Stephan Feilhauer: [00:00:00] There are really huge shifts in the overall economy. Um, and. Capital is mobile. You know, manufacturing sources are mobile. The only thing that isn’t mobile is your workforce.
Wyatt Smith: Welcome back. Welcome back. to another episode of Untapped with UpSmith. We are really thrilled to have a friend and a person I’ve known for several years here with us. Stephan is a infrastructure investor, uh, currently a partner at Anson Infrastructure Partners, and very focused on the future of investing in electrification transition and big ways society is changing.
Wyatt Smith: Workforce is a big important part of that. And so having a chance to learn from you today [00:01:00] is awesome. Thanks for joining us. Thanks for having me. Good to be here. So
Alex Hudgens: excited. Before we get into all those big words and the future stuff. We like to take it back. So, tell us, give us your story. How did you get to where you are now, both in, you know, the LinkedIn kind of career steps, but also your childhood.
Alex Hudgens: Did you always know that you would do something like this?
Stephan Feilhauer: I was born to invest in the energy transition. Uh, no, definitely not. Uh, I, I would say it’s a, a long and circuitous path, uh, full of, full of random moments. Um, the, the thing that is interesting, I am probably a child of the Transatlantic Corporation.
Stephan Feilhauer: So, uh, born and raised in Germany, uh, and then actually went to kindergarten in Corvallis, Oregon, believe it or not. So my, my neighbors still make fun of me today saying that I came back as a six year old speaking German with an American accent
Alex Hudgens: from,
Stephan Feilhauer: from Oregon, um, and, um, you know, [00:02:00] being, being a child of that sort of, um, you know, that, that period after the fall of the wall, um, the American army, Uh, basically sent a lot of, uh, a lot of their personnel back, um, and that gave me an opportunity to actually attend an international school, uh, because there were a lot of, of empty slots.
Stephan Feilhauer: Um, and, and I was, you know, I, I spoke English. Um, and so that probably set me on a path to, to going abroad. Um, did my undergrad in the UK, um, started working there, uh, and then came to the U. S. for grad school. Uh, and sort of classic story thinking, you know, I was going to stay in the U. S. for a year or two and then life happened and, uh, we’re now 15 years later and I’m still here.
Alex Hudgens: Still in New York?
Stephan Feilhauer: Still in New York. Okay. Yeah, spent two years in Singapore in the meantime, just a, just a quick hop. Um, but otherwise I’ve always, have always been in New York.
Alex Hudgens: [00:03:00] What kept you? Was it the food? What kept me? How did, how did we, who were you in pee view?
Stephan Feilhauer: Yeah. Um, So it’s interesting, right? I, I, I know, you know, you guys sort of have, you know, have a background growing up in rural areas.
Stephan Feilhauer: I always, you know, grew up in big cities. Um, I’m an only child. My wife’s an only child. Um, and I think us coming to the States, living here in the States, um, our families are very far away. Um, and so what that means is that the city is our family, like our friends are our family. It, you know, our, our, our friends are sort of the family that you choose, um, and so I think we, that, that has led us to, um, to really having a really strong community here.
Stephan Feilhauer: Um, and, and seeking people that have similar values, uh, similar views, uh, similar outlooks on life. Uh, the wonderful thing about New York is, you know, whatever your fancy, whatever, you know, whatever your beliefs. You will find [00:04:00] people that, that, that share that view. And you will also find a lot of people that have very, very different views.
Stephan Feilhauer: I think that’s what makes, uh, what makes New York so exciting. Uh, and I think that’s, what’s, what’s kept us here all, all these years.
Wyatt Smith: I’d love to hear a sort of a only in New York story that you have bonus points, if it involves, you know, some skilled workers of some sort, but it doesn’t have to.
Stephan Feilhauer: Oh, interesting.
Stephan Feilhauer: Only in New York. Um, Let me get back to that. Okay. I need to think about something, something that’s like worthy of a podcast. Fair enough. Fair enough. Fair enough. And that’s sort of clean for a podcast. There you go. I’m like, just think of stuff. Yeah. Well, I
Wyatt Smith: think about it because, so, so we first met when I was at Uber and we were thinking a lot about the future of infrastructure and how cities were changing due to these electrification, around autonomy, around things that would, would, would fundamentally reduce the cost of mobility.
Wyatt Smith: Yeah. And one thing I was always super impressed by was how forward thinking you and your team always were. And [00:05:00] I think as you’ve moved into different roles, that theme continues. And so learning from you a bit about what you see as the most important Macro trends right now is a great place to start.
Stephan Feilhauer: Yeah. Um, no, look, it was, it was really great working with you guys, um, back at Uber Air. Um, uh, you know, had we known that a big pandemic was coming, you know, we would have probably thought about things a little bit differently, but it’s It’s really impressive. I was actually catching up with a few of your, uh, of your colleagues from back in the day who are a lot closer to actually getting some of these eVTOL, these like, you know, flying air taxis, uh, that look like drones and fly through the sky.
Stephan Feilhauer: Um, you know, that are actually getting those built right now, which is, is pretty incredible if you think about just all the things that need to go right and all the planning that needs to go into that, uh, and just a lot of the physical infrastructure that needs to get built to, to enable that. Um, but, um, zooming back a little bit [00:06:00] to, you know, what are the fundamental drivers, right?
Stephan Feilhauer: I mean. The mobility and just getting people around is, is such a fundamental part of our, of our daily existence, right? Living in big cities, like how you get around, how you commute, it’s really important. Yeah. Um, and doing that in a way that’s, um, that’s sustainable and safe, um, is obviously really important.
Stephan Feilhauer: And so the question is then how do you, you know, how do you design the life? How do you, how do you design the infrastructure around this? And if you, if you think about it, right? In the U. S., the wonderful thing about the U. S. is that the country was not destroyed in two world wars, um, as much of Western Europe has been.
Stephan Feilhauer: So, a lot of Western Europe has had a leg up because you could start from a piece, a clean sheet of paper. Um, you walk through, you know, the downtown Manhattan, which is where I live with my family. And, uh, you can see hundreds of years of a chaotic lack of planning. [00:07:00] And so the question is what do you do?
Stephan Feilhauer: You know, like, how do you, in a world where we’re thinking not only about what is the infrastructure around us, but what is the infrastructure going to need to look like for the next couple of decades, for the next couple of hundred years. And you layer in the dynamics of sustainability and, and just using less resources and, you know, living in an environment that’s.
Stephan Feilhauer: Just a less polluting and better for all of us. What does that mean? And so that brings you back to these large themes of infrastructure redevelopment, a lot of the things that people are talking about in the IRA. Obviously you need the workforce to, you know, to actually get that built. Right. And so that, I think the reason why I’m so excited about the work that you guys are doing is that, you know, the, the workforce is really that undercurrent.
Stephan Feilhauer: Um, that is really, really important. I think it’s probably a topic that’s, that’s very often overlooked, um, and something I think that, um, you know, where, where you see a lot of different [00:08:00] systems in different parts of the world, um, about how people are thinking about, um, you know, about the workforce and how people,
Wyatt Smith: you know, contributing to that.
Wyatt Smith: I’d love to, for everybody’s benefit, just take a project and it can be hypothetical, but maybe a real one that you can disguise a little bit and like walk people through some of the numbers on how you think about the fundamentals of a project like that. So we can talk a bit about the workforce challenge that’s behind.
Stephan Feilhauer: Yeah. Well, look, I mean, people love talking about the solar and wind, right? For example. And, um, obviously a lot of the capital that’s required for these project is really has to do with the kit that you’re, you know, that you’re putting into the ground, you know, like the steel, the solar panels, you know, all the cabling, the connections, uh, the inverters, et cetera.
Stephan Feilhauer: Um, so, The thing that’s been so exciting about seeing, you know, seeing what’s happening in, in solar and essentially seeing a lot of the costs of solar panels absolutely collapse, right? You know, reduce, you know, [00:09:00] 10X, 20X, 30X, depending on how far you look back. Um, the, the key thing that is not collapsing at that rate, in fact, that’s increasing at a rate is, is labor.
Stephan Feilhauer: Yeah. And so. Whereas, you know, when, when, and I’m dating myself here, when I started in this industry, you know, the early two thousands, all of this equipment was hugely expensive and it kind of didn’t matter, like more or less how, how much the labor would cost. And, and you didn’t really think about. Uh, any efficiency gains in, in labor because it was just a small, you know, a small piece of the, of the pie.
Stephan Feilhauer: Now that labor is such a big part and you’re building at industrial scale and everything around you on the construction site is in the process of getting, uh, automated, you have much more robotics to help you, um, to make that, that construction site a lot safer for the people that are working there. Um, it is [00:10:00] actually really important to think about.
Stephan Feilhauer: Uh, well, if, if we want to build, and you know, there’s, there’s all these statistics out there about, you know, how many hundreds of trillions of new infrastructure we’re going to need over the next couple of decades. But if you think about that, that will require, A lot of people actually installing stuff and then I mean, it was one of the first couple of businesses that we looked at.
Stephan Feilhauer: Um, we looked at a specialty engineering business, one of my first jobs when I was at Macquarie, uh, and it was basically doing a lot of maintenance and repair work for power plants. And when we sat down with the management team, you know, we wanted to talk all about like, okay, what’s your, you know, what’s your backlog and can you actually like deliver against that?
Stephan Feilhauer: And the only thing the CEO wanted to talk about was that all of his engineers were retiring. Yep. He couldn’t get any new people out of college excited about this work. And so he was like, look, I don’t actually care what my backlog is because I don’t have the [00:11:00] people To actually deliver all that. And a different bottleneck.
Stephan Feilhauer: There’s a different bottleneck. Yeah. Exactly. And that to me, what, I mean, it was incredibly naive, you know, for, for me, you know, being, you know, but the spreadsheet monkey or, you know, like, like being a bit nervous and being like, Oh, but we can just do this and that. Um, so there’s, there are these really big factors.
Stephan Feilhauer: That we think about how do we, you know, how do we get the workforce there, especially now with a lot of the reshoring of manufacturing, uh, you know, when you and I, when all of us, well, maybe not you, but the two of us, when we, when we grew up, the answer to everything was globalization. That’s right. We’re just going to outsource it.
Stephan Feilhauer: We’re going to send it abroad. We’re going to have hugely complex supply chains. That entire logic is sort of being turned on its head now, um, from the security perspective, from a sustainability perspective, um, and just also from a perspective of, um, you know, of, of getting stuff built, uh, in a, in a timeframe that makes [00:12:00] sense.
Stephan Feilhauer: Um, and so there’s, there are really huge shifts in the overall economy. Um, and Capital is mobile, you know, manufacturing sources are mobile. The only thing that isn’t mobile is your workforce. So that’s the real, you know, I think you guys are hitting on a really, really crucial part of
Wyatt Smith: I love the example.
Wyatt Smith: So, so there’s a risk of doing public math or podcast math, but I think it’s still a very, this is a really useful one to pull the thread on. So we think a lot about the skilled trades gap that would challenge things like industrial grade. Utility scale solar installations, which is a big embedded premise of things like the Inflation Reduction Act and the, the effort is, is, is bold for sure.
Wyatt Smith: But to your point, the challenge here and bringing it to life is multifactorial and it’s complexity. So, um, our family that I grew up in, we have a cattle ranch in West Alabama and East Mississippi, an example parcel of [00:13:00] land that could be very interesting for a solar development. It’s very open, it’s soybean fields right now.
Wyatt Smith: It happens to be next door to a big substation that the Tennessee Valley Authority is the utility of record on. And so it’s, it’s a very reasonable place to go and make a bid for these projects at pretty large scale. So let’s just call it a hundred megawatts of capacity. A project like that has a five year backlog on the interconnect permitting.
Wyatt Smith: It’s a very substantial amount of time. And then you, you dig into like, why is that? Why is that the case? And it has to do a lot of the industrial and engineering services that go to support the underwriting and understanding how it work. And then the actual process of then moving those things to the queue is, is tough.
Wyatt Smith: And so as you think about that as an investor, like what are the key levers?
Stephan Feilhauer: Yeah. Well, one of the, one of the really key things, the taking a tenure [00:14:00] view that I think, um, we really need to think about in this country. It’s just how we’re bringing people into technical jobs and this sort of coming, coming from a perspective of a German, right?
Stephan Feilhauer: Um, about 6 percent of kids that leave high school go into, uh, what’s called like a, essentially like a dual education program where, um, you spend time, uh, in a technical college, you know, getting some, you know, getting some skills at, you know, in, in, in a variety of trades. Um, but you also spend time with the company and so there is, there’s a model where you’re, uh, where you’re learning in school, uh, and you’re learning on the job.
Stephan Feilhauer: And so that, that enables a lot of, you know, a lot of kids out of high school to really, you know, get driven into fields that they probably didn’t even know existed. Um, it allows a lot of the companies to really find and nurture [00:15:00] and mentor talent. Yeah. Um, and it, and it, you know, allows the system to really draw in, you know, hundreds of thousands.
Stephan Feilhauer: Um, of, you know, of, of labor that, that we, that were required, um, you know, to actually, you know, to, you know, to actually get stuff built. Um, you compare that to, to the U. S. system where about two thirds of kids that are, that are leaving high school are, you know, are going into a four year, uh, degree program.
Stephan Feilhauer: And that’s wonderful, right? Like it’s, and college is still the path to, to a high paying job. But I think this, that, that pathway. Uh, you know, into, into the trades, I think is something that, uh, what, you know, one of the few things maybe that my home country has gotten, right? Uh, but as you’re thinking about, uh, you know, from a, from a political policy perspective, um, it’s, it’s relatively easy, you know, in a, in, you know, a lot of things being equal to say, [00:16:00] okay, we got to deploy 360 billion over 10 years through the Inflation Reduction Act.
Stephan Feilhauer: Um, you know, to bring back manufacturing, um, yes, that’s obviously hugely bold and very, very complicated politically, but it’s actually relatively easy when you compare it to the, the math of saying, okay, now how do we get millions of people, uh, you know, butts and seats to actually make sure that, that we can, you know, that we can physically deliver against that.
Stephan Feilhauer: That’s actually a much harder problem. Um, and I think it’s also a much harder problem because there is. Um, you know, there is this sort of view that, um, you know, that blue collar jobs like aren’t as valuable, right. Or like, aren’t as, aren’t as useful and decades and decades and decades of, of this, this narrative of, uh, you know, of, of, of having kids, you know, look for, look for other things to do.
Stephan Feilhauer: So I think that is, that is probably a [00:17:00] much more pressing issue. It’s, it’s not something that you can fix with money, um, and it’s going to take quite a long time. Um, but it’s, it’s, it’s hugely important if you want, if, you know, if you want this energy transition to actually work.
Wyatt Smith: What, what are this, what are the secrets to the German system?
Wyatt Smith: Why does the pre prayership system work?
Stephan Feilhauer: Yeah. Um, I think one of the things is it’s, it’s considered, it’s considered quite prestigious to go into that. Um, there was. And mind you, I, I did not study in, in Germany, so I’m like a bad person to actually, you know, talk about this, but, um, it’s, I know all of my friends from high school, anyone who was anyone wanted to, you know, work for Porsche or BMW or like, you know, some car company or some engineering company because they made all the cool stuff.
Stephan Feilhauer: [00:18:00] Right? Like, you know, they made all the products that, you know, that like as, you know, as a boy or a girl you wanted to play with. And so that was the fastest way into these companies. And the salaries that you would make, you know, first of all, as an apprentice, you got an employment contract and you were paid on day one.
Stephan Feilhauer: So you, you leave high school. You, you’re going through a technical college, but you have a salary. So it’s, it’s a very egalitarian way, you know, irrespective of what your background is. Also, university is free in Germany, right? So there’s no, you know, there’s not this, this question of, can you afford college?
Stephan Feilhauer: This concept that people are coming out of college hugely indebted is like very, not a thing to, you know, to, to people in Western Europe. I actually think it’s. It’s one of the reasons [00:19:00] why, um, you know, what, why it’s just so hard and, you know, in this system, cause you have a lot of kids that go to college, don’t really know what they’re supposed to study, you know, and then sort of four years later and, you know, three, three switches later, you know, find themselves with a hundred thousand dollars of debt.
Stephan Feilhauer: Right. Um, and are, you know, that’s, that’s a pretty, you know, big nut to, uh, you know, to, to, to, to, to, to try and get, get yourself. So the fact that. There is a pathway into industry that you’re getting paid and that it’s just socially seen as something very prestigious, I think are all these things that are, that are making, uh, you know, that are just, that are just driving a lot of talent, um, you know, into, you know, into, into the production workforce there.
Stephan Feilhauer: Yeah. There’s a lot to learn in that system. That
Alex Hudgens: sounds really smart. Yeah. Yeah.
Stephan Feilhauer: And look, and there’s a lot of drawbacks. And. You know, at the same level, the, the American [00:20:00] economy and the American labor market is so much more dynamic. I mean, I, you know, I’m an economic refugee myself, right? It’s like, this is so awesome.
Stephan Feilhauer: You know, like why am I sitting here? Why am I not back, back in Berlin? Right. But, um, uh, so there’s lots of drawbacks as well, but I think the, for the. Uh, for the median person, uh, I think there’s, there’s just a lot of opportunity. Um, and that’s, and that’s before we talk about a lot of it.
Wyatt Smith: We think a lot about it at the firm level in the U.
Wyatt Smith: S., so we support a lot of companies that are looking to build their own apprenticeship programs or already have in many cases built them. And one of the big challenges that they face is unlike a European model, there isn’t a lot of support from the state. It’s a, it’s a business case that has to stand on its own feet.
Wyatt Smith: In the context of how you’re going to show some type of return on human capital that you’re investing in. And so you become also very subject to the retention risk of those employees. And it’s really great that the U. S. system is so dynamic that [00:21:00] at will employment allows for people to kind of vote with their feet if they don’t like the culture or other parts of their job.
Wyatt Smith: It makes it awfully difficult to underwrite a bigger ongoing investment in apprenticeship as the firm. And so I think that there’s interesting things to learn about a system that. It takes a point of view that we want to increase the workforce capacity in the system, because that’s how we’re going to increase like overall GDP growth.
Wyatt Smith: And then the question about who delivers the training is an open one. Is it a community college? Is it a trade school? Is it the company itself? And making the dollars somewhat flexible to follow the learner is an interesting policy mechanism that doesn’t require any new spending and just requires some flexibility on the dollars that are out there.
Wyatt Smith: It’s like your 401k, like it sort of moves with you. A hundred percent, like a lifetime learning account.
Stephan Feilhauer: Yeah.
Wyatt Smith: And you can, you can conceive of a model now where as an employer making a bet on a young person saying I’m going to pay them on day one, even though they’re not technically qualified yet to do this [00:22:00] job.
Wyatt Smith: But I’m really excited to do that because they’re in intrinsics, their work ethic, their grit, their coachability are off the charts. Pretty soon their technical skills going to be there as well. It works when you have highly productive jobs where you can attribute revenue to a skilled worker. It is more challenging when attributions tougher because you’re on the manufacturing line or.
Wyatt Smith: It’s a little bit less clear how to differentiate the most productive from least productive person on a team. So I think it’s very possible that it starts with roles that have like very clear job and ticket level attribution of revenue growth, because you can under underwrite that so much more tightly.
Wyatt Smith: Now, if only there was
Stephan Feilhauer: a software
Wyatt Smith: platform,
Stephan Feilhauer: we can track those things, right?
Wyatt Smith: Someone should work on that. I know. It’s true. I know. That is true. Um, advice you have for entrepreneurs out there that are looking to make big investments Either directly themselves or through.
Stephan Feilhauer: Yeah, it’s, so it’s, [00:23:00] it’s, it’s funny.
Stephan Feilhauer: It’s something that we think about a lot in, in the whole context of the energy transition. And, you know, maybe just to step back a little bit, right? There’s a lot of excitement about climate tech, energy tech. It’s funny, the moniker has changed a few times, you know, it used to be called clean tech, you know, then there was a clean tech winter.
Stephan Feilhauer: Um, that was called climate tech. Uh, it’s sort of all, all means similar things. Um, what, what I’ve looked at and, you know, we, we sort of looked at this a little bit in, in, in my prior job was, um, just where the money’s going, follow the money and just looking at the supply and demand. Um, what is absolutely wonderful is that there are a lot of new startups in this space.
Stephan Feilhauer: And there’s a lot of capital for these startups. So, you know, back in the day, um, you know, when I got started, the concept of, you know, a pre seed round for some [00:24:00] idea that, you know, that was, that was on a piece of paper, outside of Silicon Valley, candidly, was laughable. Now, you know, I can, you know, probably tonight, there’s three events here in New York.
Stephan Feilhauer: Where you can pitch a climate tech startup to some investors and get funded, you know, like almost immediately. So it’s, it’s wonderful that there’s, that there’s, you know, that there’s this understanding and that there is this, this community around it. Um, if you look at some of the numbers, there’s.
Stephan Feilhauer: Arguably an oversupply of capital for early stage venture in climate tech. And you see that there are a lot of early stage funds have been raised. And especially now with the fundraising environment getting a little bit tougher. A lot of the funds. Are skewing a little bit smaller. And so what that means is that they’re skewing earlier because that’s the only way how you can make the portfolio math work.
Stephan Feilhauer: Um, so, so that’s sort of the, the [00:25:00] very early stage of, you know, of where we’re at, you look at the other end of the barbell, so that the late stage private equity, late stage infrastructure through the cycles, um, that. Um, that asset class is relatively well understood, you know, has very deep backings and especially the large platforms, you know, that are managing several billion have very good access to capital.
Stephan Feilhauer: So I would say the supply and demand on the late stage on the, you know, the, you know, billion dollar plus, um, you know, tickets is very much there on the early stage. It’s, you know, there’s too much capital and not enough ideas in the middle. Um, it’s actually flipped around. So there’s, as these, as these climate tech companies are growing up, and they’re now not raising 5 or 10 million, they’re doing really well, they need to raise 20, 50, 75 million dollars.
Stephan Feilhauer: Now all of a sudden the early stage, uh, funds are tapping out. [00:26:00] Uh, and there actually isn’t enough growth capital in between. Writing the, you know, 50 to $200 million, uh, checks. Um, and there’s a real dearth. And so people used to talk about the Valley of death Yeah. Of, you know, of, of a lot of these startups.
Stephan Feilhauer: You know, you would get, you would develop some technology, uh, and it looks really promising, but then, you know, you have to pilot it and you have to go through and, and, you know, and, and basically yeah, you, you, you know, you get, uh, you get killed. In, in the meantime, because you don’t, you’re not making it to like, you know, the, the, the full on rollout, um, in, in climate investing, it’s very much like that where you’ve got a really promising technology and you’re doing some pilots, you know, and you’ve got some very early commercial traction, but you’re not, you know, you’re not getting that, that incremental financing because you’re not sort of there where it’s fully de risked and you’ve got Um, an [00:27:00] engineering shop that writes a bankability report on you and you’ve got, you’re signing 10 year off tech contracts with the U.
Stephan Feilhauer: S. Government. Right. And so that is really where the, where the biggest capital opportunity mismatches, um, and that was a very big driver for, you know, why, why I’m sitting in the seat that I’m sitting in today because the, the organization that I’m working with today is actually really much focused on that middle piece.
Stephan Feilhauer: And taking a lot of the companies that are coming out of the early stage grow and essentially helping them grow to, um, you know, to the late stage private equity infrastructure world. Um, that’s where, that’s where it’s, it’s a pure, it’s a pure supply demand side. Uh, I think that math is going to change over time, but today and probably for the next couple of years.
Stephan Feilhauer: Um, that’s really where there is, there is the biggest dearth of capital and therefore the largest [00:28:00] opportunity set, uh, from an, from an investor perspective.
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Stephan Feilhauer: if it’s a good fit? Um, you know, there, there’s a few things of, you know, like, is the round size big enough? You know, what [00:29:00] sort of just a few financial metrics.
Stephan Feilhauer: But if you think about it for these companies, um, the question is, is this, like, is there a binary technology risk or if there is, then we, we can’t take it. Um, we also spend a lot of time looking at the team and not only, not only the CEO and not only the founder. Um, but really sort of the bench, um, you know, around the senior management team, um, do they have experience, um, and, and especially, you know, in the energy transition world, who, like what partners are they around, do they know how to negotiate an EPC contract, right?
Stephan Feilhauer: Like, do they, you know, have they worked with construction crews before, you know, what offtake, uh, agreements are in place? Uh, you know, how, how do you, you know, how do you go about financing the rollout of these companies? So there’s a lot of. I would say there’s a lot of, like, hard metrics. But then also just a lot of soft [00:30:00] metrics around, you know, what is, what is the culture that this team has built?
Stephan Feilhauer: Um, are they attracting talent? Is there retention? You know, are people staying? Um, are they, you know, are they addressing, uh, topics and problems that are, that are big enough? Is there a market for that? You know, what are, and a lot of it is just, You know, like what, what are the contractual relationships of this, of this company, both on, you know, the inputs and the outputs, um, and, and are the, do the unit economics stack up because it’s, it’s, it’s wonderful to have a great idea, but, um, you know, in this capitalist society that we live in, you know, unless you can make money, uh, you know, it’s not, it’s, it’s not going to scale sustainably.
Wyatt Smith: Yeah. When the unit economics aren’t there, because a lot, for a lot of firms, that was not the most important thing to solve. Yes. You know, at series seed and A and sometimes even at B. Um, when you see unit economics not tying, is it because they’re operating with too many services tied to the, [00:31:00] I know it’s hard to, it’s hard to generalize, but where, where tends to be the place where it falls?
Wyatt Smith: Yeah. Upside down.
Stephan Feilhauer: Yeah, no, and this is sort of exactly what we’re looking for, right? Cause we’re looking to take scale up risks. So for, for me, the thing that I really focus on is. Uh, the, the Unitech fabrics might be really attractive and they may work, but you just don’t have the scale. You’re not making enough widgets, you know, building enough projects where, um, you know, all of the rest of the team that you have around is, is operating efficiently.
Stephan Feilhauer: Um, but if you just, you know, double, triple, 5X, you know, the widgets that you’re building or the stuff that you’re building, Then as a, as a company, as a going concern for the company, then it works. That’s exciting for us, right? Like that’s exactly what we’re looking to, to bet. Um, there are a few technologies that I think are just going to struggle very long term.
Stephan Feilhauer: Um, and even if you make some really heroic [00:32:00] assumptions on cost curves coming down on, you know, government funding being there to, you know, to bridge these technologies, it, it may not be enough. Right. And so then that’s. Um, those are the kinds of bets that, you know, my, my venture colleagues are taking. And if they get it right, it’s a hundred bagger.
Stephan Feilhauer: They return the fund that they, you know, and you know, they’re, they’re on, you know, on, on, on the first page of time magazine. Um, you know, as a, as an investor, I’m looking for the sort of like the doubles, the triples, the boring stuff, the non sexy stuff, but the stuff where we can deploy billions of dollars of capital, um, you know, as opposed to looking for a few of these moon shots.
Stephan Feilhauer: Boring is, boring is my motto. It served me very well, like in, in personal life and professional life. You make it seem interesting. I’m
Alex Hudgens: sad. None of this is boring. I’m just.
Wyatt Smith: Yeah. Not boring to
Alex Hudgens: us.
Wyatt Smith: It’s good. We, we, we, we’ve been [00:33:00] thinking a lot about ways software creates leverage for companies to be able to address a workforce shortage.
Wyatt Smith: And there’s probably three levers that we’re testing. The first is how to get more people into the supply base. So this is taking somebody that is unskilled. Yeah. Yeah. Yeah. And helping them build a skill quickly. And if you take the point of view that largely these are competency driven jobs and not time based jobs from a mastery standpoint, you can find people to have really good intrinsics and make them skilled quickly.
Wyatt Smith: The second lever is production. It’s how much output you can generate for every labor hour of people in the system. And often the challenge around productivity is. You have a hardworking person, but they’re not set up with the right tools to be as impactful as they could be. And so technology plays a really cool role in helping drive more incremental output per hour.
Wyatt Smith: And then the third lever is retention. So if you can create a better experience for somebody so that they feel more appreciated, [00:34:00] they feel more rewarded, there’s a chance to participate in the value that they’re creating. And that’s really interesting from a wages growth standpoint. Well, gosh, that’s pretty powerful.
Wyatt Smith: Now I want to stick around. In the industry at the company much longer. And so if you get more people in and they all produce more and they stick around longer, that’s a way to increase productivity significantly. And if, if, if you look at it from like a time and materials as being the big drivers of cost in many of these companies, being able to reduce the time.
Wyatt Smith: That is required to get a product, project done, materially increases the profitability of that project too. So that’s, that’s the way we’re approaching it. I’m curious about things you’ve seen from a technology standpoint that have been most interesting or on how to increase productivity. Yeah.
Stephan Feilhauer: Um, a lot of it is really driven by automation and, and robotics and taking, um, [00:35:00] taking sort of manual processes and just making them.
Stephan Feilhauer: A lot more repeatable, uh, quickly. Um, and, and some of that means that you may actually need fewer people on it. Um, very often though, what it means is you need more specialization and you need people that actually are, uh, you know, back to sort of my, my welding example, right? Like. If you have an order book that’s big enough and you know, you can have an awesome guy who is, uh, you know, an ace welder and, and he is welding.
Stephan Feilhauer: All day, every day, not only does he or she become, you know, even better at their job, but, you know, their, their work product becomes, you know, becomes even better, um, and it sort of becomes this, you know, this virtuous cycle, whereas if you’re in a [00:36:00] situation where, you know, people are sort of moving around, it’s a little bit chaotic, it takes, um, you know, it takes a lot of time to mobilize and demobilize and move in between jobs.
Stephan Feilhauer: Um, that’s when we see sort of this downward spiral, right, where, like, people get demotivated, um, you’ve got this attrition problem that, you know, that you had mentioned. Um, and so it’s, it’s really, it’s really building that expertise and, you know, and building that specificity, um, and making sure that, you know, the, you’re, you’re really guiding that specialization where, where you do find yourself in a way where, where it’s this upward spiral.
Stephan Feilhauer: Um, and that’s where, that’s where these businesses just become really competitive and really like really great. And it almost doesn’t matter. Like, It’s, it’s a little bit, you know, like I have this conversation with, you know, we use a lot of lawyers, you know, for all this, these deals that it’s always these, you know, these comments that you have, you know, if you have a really good lawyer, um, it, it, you know, [00:37:00] it, you can afford to pay that lawyer a lot of money per hour, uh, because the, the output, the work product that you’re getting is, is just so much better.
Stephan Feilhauer: Um, and it’s, it’s, it’s worth all your money. And it’s the same thing with, you know, with, uh, with, with the skilled trades, right? If you. If you do not need to rework, if you don’t have any defects, if you know, you’re not going to have any, any liability claims, um, that, that really matters now, it may not matter over the course of a week or a month.
Stephan Feilhauer: And this is where sort of the incentive timelines, you know, need to be properly calibrated, but if you’re a business owner, you’re sure as hell going to care about that. Right. Uh, the problem is. You know, if you’re Boeing and you’re, you’re, you know, managing for your next quarterly earnings, uh, it may not matter.
Stephan Feilhauer: Right. So, and, and you’re solving for different things. So I think not to bash that company, but I think [00:38:00] having the incentive alignment is really important. Uh, and, and making sure that the teams that you’re working on are thinking like owners and are, you know, and are incentivized with the right longterm incentives is, is hugely important because that.
Stephan Feilhauer: Um, you know, that drives the right outcomes.
Wyatt Smith: I think about this in the context of how do you reward people and recognize them for doing the right thing. Um, and we’ve been, we’ve been testing lots of ideas around best practice adherence and how do you really celebrate it. I’m curious about your views on artificial intelligence and machine learning and how those types of tools can solve a problem related to best practices and ensuring people have that right alignment.
Wyatt Smith: Are you seeing anything that you find compelling?
Stephan Feilhauer: Yeah, it’s, uh, it’s interesting, right? Like AI has become such a buzzword. Um, I, I don’t think I see like a single company pitch that doesn’t find a way [00:39:00] to, like, shoehorn, exactly like, you know, there’s, uh, you know, to, to add AI in. Um, but to, um, but to think about it, look, I think it’s, if you think about what, what artificial intelligence can do and what AI can do just in terms of.
Stephan Feilhauer: Of further empowering the workers, right? And, and it can be, and it can be anything from, you know, the, the person who’s on the assembly line in, in a, in a prior job. Uh, yeah, we, we were invested in a fully electric industrial yard truck company and I called orange TV. Um, and one of the big things for them was making sure that, uh, the folks on the assembly line.
Stephan Feilhauer: Are following instructions and are really going through checklists, right. And basically having this industrial process that makes sure that quality and the product is sort of exactly where it needs to be. Um, right now, all of that stuff is printed out on pieces of paper. Um, it, it looks pretty [00:40:00] cumbersome.
Stephan Feilhauer: Uh, and, um, and it’s, it’s not super elegant, but it works. Uh, I can definitely see a world where, you know, it’s, The future worker will, you know, just have some glasses on, you know, and we’ll get some prompts there. And there’s a, there’s a level of quality control in that, um, that kind of technology already exists in offshore oil rigs, um, and in, in a few other, uh, you know, in, in, in a few other applications where you are very far away from somewhere or it’s, or it’s hard to have it.
Stephan Feilhauer: Um, yeah, the cost of having to redo something is, is very, very high. So I think those are, those are sort of some of the first areas, you know, medicine, um, is sort of another one that, you know, that people always like to cite. Um, but even, you know, even in something like very pedestrian, right, like coding or even just like writing emails, it’s like, you know, you have some, you know, you have, you have someone that says, Hey, how about, how about I [00:41:00] respond this way?
Stephan Feilhauer: And then you say, Oh, that’s. That’s actually a much more eloquent way than what I would have come up with. Yes, please. Um, so, so there’s, I think there’s a lot of, there’s a lot to be said about productivity. I think we’re, we’re definitely, it feels like we’re, you know, we’re on the upward slope of the, uh, you know, uh, of the hype scale, um, around, around a lot of things AI.
Stephan Feilhauer: But I think when you, you know, when we sort of go, go over the peak and, you know, come down on the other side, I think we, we will see that there’s just a lot of really useful things. Um, that will just make our, our daily life, uh, more productive and, uh, you know, more pleasant. And so, so, you know, we’ll, we’ll all get to benefit from that.
Stephan Feilhauer: I agree. Well said.
Alex Hudgens: That’s pretty hopeful. That’s been going through my head this whole time is when you are working in an industry that has some just massive and arguably scary, depressing problems
Stephan Feilhauer: that
Alex Hudgens: you’re trying to solve. [00:42:00] How do you remain? I’m hopeful and excited that, you know, we can do, we can do this.
Stephan Feilhauer: Yeah. Um, well, I guess I’m, I’m a relatively optimistic person to begin with. Fair. And I mean, like, you know, the world’s ending if we don’t do anything. So you can either, you can either freak out and you can have fear be, you know, be your guiding force. And, you know, sometimes it’s quite good to like get a jolt.
Stephan Feilhauer: Uh, right, because, uh, you know, yeah, not to scare anyone, but like, this is the decade where we have to nail it. Yeah. Because otherwise, we’re going to be battling temperatures, we’re going to be battling floods, we’re going to be battling all kinds of natural disasters. Uh, so, now’s the time. The thing that makes me really optimistic is just thinking about what the, what, what the overall scenario is that we’re, that we’re looking into.
Stephan Feilhauer: So [00:43:00] when, when I started my career, working in clean tech was a really bizarre and geeky and niche thing to do. And, um, Uh, yeah, I’m still, still involved with that campus recruiting and sort of, you know, talking to some students that are, you know, that are thinking about like what’s their first job out of college.
Stephan Feilhauer: And for some reason, you know, investing in climate tech has become super cool. Uh, and, and just the amount of talent that the industry is now attracting is absolutely phenomenal. And. We, we saw this, you know, a few years ago, it was really tough to, uh, actually, you know, get tech talent, right. And you were always competing and candidly, we were always losing against, you know, some of the big, you know, the Googles, the Metas, the Amazons of the world that has now changed a little bit, you know, as these industries have, you know, have been right sizing, uh, themselves.
Stephan Feilhauer: [00:44:00] Um, and so there’s just this incredible inflow of talent. Um, and yeah, a generation of folks and people always like to, you know, like to, like to talk down to like, you know, the new kids and oh, they, you know, have no work ethic and they, you know, and they don’t care. Um, I actually find the absolute opposite.
Stephan Feilhauer: I find that, uh, a lot of the, um, you know, a lot of the young students that are coming, you know, that are joining the workforce are incredibly mission driven. You have a really clear sense of purpose, have a strong desire of working in companies that, that they like, but also working in a broader cause. Um, and so I am, I am incredibly hopeful just looking at that and seeing, and seeing the amount of talent that’s, uh, that’s going to the right place.
Stephan Feilhauer: That’s great.
Alex Hudgens: That’s great. Team optimistic, too. That’s great. But it’s helpful [00:45:00] to hear it from people, boots on the ground, actually talking to Gen Z. I’m like, especially with what you do, it’s like, well, they’re going to be on the planet longer than the rest of, like, this, they’re, you know, we, we’re here, too, and perhaps we could be resentful of previous generations for not setting us up the best, but now
Stephan Feilhauer: We’re going to check out earlier.
Stephan Feilhauer: That’s for sure. Exactly.
Alex Hudgens: They got it.
Stephan Feilhauer: Alright, let’s lighten you around.
Alex Hudgens: Not to be dark. Okay, we start with a book recommendation. How did you frame it?
Wyatt Smith: A book, a book that has caused you, after reading it, to change your behavior in some way. Oh, wow. Um,
Stephan Feilhauer: Well, um, not to sort of get super dark about this, but, uh, go for it.
Stephan Feilhauer: I
Alex Hudgens: already went there, keep going.
Stephan Feilhauer: So, um, my, my father passed away when I was, um, you know, when I was a late teenager. Um, and I found myself in a situation where I had to, you know, very quickly just, [00:46:00] you know, take on responsibilities that I thought, you know, I was not going to have to carry for, you know, several decades.
Stephan Feilhauer: Um, and so I actually read a book that’s called, uh, the, the Tibetan book of living and dying, um, that, and, and I’m sort of not Buddhist, you know, by any, you know, stretch of the imagination, but there is just a, there was a broader. Vision of resilience and of, um, and of acceptance of, of your, you know, life’s fate that, um, you know, as a, as a late teenager was, uh, you know, was very helpful to me.
Stephan Feilhauer: Um, and I think has really changed, you know, at the time just really changed how, you know, how I approached life and, um, you know, how, how, how I act it. In other news, I actually don’t read a lot these days. I’ve got two little kids. They keep me very busy. I travel a lot. Um, what I will say is, um, and I’m not getting paid for this, The [00:47:00] Economist makes very, very good podcasts.
Stephan Feilhauer: And so there’s one really good podcast series called The Prince about China and Xi. And there is, this is excellent. There’s one really good one called A Year in Moscow, which is about Putin and the Ukraine war. Mm. Uh, and. Those are, you know, I think I, you know, keep up with current events and I, you know, like reading books every once in a while, but this was just a really, really good way of distilling a lot of, you know, you learn a lot about the history and you know, you just get a lot of, a lot of in depth, um, analysis that you, you know, that you wouldn’t get otherwise.
Stephan Feilhauer: So yeah. It’s great. So yeah. The
Wyatt Smith: Prince. The Prince and A Year in Moscow. A Year in Moscow. Yeah. In The Prince, they, they chronicle Xi Jinping’s experience coming to Iowa. Yeah. Exactly. Yeah. In the seventies, he was an exchange student and he’s like at the, at the fair, [00:48:00] riding a tractor. This is his introduction.
Wyatt Smith: Right.
Alex Hudgens: Oreo or something.
Wyatt Smith: Uh, and he befriends a young governor, Terry Branstad, who he like forms this lifelong relationship with, uh, so much so that Branstad becomes the ambassador to China in the last administration and was on a much closer relationship with president. She, than many of our previous ambassadors have been.
Wyatt Smith: It’s a really wild story. Yeah. Yeah. Those are really good racks of podcast.
Stephan Feilhauer: Yeah.
Alex Hudgens: And you answered lightning round question number two, which was, do you have any podcasts?
Wyatt Smith: Oh, there you go. There you go. Two in one. Exactly. Two in one. Double lightning. Yeah.
Alex Hudgens: Tools. This is one of my favorite, this is becoming, I think, my favorite question in our lightning round.
Alex Hudgens: What are some tools, most likely productivity tools, or hacks, or habits, that you have That you have and would
Stephan Feilhauer: recommend. Interesting. Um, well, I was just reflecting on this and, uh, my, my wife was [00:49:00] reminding me that I still have a lot of, um, of like paper booklets that, so I, I always used to have like pen and paper and would just have, you know, like a, like a notepad and basically scribble some notes on to do lists, you know, like meeting notes, whatever.
Stephan Feilhauer: Um, I, I have gone fully digital. And the one thing that I find that is wonderful about being fully digital is you can actually find stuff always. Um, and so what I’ve, yeah, I’ve been using Salesforce a lot. Um, there’s many other free tools. Um, and there’s also just things like writing notes or like writing an email to yourself.
Stephan Feilhauer: Uh, especially, you know, like I’ve switched jobs a couple of times over the decades. Uh, you know, if I’ve emailed myself to my personal email, I can, you know, pull up an email, you know, like, or, or some, you know, some interesting report or something that I read, you know, 10 years after, like, And search used [00:50:00] to be really painful.
Stephan Feilhauer: Search has gotten much, much, much, much better. Um, and so retrieving, retrieving things digitally is, is, has become so much easier, whereas, you know, before I would ruffle through, you know, stacks, stacks of paper, um, and, and would give up in a, you know, in a very frustrated manner. But yeah, so that’s, it’s not, it’s not glamorous, but I think that’s, that’s, that’s my productivity hook.
Alex Hudgens: Um, my memory is not where I’d like to be, so yes. Search of all the notes, but I’m also a handwritten note person as well. Where is the AI or tool that I like, I don’t know, set my phone on the thing and it goes
Stephan Feilhauer: Well, so I’ve actually, I’ve actually, well, so that exists. Um, uh, I actually don’t know what it’s called, but you know, it definitely exists.
Stephan Feilhauer: And then the other thing that I’ve seen that’s pretty cool is that, Um, you can, you know, AI just reads some samples of your handwriting and [00:51:00] then learns how to handwrite. And so I’ve seen, you know, like a little, a little robotic arm with a pen, like writing handwritten notes in exactly your handwriting.
Stephan Feilhauer: So, uh, You know, the next time you’re, you know, organizing a dinner party for 250 people or writing wedding invites or whatever. I just did that last year. Oh,
Wyatt Smith: there you go. Congratulations. And, uh, our closing question is how can listeners help you right now? What are projects you have going on? Can they help me?
Wyatt Smith: The people could be useful.
Stephan Feilhauer: Find me good, you know, good growth companies that we should invest into. You know, we’re writing 50 to 200 million checks. into companies that, um, you know, are growing quickly, have, you know, have substantial revenue, um, and, um, you know, are looking to, to solve the, you know, some facet of the energy transition.
Stephan Feilhauer: So, uh, you know, come, come find me on social and pitch me the deal.
Wyatt Smith: That’s right. Request for startups.
Alex Hudgens: That [00:52:00] last bullet point requirement. I was like, if you wrote me a 50 million check, I would do good things in the world. I promise. But I’m not specifically doing that.
Wyatt Smith: We got to get through your economics up and revenue revenue is the key.
Alex Hudgens: Where can we find you on social?
Stephan Feilhauer: Oh, on social. So, so I’m only on LinkedIn. I, I consume through, you know, Instagram and Tik TOK and Facebook, but I, uh, I do not post. I, uh, There’s just too much craziness out there.
Alex Hudgens: LinkedIn.
Stephan Feilhauer: Yeah.
Alex Hudgens: Yeah.
Stephan Feilhauer: Very, very old and boring.
Alex Hudgens: You said boring a few times. I’m like, it just sounds efficient.
Alex Hudgens: That’s, we like boring.
Wyatt Smith: It’s been a fun conversation. Thank you for joining us. Awesome. Thanks for having me. for your friendship and believing in this mission. And we’re really excited to collaborate with you in the future. Awesome. Thanks so much, guys. Thank
Stephan Feilhauer: [00:53:00] you.
