to get to a later stage of startup. 
 

Kate Henningsen: And so now we've been with some of our board [00:28:00] members for six years, which in startup life is a lifetime. But I do think picking those early board members who are investors, you really do want to be on the same page as you, you're going to have a lot of ups and downs in those early years together. 
 

Kate Henningsen: Our board up until about eight. Your two years ago was all of our investors. So we had our, A, B, C, E rounds. Basically, our D didn't take a board seat. So we had all of our investors. And then what was interesting for us is we, I think, as we matured more as a company both because as you prepare for, public company readiness preparations, or that's where we are in our maturity cycle, you get more independent board members. 
 

Kate Henningsen: But also the problems you're trying to solve, I think, are helped. Investors are very good at a lot of things and they have pushed us on economics and seen our business in different ways. But as an operator it's, you want that independent voice. And I think that was actually a good and positive change for us is to have more independence around the table. 
 

Kate Henningsen: So we really started, we're now about half and half. So we've started to build out [00:29:00] our independent board in the last two years. And it's been great to see those perspectives co mingle. I think in terms of tiki tac board management, the biggest shifts we started to make were we send out on a, like we plan the year, right? 
 

Kate Henningsen: So board meetings used to be in the early days. People just met there wasn't agenda was loose. I think as we've tightened up all of our processes, like there's a we have standard agendas like, okay, this is our strategic meeting. This is our budget meeting. This is our employee review meeting. So we basically we have 5 board meetings a year. 
 

Kate Henningsen: They each have their set, decisions we're going to make and that helps our, us prep for that. We schedule them way far in advance. So I think we've just gotten much better at board management over the years as well. The other little, ticky tacky tip is telling your board when it's a, is this an informed discussion we're having? 
 

Kate Henningsen: Is this a decision discussion we're having? Is this an advice discussion? I think that board members in early and late stage, want to know what you want from them. Are you asking me for an opinion because you want me to raise my hand and make a vote? Are you coming to me as a, [00:30:00] a confidant and you just want to, roll some stuff around? 
 

Kate Henningsen: And I think letting them know what you need from them is actually a good way to start a conversation, start a board meeting, make it clear what you need them to come back. Gosh,  
 

Michael Koenig: to be a fly on the wall in that boardroom with Arcadia, that would be extraordinary.  
 

Kate Henningsen: It's fun. We got a strategy meeting. We're going to talk all about the, decarbonizing the world. 
 

Kate Henningsen: It'll be  
 

Michael Koenig: fun. That blows my mind. So let's chat on risk management, which we've talked about. The macro has been totally bonkers. They're just Things that are completely out of our control. Who knows, an investor wakes up tomorrow and is Ah, it's unseasonably cool. Oh my gosh, the sky is falling. 
 

Michael Koenig: But you have to invest. And then you also have to manage risk. How do you balance it? How do you decide when to grow? How do you decide when it's time to guard your flank?  
 

Kate Henningsen: We are, I think, in a unique, so Arcadia was founded in 2014. We've been through [00:31:00] cycles before. I do think that this cycle has, this has been a more serious cycle or a more clear cycle that people have been, guard your flank universally, keep your cash, your powder dry. 
 

Kate Henningsen: I think, again, starting from my background as a lawyer, that was one of the really nice things I think about. The background is lawyers trade in risk for most lawyers. That means they're conservative. I find myself to just be comfortable with risk and evaluating risk objectively and knowing how to what the playing field is and feeling comfortable with knowing that risks exist and it's out there. 
 

Kate Henningsen: So in terms of cash management and growing the business, we've been fortunate to grow. The market we picked community solar was growing with us. And so I think we've been able to sustain the growth through, tight times. I think this is where also the irony of a regulated product actually was helpful for us for a long time, right? 
 

Kate Henningsen: Because. The state, state legislature in Illinois wants to do something innovative. They're not worried about a macroeconomic event. They're worried about doing something great for their community and bringing savings and local power. [00:32:00] So actually, I think that the regulated line of revenue, while most people, it can't grow you to a trillion dollar valuation, but most people think of that as a risk. 
 

Kate Henningsen: I actually think that's been a a really nice Floor to have to our revenue into our business that it's not going to go away because of the macroeconomic shift or something that there's like a, a real policy that exists. And so that diversity, I think, has actually protected us in a lot of downsides because, it's a business that's generating millions and millions of dollars, and it's not going to go away because of a budget decision. 
 

Kate Henningsen: So I think that has actually been an ironic advantage is the regulated line of revenue diversified us and protects us in a downside. And then we're also fortunate to be in a market that I think is Larger than macroeconomic events. It doesn't mean it's immune, but I think that people do realize that the energy transition is here. 
 

Kate Henningsen: There's going to be, according to consultants, 100 trillion dollars spent in the next sort of 10 to 15 years to retrofit our economy to [00:33:00] be decarbonized. And so we feel. We can be more aggressive in this, even in a down, down environment because we are in such a large untouched market that you don't want to be too conservative because the market's there and the problem is there to solve. 
 

Kate Henningsen: That being said, like any tech company, we've had to, we cut our expenses, right? We're taking things off the board. We're prioritizing and focusing in a way that we weren't maybe, two years ago. It's let's build everything. And I do think that in this moment, you want to have cash on hand for. 
 

Kate Henningsen: 18 months, two years, feel like you have enough room to deliver new products, get them out the door increase the revenue. But we feel a little bit protected that in our market and with our regulated line of revenue. Providing some stability. Tight  
 

Michael Koenig: times create renewed focus. It's,  
 

Kate Henningsen: It's, it, I've actually liked it. 
 

Kate Henningsen: I don't know, this is our COO brain talking. This, now we get into the real stuff, right? It's been nice to have focus, I gotta say. It's felt good to have people listen to you about priorities for the first time. So I don't know how you [00:34:00] feel about that. But what COO doesn't like a programmatic focused and prioritized plan to execute,  
 

Michael Koenig: Let's chat on that. Litigator to COO. You had a stopover in BizDev, which I actually came from as well. Oh, did you? Okay. I did. Yes. Okay. But moving into the COO role, you hadn't been at a tech company, startup, private company for that matter. How'd you learn it?  
 

Kate Henningsen: So I, the other part of my background is I like learning. 
 

Kate Henningsen: I'm a learner. I went, I got a college master's and a law degree. So I think there is something here with me of curiosity and feeling, there's this concept I think of the beginner's mind where you enter a problem and you just want to ferociously, Eat it and say, Oh, I don't know anything. 
 

Kate Henningsen: Teach me about it. So I think I actually approach most problems like that naturally of a curiosity to learn on. Then, so you start reading newsletters, you start going to conferences, you start asking people about energy and maybe a lot of markets are like this, but the [00:35:00] energy market in particular, it likes people that like it back. 
 

Kate Henningsen: And so if you show interest and you get more conversations and, because it's not a market like. We're not a cool car transportation company or whatever the hot thing is. No one's really said that about energy until about two years ago. And so I think there's a genuine interest in the community. 
 

Kate Henningsen: And then certainly when you get into climate tech, I will say there's a, it's an amazing community. And I invite all of your listeners to apply for climate jobs because everybody wants to solve a problem. And so if you approach it with a learning curiosity, beginner's mind, and then find yourself around great people who want to give you the knowledge. 
 

Kate Henningsen: Of course, you have to pay it back once you get to your station in life. And then, the same yes adage to me is still, it still holds, right? You just, you have, you say, yes, you, yes, I will do that. Sure. Let's try it. Let's go. In the early years of startups, that's so great because no one else is around. 
 

Kate Henningsen: And yes, I'll be great. I'll take it all on. But I think that still holds later on that you have to, one of the things that I've discovered about myself is. Yeah. There's a tension, I'm a growth mindset person. I love to grow. I need to get new experiences [00:36:00] and that means there's always going to be a little bit of, I'm going to be above my skis sometimes, right? 
 

Kate Henningsen: In order to grow, you have to do things you haven't done before. And so I think having comfort with yourself, that to learn means discomfort, to grow means discomfort. It means pushing your boundaries a little bit and accepting that rather than trying to say you're not good enough, you shouldn't do it, quiet that voice, I think is actually a really powerful. 
 

Kate Henningsen: internal conversation to have of I'm going to come in, work like hell, learn, and just keep moving and keep saying yes.  
 

Michael Koenig: So moving into operations, having all these conversations, figuring out how to be a leader, what do you Learn the hard  
 

Kate Henningsen: way. I still, I have conversations with my HR VP today about learning things. 
 

Kate Henningsen: We're all learning. It is very different being a leader and a manager. I think that is the, especially as a co founder, the lesson I'm still learning is I like to motivate people. I like to energize people. I like to tell them why, get on this train, let's go. And I think that's a lot of uniqueness and skills that I bring to [00:37:00] Arcadia. 
 

Kate Henningsen: That also can mean I can be overly optimistic sometimes, I can not shy away from the hard conversations, which is the managing part, and so having to really force myself to manage which is thinking about other people as individuals, communicating to them, making sure that they understand the road that they're on and how they can grow on that road that to me has actually been, I think, the learning experience is how do you have your leader head on, how do you have your manager head on at different stages of the company, and As a co founder, I think that can be, a balance to strike. 
 

Kate Henningsen: And I think, management, it's 90 percent about communication, I think, really. We can dress it up and all these other things, but it's 90 percent of, do you understand what you're, do you understand what you're supposed to do? And do you understand what I think of how you're doing it? 
 

Kate Henningsen: And those two questions are 95 percent of a person's success and happiness. And so trying to just boil it down to Checking yourself of, okay, does my direct know what they're supposed to do? And does my direct know what I think of what they're doing? And if you can answer those two things, you're probably a good manager and you [00:38:00] should make, you should ask for feedback on those two things of whether your direct knows those  
 

Michael Koenig: things. 
 

Michael Koenig: As companies grow. and the operations grow. I can think of several times where I look back, I look, or rather, I look at where we are now, I think about where we were, and I'm just like, this operation is awesome. And I'm so excited about it because you've seen it and I get so much energy from it. 
 

Michael Koenig: Something at Arcadia that you look back on, you look at where you are now and you just go, that's a really complicated sort of operational feat and we've done a really good job and it's on the right track.  
 

Kate Henningsen: Yes, I think I told you when we started that my line about startups is the days can suck, but the years are amazing. 
 

Kate Henningsen: And you look back at what you do in a year and you're like, oh my gosh, we moved a mountain. That mountain was heavy and it was hard and I didn't know where it was going, but we moved a mountain down this road. So I great question. I think and it's also apropos because we're about to go into a board meeting. 
 

Kate Henningsen: So that's a lot of times you quantify achievements and sing for your supper and tell [00:39:00] them all the good work. We brought together a global operations organization. We bought a company last May. They had 400 people working in India. As part of their operations team. And so over the year, we have brought that global operations team together. 
 

Kate Henningsen: So they're now working in unison. They're there. We have a continuous end process and we've actually driven down the combined cost to serve by 50%. It's a really big achievement of not only to have you brought it together. So it's working, but then through automation and other sort of Process development, we've reduced that total cost by 50%. 
 

Kate Henningsen: And that feels good both as a leader who's okay, let's combine and see the vision and make sure that people are collectively working on a problem together. And then it's just, gosh, they're working better and more efficiently. And, those are like really exciting things to reflect  
 

Michael Koenig: on. 
 

Michael Koenig: That's phenomenal. I love it. Time for my last and favorite question. We've all had those moments in the COOC where we'd see something just completely off the wall and we're like, I never [00:40:00] thought I'd see that. Do you have one that you can share with us?  
 

Kate Henningsen: It's a great question. I think for us in the early days, we did have some existential moments where when we first started to launch, we launched direct to consumer products. 
 

Kate Henningsen: And so we were You know, sending mailers out, digital channels, all the stuff you do. And we got probably five cease and desist letters within our first 18 months from utilities. And this goes back to the, regulated monopoly. Utilities are not used to anybody saying your customer, my, it's my customer. 
 

Kate Henningsen: No one else is going to be this person, there's, we're the only person that's going to serve this customer. And so we got about five cease and desist the first year of. Who are you? What are you doing? Why are you talking to our customer? And it takes a lot of, guts and hoots, but I call them back and be like, everything, nothing to see here. 
 

Kate Henningsen: I got no money, no people, but I am confident that I can, get through this problem. And so I think that's really the, we now have a sophisticated team of utility relations that deals with the utilities all the time. But back in that day, there was really these moments where the letter would thump on [00:41:00] your desk. 
 

Kate Henningsen: It'd be like the, you got three pages in there. It'd be from an official state document and you'd open it up. Be like, okay, how do we deal with this? We did, it went away but there's, there's real moments where, not like other startups maybe that don't have to deal with this, the XYZ power company really wants to know what you're up to and trying to explain that all when you're a little infant startup was a good  
 

Michael Koenig: challenge. 
 

Michael Koenig: That's when it becomes super useful to be an attorney and litigator.  
 

Kate Henningsen: And maybe that's why other, other people would have stopped, right? Other people would have said, Oh my gosh, 110. And I was like, I'm a litigator. I know that they're not going to get this. Gobs of time before there's trouble. 
 

Kate Henningsen: Don't worry. Gobs of time.  
 

Michael Koenig: And I'm also thinking about the diligence process when you're raising that funding. Wait, you got five cease and desist? Hang on, wait, what should we like? That takes some really visionary investors to say, Hey, you know what? These are speed bumps. They're still going to change the market and they've got what it takes to get over that. 
 

Kate Henningsen: Yeah. And you start talking about the regulated [00:42:00] monopolies and how we're disrupting power and people love that stuff. So it was okay. And  
 

Michael Koenig: people love that stuff. That's fantastic. Kate, thanks so much for joining me. Where can people go to keep up with you?  
 

Kate Henningsen: Oh, LinkedIn is my, I'm not on, I'm not on the Twitters. 
 

Kate Henningsen: I'm not on the Twitters not to be, huh. I know, I just, I'm on the LinkedIns, I'm at Kate at Arcadia. I will say, one of the things we didn't talk about is I I met Kieran through a cold email. I do always believe in the power of, reaching out to somebody who there might be a  
 

Michael Koenig: connection. 
 

Michael Koenig: Yeah, fantastic. There you have it, everyone. Thank you so much for listening to between two COOs. I'm your host, Michael Koenig, and a very special thank you to Kate Henningsen for joining us. Tune in next time for our next COO chat on between two COOs and be sure to subscribe on Apple podcasts, Spotify, or wherever you're listening to podcasts. 
 

Michael Koenig: So you never miss an episode, just visit between two COOs. com for more. And if you have a minute. Please leave us a review on Apple Podcasts and tell others about the show so they can get great advice from phenomenal COOs. Thanks for listening. Tune in next time and until then shared [00:43:00] service solar no shared solar services shared solar  
 

Kate Henningsen: service Just sign up at arcadia. 
 

Kate Henningsen: com.  
 

Michael Koenig: There you go. Sign up at arcadia. com All right. Thank you. Bye. Bye. Thanks. Bye