Navigating the Energy Transition with Daniel Frey

Jake Aaron Villarreal: Welcome to From the Ground Up, the podcast where we delve deep into the inspiring stories of entrepreneurs and their journey to build successful startups. I'm your host, Jake Aaron Villarreal, and in each episode I sit down with the founders to learn about their experiences, the challenges they face, the lessons they've learned, and the insights they've gained while turning their dreams into reality. And super excited to have on today's episode Daniel Frey from Austin, Texas, who leads THG Energy Solutions, an innovative software as a service platform around energy, data, and technology. And let's get into you, Daniel. Um, first of all, welcome to the show.

Daniel Frey: Thanks, Jake. It's good to be here. Appreciate your time.

Jake Aaron Villarreal: Great. So a little background on Daniel. Daniel has more than 30 years of experience in energy marketing and trading. In 2011, he led a group of investors to acquire THG Energy Solutions. Since then, he and the management team have dramatically expanded the company and its offerings in North America, and we'll dive into that a little bit more, but he does come from a good background in terms of education. He's a CPA and received his MBA from Oklahoma State University. So Dan, do you go by Dan or Daniel?

Daniel Frey: Dan is fine.

Jake Aaron Villarreal: Okay, Dan. All right. Um, before we dive into your company, and we'll touch on that, we'll dive a little bit deeper, tell me a little bit about you. Where are you from originally? Where were you born? Where'd you grow up?

Daniel Frey: Yeah, uh, grew up in uh Hutchinson, Kansas, which is right in the middle of, of Kansas. Had a, had a great background. I'm the youngest of five siblings and just had a great time growing up. My dad was in sales and uh learned to appreciate uh, you know, discipline, sales, marketing, always doing what you're supposed to, to do. And so we had some great role models growing up, uh Midwestern background. Was able to get involved in the energy business right out of school uh in, in oil and gas in Tulsa. Moved down to Tulsa in 1983. Essentially have been in the energy marketing, uh trading space for most of my career.

Uh, a lot like, like your intro talked about a little bit, uh I was, uh I had an opportunity to, to get involved in more of the data side of energy management in 2011 with THG. Prior to that, I spent a lot of time with customers trying to help them understand their data, their energy management, in, in particular helping them purchase and, and structure natural gas or electricity agreements. These are large commercial, industrial customers uh that we're trying to save money and, and be more efficient. Saw lots of opportunities for, for savings and, and just a better product offering around uh energy management. So that, that's what kind of got us started in the, in, in this path.

Jake Aaron Villarreal: That's great. I'm going to take you back a little bit earlier than that. What was your very first job that you had? And not even in college, maybe even earlier than that?

Daniel Frey: Well, uh, we, I always had to find my own money, uh so, you know, paper route, uh you know, at 12. And, you know, people kind of think that's a, an easy thing, but it was, it was a morning paper route. So, you know, people would start calling the house at 6:30 if they didn't get their paper, and you had to get it all delivered before school. And, and then you had to collect all the accounts, and you had to manage, uh, you know, inventory in terms of uh, number of papers that you had versus how many customers you had, and, and then focus on customer service and, and get things done. I, I really liked uh being independent. Uh I liked being up at 5:00 in the morning riding my bike around town, throwing papers and, and being able to leave the house and, and do that.

So uh, that was kind of my first job and, and my first kind of business that I, that I had. I, I got to, to learn a lot about that. I ended up actually selling a lot of papers door-to-door, and, and uh, and then uh, they actually gave me a job in college to uh be an accounting intern in the publishing company. So I learned a lot through the newspaper business uh in, in Wichita, Kansas. And uh, it was a good first entrepreneurial experience uh being a paper boy, so uh, goes, goes back to when I was 12.

Jake Aaron Villarreal: Yeah, that's great. I can't tell you how many entrepreneurs we've talked to that that was their first job. And if you were to correlate that experience versus where you're at today, it seems very consistent, which is you have to have the consistency to do the job, you got to wake up early, you have to be on a schedule, you have high demand from your customers, customer service is critically important. It's just the paper, but it's the start of someone's day. And then collecting, making sure that you're getting paid so that it actually makes sense for everybody. Really uh a valuable job and experience.

Going from that experience into college, you know, when I think of energy, gas and oil and everything above, there's a lot of areas that it could go down in paths. I'm a huge Dallas Cowboy fan and I know Jerry Jones at some point was in that space, and I don't know the particulars exactly what he was doing, but you hear about, you know, lots of opportunities in that area. You know, for those of the listeners that aren't very deep into energy, you know, we remember Enron and, and all sorts of big company names that bring it to the surface, but everybody needs energy. Every company uses energy. So particularly you, what was your interest around that? Sometimes it's proximity because that's what you grew up around, those are the industries, but what was it that led you into the energy space?

Daniel Frey: Well, it was a pretty simple analysis of, geez, we, we spend a lot of money on energy, and it seems like if you do it right, there's, there's got to be an opportunity for, for making a little bit of money. So there, there were a lot of energy companies uh in the, in the Midwest and in uh, in Wichita. There's, there's Koch Industries. I was a Wichita State graduate, um saw how tremendously successful they were, uh starting to. And, and then seeing, you know, you mentioned Jerry Jones, you mentioned uh, you know, a lot of what was going on in the, in the oil and gas business. It was, it was just starting to, to open up uh and, and provide um competitive markets. If you remember, this was back in the Jimmy Carter days. So um, you know, big uh price volatility in the 70s, OPEC, uh you know, deregulation of natural gas. So there was, even for somebody outside of the business, it was clear to see that energy was uh an exciting place to be.

And, and I just thought, I, I, I'd like to be a part of that. And in some way, shape, or form, I had an opportunity to get involved with an oil and gas company that was very entrepreneurial and uh, um growing quickly. And, and uh, was able to, to kind of be involved in the ground floor of building the first energy marketing companies. When energy was starting to deregulate, companies were able to purchase uh their own natural gas. These are commercial, industrial accounts that could, could buy third-party natural gas and, and transport it and ship it. And you know, for, for people outside of the business, it's a little bit similar to, you remember when, when telecom deregulated and you could buy, you know, your long distance telecom from anybody, uh didn't affect you know, how, how telecom service was delivered to your home. You just purchased, you know, your, your long distance telecom from Sprint or, or some other company.

Energy is kind of the same way. You can buy natural gas or electricity if you're a big customer from third parties, and you can ship and, and transport uh your, your energy using, you know, pipelines or, or uh electricity using the grid. So that was a fascinating business uh for me, and uh saw lots of opportunity around it. It started uh in the 1980s. Uh you mentioned Enron, uh you know, that was kind of the, the go-go days of you know the 80s and 90s when energy was starting to be commoditized and traded and uh actively marketed. And so it was an exciting time and, and I was uh fortunate enough to, to be around there. A lot of the folks that started at that time went on to, to build energy companies and in the deregulated related energy space. So had, had good opportunities and, and to, to learn about the business. And um so, great time to grow up around the energy business.

Jake Aaron Villarreal: Yeah, sounds like a gold rush time where deregulation happens and everyone can jump in and figure out what strategy could work and if they do it right, execute and have a lot of success.

Daniel Frey: Yeah, a little bit of that.

Jake Aaron Villarreal: Yeah. Walk me through your entrepreneurial experiences a little bit. So THG Energy Solutions, we'll, we'll talk about THG and kind of how you came together with the group and you're leading that company now. But prior to that, were you holding VP level roles in other companies, or did you actually ever take a company, bootstrap it and try and take it to market?

Daniel Frey: Yeah, so uh, there were a couple of uh companies I was involved with prior to THG. Really learned the business just uh driving around in the Midwest looking for smokestacks and, you know, calling on plant managers to purchase gas or electricity, natural gas primarily, you know. And these, I was in the steel mills and the chicken processing houses and the, you know, the paper and pulp manufacturers. And this was prior to the internet, it was, you know, you, you'd show up and sit in the plant manager's lobby and, and try to take him to lunch. And so all of that kind of grew up with a sales, marketing focus and helping these clients kind of with this new idea of purchasing, you know, cheaper, better energy solutions, helping them hedge their product, helping them manage fixed price exposure around energy, which was very volatile.

So I got to learn by working with a lot of the big industrial customers and some really smart facility managers and energy purchasers. And saw opportunities to start a couple of businesses around the marketing and trading of energy. The, the one was primarily a company called Seminole Energy. I was one of the first four people that started that company. We, we uh, in the post-Enron era, uh most companies were having to exit uh energy marketing and trading. At Enron, it kind of poisoned the water a little bit, uh and, and so there were a lot of companies that decided that this was not something that their shareholders wanted to support. So for about a 10-year period there, there was opportunities to acquire, build uh, and, and put together uh still very necessary energy marketing, trading uh you know, strategies for companies. And, and so Seminole Energy was, was uh, I was uh one of the full partners in, and we actively grew that business and acquired a lot of these small marketing books and kind of put that into a very successful company. So, you know, prior to THG, that was, that was really what I was focused on all the way up until 2011.

Jake Aaron Villarreal: That's great.

Daniel Frey: We raised outside capital, we, we eventually exited that business and it was, it was a very successful uh effort around that. Grew it from four people to, you know, somewhere around 300 people at the time.

Jake Aaron Villarreal: Wow, that's great. You know, in that trajectory of four to 300, there's always ups and downs. What was the biggest challenge of getting that company off the ground and really hitting the target market?

Daniel Frey: Well, there we were always uh having to manage uh credit. Uh he, you know, and that, that also kind of got to why we did some things at THG that we wanted to do. So, you know, buying uh a lot of uh natural gas and electricity, uh the, that business, marketing, trading business, uh can, can be very volatile. So managing risk on a, on an hour-to-hour, day-to-day basis around commodity volatility, making sure that uh, you know, you're properly hedged and that, that you're, you know, helping your customers be properly hedged as well. Uh again, a lot of price volatility, and, and you're maybe at the end of the day making, you know, 1 to 2 percent margins on uh, uh, you know, natural gas or electricity sales. So um, you could easily get steamrolled uh if, if you're not managing your risk properly.

And uh every once in a while uh the industry cycles through these big credit uh, you know, problems or cycles, and uh you know, somebody gets in trouble and, and, and it uh, it moves around the industry and you've got to make sure that you've got good credit, good um you know, balance sheet capabilities. And so learning from all of that volatility, you know, helped us kind of be more conservative, make sure that we're fully hedged, make sure that our customers weren't getting out over their skis, uh and, and really helping them think about energy management and energy risk.

A lot of this drives toward, you know, good energy data, and that's really what, what was about was helping customers really get good analysis around what their energy spend was, what their requirements are going to be, how to best purchase that energy uh and, and how to think about opportunities for energy savings. So all those things really are derived from better data on, on your energy cost, your use, your spend, and over time it's getting more and more complicated as, as people understand, uh, you know, there's this whole... there are two big opportunities right now. There's uh distributed energy, which you can think about as solar panels or battery storage that you're installing or EV chargers that you're having to manage. So these are all kind of, you know, behind-the-meter opportunities for people to start to take control of their own energy production and consumption. And you can think about all of the data requirements that that uh brings to, to uh, you know, what was previously a centralized utility, kind of, you know, one source for all your power. Now you've got to try to integrate solar and maybe you have a battery solution, maybe you need standby generation, you want to monitor that in real time. Those are all really data-rich uh situations where you've got to get, you know, all that data and, and be able to look at it across your company and, and be able to manage it in a way that you didn't have to before.

And the other big driver that people talk about is greenhouse gas emissions or carbon management. You know, we introduced greenhouse gas emissions in 2017, and uh this was, we were fully compliant with uh the greenhouse gas protocols. And uh we rolled it out. We spent about a year and a half testing it, uh and we had zero sales. Uh we were all excited about our, our ability to, to help customers track their greenhouse gas emissions, and uh we couldn't convince anybody that, that it was important enough to do it. And, and so, you know, last year it was probably 80 percent of our sales uh was around greenhouse gas emissions uh reporting and requirements. Uh but it took us five years uh to, and we were essentially, you know, maybe three or four years too early uh in developing the product and, and rolling it out. Uh so, you know, timing and a lot of this stuff is really critical. And you know, you can be early, and if you can survive being early, uh that's, that's, that's not a bad thing. But, but sometimes you're just early. Uh so um, you know, you ask about experiences, and, and that's, that's one of them that I've learned, is, you know, market timing and the ability to anticipate, you know, where the market's going, and, and to be a little early but, but not too early. Uh so that, that's, that's part of the challenges that I've tried to, you know, pick up and learn. Uh.

Jake Aaron Villarreal: Yeah, that's great. I know it's trying to understand, anticipating how far you want to build something, but it's also, you know, business is about solving a problem. What's the problem your customer has that they can't fix and you can bring something to them? So it sounds like in THG you bring in data and clarity about what their spend is and potentially how they can reduce it and manage it better. In your words, what's the problem THG Energy Solutions is solving?

Daniel Frey: Yeah, so the, the two things that I, I kind of, you know, talked about a little bit were, you know, there's 6 million buildings in the United States according to CBECS data. Uh maybe five percent of the customers up till now have started to report on their greenhouse gas emissions. Uh it's just, it's, it's not uh a problem for most companies. But here are the two big things that are happening in, in the energy, in, in the space, is uh if you've got a big customer, uh you're serving General Motors or you're, you're serving, you know, uh pick a Fortune 500 customer, uh they've, they're now coming to you and saying, "Hey, I need your greenhouse gas emissions for your product because I've got to integrate that into my sustainability reporting."

Uh so there's something called Scope 1 uh greenhouse gas emissions, which means it's, it's the, the gas or the diesel or the propane that you consume on site. And then there's something called Scope 2, which is your electricity usage and how clean that utility or, or your portfolio of electricity is. And so it, if you're, if you're in a space where, you know, the, the utility you're securing your electricity from is 40 percent coal and 20 percent wind and you know 30 percent natural gas, you've got to be able to calculate the greenhouse gas emissions from that portfolio of Scope 2 emissions. Most companies are never going to be able to do that themselves. So they've got to hire somebody to, to do all that math and, and to give them a number that extracts down to what's my uh pounds of CO2 that I'm consuming uh in my, in my business, in my, at my facilities. So those are called Scope 1, Scope 2 requirements. And they're pretty well established. There's a lot of things that are controversial in ESG right now, but most people agree that, hey, the, the basic data around Scope 1, Scope 2 reporting is important and I'm gonna have to figure it out.

So five percent of the companies probably do it today. Uh my guess is that in three or four years, 90 percent of the companies are going to have to do it. And it's because your, your supply chain is going to require it, your banker is going to require it, your investors are going to require it, uh or uh you've got the, the Securities Exchange Commission has published uh, you know, now requirements for uh, you know, being able to report this accurately. So in the past, you know, people have, have the tone is greenwashed uh, you know, their sustainability. "Yeah, we want to be green, we want to be sustainable. Here's a, here's a picture of a kid with a flower and here's a, here's a picture of a solar panel and, and we believe in that stuff," and that's it. Now, you know, you've got to be able to incorporate that information in your annual reports. So if you're saying, "Look, I'm going to reduce my greenhouse gas emissions in 2030 by 50%," the question you've got to be able to answer now is, what was your baseline consumption uh in 2020 (if that's your baseline year) and how are you going about this and where are you today?

So, so there's a protocol for managing all of that data that didn't exist before. And the issues now saying, "Look, you know, you've got two to four years to kind of get your act together, but you can no longer just say, 'Yeah, we believe in this and we're moving forward' and, you know, not have the data." So companies are scrambling to try to understand greenhouse gas emissions and they need help. And most of them are doing this for the first time. So that's a huge requirement and a need. And depending on where you live and how important that is to you, you may already have a fully engaged sustainability team or you may just be, "Hey, I don't know, I've got to start on this process. I'm going to have to check a box." Uh yeah, so we, we deal with all kinds of folks, but what we really focus on is, hey, we can help you accomplish this in a, in a way that's cost-effective and efficient and, and doesn't, you know, kill the people that are, are trying to get their regular work done. So greenhouse gas emissions protocols are coming to almost every business and every institution across the United States. And most companies are, aren't very well prepared for it. Uh so that's, that's one big opportunity that, that we're really focused on. The other one...

Jake Aaron Villarreal: Before you go there, I want to actually just add a couple things. So just for the audience, sort of big picture, if you're conserving your energy and you're running a company, say an automotive company like Ford for example, and you're using up a lot of energy and your products that you deliver into market also might put a bunch of CO2... I'm probably missing how I'm saying this, but ultimately pollution leading to potentially global warming and impact of what the government's regulating companies to provide in terms of data and also how much you are, you know, basically polluting the world, if you will, or warming it up. Uh walk me through how this ties into your company at all. Is there this thought about regulations and the SEC saying, "Look, we want to see how well you're being a good, socially good company when it comes to energy," and then there's the carbon credits component to it and taxation, and how does that all tie into what you guys do? Yeah, if at all.

Daniel Frey: It is, as you've talked about, it's, it's very complicated. There, there's a very, there, the, the broad overview is called ESG, or Environmental, Social, Governance, and that involves a ton of different, you know, employee miles and uh, you know, diversity and all kinds of social governance uh reporting requirements. We're uh really focused on facilities uh, and uh, the operating energy and sustainability uh factors for, for managing those facilities. So we're primarily on energy, but it also involves water, waste, recycling. So you can think about it as what's your utility spend for, for water, waste, electricity, gas, what does that footprint look like that you can measure and manage. So that's one subset of a much broader energy and sustainability and social governance kind of uh, you know, solution. But it's, it's the hard data side of it, and, and it's directly related to facilities and, and operations.

Uh and, and over time uh big companies are having to reach out and integrate their entire supply chain. So the, you know, the, the product life cycle of uh how to, how to manage that in a more sustainable way, kind of the, the basic math around that is what are your, you know, uh facilities, what are, how are they consuming uh energy, uh and what are you doing to try to mitigate uh that? Now, well, most companies are, uh the best strategy around that uh, and, and the one that most companies are involved in, is electrification and purchasing of renewable energy uh separate and apart from what your utility might be doing. So there, you know, you see all the time where companies are buying uh a wind farm or uh they're buying renewable energy credits or they're offsetting their purchases with renewable energy: nuclear, wind, uh solar, uh you know, whatever it is. So there's, there's ways of tracking all of that and reporting all of that, and we're engaged and we work with customers to both manage, you know, identify what their current consumption is, and then help them track uh renewable energy purchasing and energy efficiency ideas to help them reduce that footprint as, as time goes forward.

Jake Aaron Villarreal: So what's, what's an ideal client for you and how big are those facilities?

Daniel Frey: Yeah, so you know, we work with uh customers that are managing, you know, multi-facilities. They've got lots of meters, they've got lots of energy spend, and they're trying to pull all this together in an enterprise platform. You can think about uh health care, schools, hospitals, uh REITs uh that are, that are managing commercial real estate, manufacturing locations that have manufacturing, distribution. You know, so anybody with lots of buildings, facilities, meters, and accounts, uh and that could be anyone from, you know, 20 facilities up to 2000 facilities. You know, banks, financial institutions, they're very uh socially uh plugged in. They've got a lot of branches and locations, they want to be good community partners. So, you know, health care same thing, schools, universities same thing, and then commercial real estate obviously. So lots of, you have lots of buildings, lots of meters, lots of accounts. Those, those are typically who, who we're working with.

Jake Aaron Villarreal: That's great. You guys have been in business since 2011. How big is the company today?

Daniel Frey: Uh yeah, so in, in 2011, uh we, we, and up, up until 2019, this was just bootstrapped uh with, with friends, family, and myself. So we, we grew very slowly initially. We weren't sure uh what the requirements were. We spent a lot of time with customers trying to understand, you know, what, where they saw value and, and what they needed and, and what made sense. Uh so, you know, started with when we acquired THG, I think they had maybe 300 accounts, uh so not very many uh, you know, customers, primarily in Texas. So, but they had good energy analytics. So energy cost per square foot, uh total energy consumption. So it was more about energy efficiency and trying to save money and, and, and structure your energy purchasing. Over time slowly grew that.

Uh now we've got uh around 20,000 active accounts in our platform. Uh we, we have our eyes on around 300,000 utility accounts that we're working with to kind of turn those into full sustainability customers. So we have a lot of opportunity within our platform to really help customers develop this broader energy management and sustainability platform. Uh but right now they've just got electricity accounts and they're trying to start with that process. Electricity is the most complicated, it's the most expensive, it's the most impactful, so it's a good place to start. But most of these companies don't yet have a strategy uh for, for implementing uh, you know, sustainability reporting, greenhouse gas reporting, but they're going to have to figure that out over the next three to five years.

Uh so uh we've got today, we've got 30 people. Uh you know, started with just three or four or so. Uh have grown steadily. Um we've got offices in Austin and Tulsa, Oklahoma. Data center is in Tulsa, lots of good energy people there. Uh engineering and operations, and some of our development team is, is in Austin. But 30 people and um, you know, a really big runway of, of customers that uh we, we can work with.

Jake Aaron Villarreal: That's great. Yeah, Austin's like the Silicon Valley of Texas, right? They've got all sorts of innovation. I worked for Oracle, which is based out of California, now it's based in Texas. I think it's in Austin now. And everyone seems to be enjoying the uh, the benefits of Texas. I don't know if Texans enjoy the benefits of Californians, but yeah, there's a lot of uh migration. So um, that's great. What, if you look at your company today and from when you started, what's the mission that you are providing to not just your customers but also to your employees? Yeah, like at the end of the day, what are you serving? What's the purpose that you feel?

Daniel Frey: We, you know, we want to be good stewards. Uh and, and there's uh, you know, I've spent most of my time in the energy space, but I also know that we can do a much better job of being sustainable and being good stewards of our environment. And uh helping uh customers really on the Main Street, not, not the Wall Street, but the Main Street side, the, the broad customer engagement, help them uh be better energy managers and better sustainability uh partners. Uh and the, the energy industry is undergoing this big change of having to be more accountable and more sustainable, and uh we're, we're a part of that and we're excited to, to be there.

With, you know, a lot of our customers are significantly reducing uh their, their sustainability footprint. Uh they, they're really serious about uh being able to purchase renewable energy and uh at that, a strategy of engaging to reduce their, their, their footprint. Uh so um, that's, that, we've got a lot of challenges uh, you know, in, in the economy overall around trying to transition to, you know, clean renewable energy. Uh it's gonna be a bumpy road. Uh, you know, we know there's lots of challenges going from, you know, carbon-based to, to renewable energy. And uh, uh, you know, the next 10 years are really going to be important. Uh so, you know, we're, we're engaged in that. Uh our, our part of it is just giving customers, you know, as good of data and as good of tools and, and resources as we can, help them with in, in that, in that journey. Uh that's really what we're focused on.

Jake Aaron Villarreal: That's really cool. They say the data is the new oil, and you know, there's all sorts of solutions around taking the data and making better use of it, and there's a lot of breakthroughs right now with AI and how that makes sense for multiple industries. How do you see, and do you see AI as being a value to your current platform or in the future?

Daniel Frey: Yeah, absolutely. Uh, you know, I, I think that there's a lot of concern around AI nowadays, uh but when it, when I look at it, I think that, you know, we can accommodate much more uh management of data. And, and if there were an AI that could in real-time babysit each of the facilities, what their consumption was, uh, you know, look at history and peer groups and, and look for analysis of, you know, variances and, and manage that in real-time. Uh when, you know, today a building manager has no capability of doing that. Uh we are in uh so much more of a sophisticated and data-rich environment.

I'll give you just one example. So, you know, obviously you get a monthly utility bill, so you get, you know, for one electric meter, you get 12 bills a month, a year, right? But you know, with, with hourly data, you get 8,760 intervals a year. And with real-time data, you know, who knows, you know, you get, you should get data every 15 minutes. So you know, you go from, from 12 data points a year to 8,700 data points a year to, you know, 50,000 data points a year. And that's just one meter, right? So you want to manage that in real-time, there's a lot more data that should, that you got to look at and manage, and it's impossible to do that without some kind of AI solution that's actively looking at, you know, market grid conditions, real-time price, consumption, demand. All of those things that need to be smartly integrated.

So, you know, we've been working on projects to help our clients uh be more energy-wise, if you will, looking at smart meter data in particular, which interval data that we talked about. So, you know, lots of customer areas now have access to, you know, 15-minute power data, and they have no mechanism for being able to manage that in an effective way. And the utilities are the same way. They've, they've had smart meter data around for 20 years, they're not really doing that much with it. So the opportunity to, to smartly manage that and look at all of the variables, something a system can, can do in, in real-time across, you know, a few million buildings. That's a great opportunity for um, you know, for, for, for the energy business.

We're in a great spot because we've got a huge amount of data now. A lot of it is, is customer data that is, you know, consumption, use, facility information. So a big uh platform of uh data that, you know, smart meter data. So we get, we get, you know, more than 200,000 accounts updated nightly um for, for smart meter access. That, all of that is just, you know, ready for a, a broader uh engagement through, through AI. So we're excited about it. There's obviously a lot of risks and opportunities and um, we're kind of in a brave new world the way I see it clearly, uh but it'll, there's, there's good opportunities there and we're excited about it.

Jake Aaron Villarreal: Yeah, that's great. Yeah, we were on a call last week and we're talking with a company called Scale AI. Not sure if you've heard of them, but they were, they're on Forbes, Alexander Wang's on Forbes this, this month, kind of like providing the tools to the gold miners during the gold rush, and so they raised 600 million dollars. They're absolutely it when it comes to providing services around companies that are looking to utilize AI but not sure how to do it, or you have a bunch of data and you're trying to figure out how to train it. And they have some really easy ways to, to go about the process, some self-serve tools and also, you know, some paid services and whatnot that can help. But uh, it seems like there's some real clarity now about how to approach it, whereas before it was a black box and you weren't sure what it meant and how to use it. But it's coming along pretty good with a lot of the breakthroughs that are out there now. So should be really interesting to, to see how that goes. Curious to follow back up with you when, when that, when that happens.

Daniel Frey: Yeah, we're in a very exciting time right now for sure. I mean, the economy is, the technology is, it's, it's, it's, it's really an exciting time. People are, are concerned about it, but I'm more optimistic about it.

Jake Aaron Villarreal: Yeah, that's great. Looking at your platform, if you're a facility out there and you're wanting to utilize it, what's it take to start using it? To, to, to strike, picture a deal like, is it a, a monthly basis, is it a license fee? How do they, how do they use your platform?

Daniel Frey: Yeah, well, first of all, we, we work a lot with industry partners. So these would be uh companies that are, maybe they're an electricity provider, maybe they're a broker, an aggregator, or a consultant, or somebody that's advising commercial customers on their energy strategies. And they bring us portfolios of, of customers. So they, they, you know, a common situation is there's a broker, advisor, or consultant that helps with purchasing strategies. And, and they might have a school or a hospital that they've helped purchase electricity for, and maybe they're wanting to look at renewable energy or, or some other strategy for reducing uh their, their emissions. Uh so that, that's where we engage. We're kind of the data and technology partner with that industry's offering. A lot of times it's private-labeled, so you don't see THG Energy Solutions, you see somebody else, but we're the, we're the, the platform that helps operate that. So log into your Advantage website, and, you know, their, their name, their, their label, white label, but it's, it's our platform. So we work with a lot of industry partners and that's really where a lot of our, our, you know, customers come from.

But uh, you know, the, we start with the utility data. Uh and, and, you know, a school or a hospital would come to us and they say, "We, we've never pulled together all of our data in one spot. Uh we, we get a general, we have a general ledger, we kind of know how much we pay, but we don't have any of the other data that we need." So, you know, if you're going to report on your greenhouse gas emissions, you've obviously got to know your usage and, and your demand, and, and each of those has different units of measure. So, you know, most people look at their general ledger and they go, "Well, I know I spent 3 million dollars on utilities, but I have no idea where, how, or, or who or anything else." So it's a fact-finding process for us usually. Uh if the customer is engaged, it's about a 90-day process for us to access all of those utility accounts, be able to start to download the data, get the permissions that we need to get that on an ongoing basis.

A lot of companies are having to manually enter their utility data. We digitally access most of the data, about 90 percent of the data comes through electronic access. So we can streamline that process. Highly reliable, much easier, cheaper, faster, you know, help pay and process the utility bills, and at the same time gather all of this data that customers are needing, often now for the first time. Uh so that's really what our, our process looks like. It's, it's 90 days to 120 days uh to, to take all of the accounts, integrate them into a single platform: water, waste, gas, electricity. Uh starts with the monthly utility bill. Uh on the electricity side, a lot of the bigger accounts are now getting smart meter data or interval data. So we, we help onboard that and analyze that, and, and provide tools for doing a better job of looking at your, your, you know, smart meter data. And then a lot of companies have, you know, sub-meters or smart meters or, or thermostats or building automation systems or some kind of other uh IoT data that they want to pull into the same kind of platform. So, so we, we help with that. A lot of third-party data that we just have to go get.

You know, utilities are, are kind of their own silos of information. So we, we gather data from around 1,300 utilities in the United States right now. Uh all of those uh have their own systems, their own processes, their own, you know, way to, to measure it. It's, it's, it's shocking how little standardization there is in, in the space, but really you've got to kind of figure out each, each one of those and how they report it and what their processes are. So um, you know, being able to, to provide that in a single pane of glass, if you will, a single enterprise platform is a big data challenge. Um, you know, you'd asked previously around what, what some of our, our bigger challenges were. It's that, you know, it's, it's not the UI, it's not just building, you know, the, the customer-facing side of it. It's, it's getting all of that data um in an accurate, complete, timely basis, and being able to validate it all. That's really where 80 percent of the work of our, of our business is. Uh and, and there's not a lot of companies that are, are doing that in, in a way that, that we do it. We're trying to, to be very uh diligent around data validation, and, you know, try to integrate best practices and Six Sigma processes. And there's a lot of people that are a lot smarter than me in the, in the business that are uh helping us with, you know, data scientists and, and folks looking at the, looking at the data in, in new ways, and, and helping to, to validate it in a better way.

Jake Aaron Villarreal: Seems like you're ready for AI.

Daniel Frey: Absolutely. Lots of data. A lot of affinity through AI, yeah.

Jake Aaron Villarreal: That's great. What motivates and inspires you? You've been with this company, you've been leading this company since the beginning, it sounds, 2011. What motivates you and inspires you and keeps you inspired every day?

Daniel Frey: Yeah, I mean, I, I love our mission. Uh you know, I, I, I like helping companies uh be more accountable and, and be good stewards. Uh we have a great team of people. I get to work with my son who's uh, uh on, you know, on, on the team as well, and, and other family members. And uh so, you know, it's, it's still a small company. Uh we, most of the people uh, almost 75 percent of the people have been with us for more than five years, so we've got good, you know, longevity, good experience, just good folks. I, I enjoy our team a lot. Um and we're getting, you know, uh it's really hard to get uh above a million dollars in revenue and then above two million dollars. That's really, a really, these are really hard things to, to do, you know, get to scale and uh and, and get through that, that process. That, the desert of uh engagement and, and commercialization and scale that, that most entrepreneurs and companies have to struggle with is getting from, you know, your first sale to, you know, viability. It is uh, you know, it was hard for us, it's hard for a lot of folks in the energy space. Um but we're now to a point where uh we, we see a lot of value in our services. We can really start to make a difference uh for, for companies that are, are trying to execute on a sustainable strategy uh or a core part of that. And uh got a great team of people that we get to work with, so that, that helps me get up every morning and be excited about what we're doing.

Jake Aaron Villarreal: Yeah, it's great. What's the future? Where do you see where you're at today and where you can go in terms of what's that compelling journey and vision look like for you? Like where do you see this going in three, five, ten years? What can it, what can it be?

Daniel Frey: Yeah, I mean, we've talked a little bit about it. But, you know, as, as the economy transitions toward, you know, renewable energy uh and moves away from kind of, you know, traditional uh base load energy, there's a lot of challenge. And there, there's uh, you know, solar obviously. Sun keeps going down every day. You know, wind. You know, these are variable um uh renewables. And, and you're trying to replace that, you know, base load coal, natural gas uh generation. There's a lot of challenges associated with that. And uh, you know, companies are trying to figure out, "Okay, uh you know, I've got EV chargers that I've got to put in uh for my employees, and I, I want to put solar on my roof, and I, I want to install batteries, and I want to buy renewable energy and, and help manage that."

So there's a huge transition uh, uh of, you know, centralized base load coal-based power to, you know, what will ultimately be 100 percent renewable energy, and all of the grid integration, and all of the opportunities for that, and investment uh, and distributed energy. Uh helping uh customers transition in a way that's smart, cost-effective, saves them money, is practical. Uh we're, we're all about that. And the companies that, that we work with, they know that they've got to be more uh broadly focused. So an opportunity to expand from maybe what used to be just a, a provider of electricity to now a provider of, you know, sustainability funding, energy management funding, solar projects, uh funding battery projects, integrating with the grid. So there's a whole lot of things that uh we're going to have to do much better as, as an economy uh if we're going to be successful in this kind of green transition. And there's a lot of folks that are working on it. Data is going to be a huge part of it. So, you know, all of that is, is, is moving at a quick pace and getting quicker uh every day. It's kind of like AI, you know. If you're gonna wait around for it, you're probably not uh, you know, not going to be able to catch the bus because this thing's not slowing down, it's speeding up. So um, you know, there's, it's just an exciting time to, to be uh in the space. And um there's, there's great opportunities to, to work with companies and, and partner with people that are, are trying to do the good things.

Jake Aaron Villarreal: That's great, really cool. Um, you've shared a lot about business and what you're building today. As a founder myself of a few different ventures, I know there's a lot of ups and downs. You talked about being ahead of the market and trying to anticipate where your clients are and where the market might go. Sometimes you're a little too ahead and maybe sometimes a little too far behind. What's a story that you can share that you really learned from that you can take with you going forward, whether it's with this company or maybe even future companies that, that you decide to build, that really had an impact when you went through it, but also a good lesson you, you left with when you came out of it?

Daniel Frey: Yeah, I mean, we are constantly uh looking at uh our product offering. And it's almost every day a customer comes to us and says, "Hey, we, we want you to do, do this thing that's different from what we're doing." And so we, we've got to decide what are we good at. Uh what, uh you know, because there's, there's a whole universe of, of things that we could be doing in the, in the, in the space around utility reporting, energy management, sustainability, you know, Scope 3 reporting. There, this, this has a very broad universe of uh requirements. Um so being able to stay focused and, and stay on task and say, "No, we're really, really good at this part of this and we're not good at this part."

And I'll give you an example. We had to go find a partner that does waste. Because waste, recycling, waste tracking, that is its own rabbit hole. It's, it's its own, you know, universe. And yeah, you can do kind of a summary level analysis of that, but if you're going to be really good at waste and recycling and product streams and medical waste, and being able to track all that and manage it, and that, that's a whole different product offering. So, you know, one of our customers, big hospital, came to us and said, "We like what you're doing on the energy side. Uh we want you to do something similar for us in the waste and recycling side." And we had to say no. We got to say, "No, we're not going to do that. We've got a partner that we can work with that can really help you on the waste side, side, but we're going to stay really focused on energy and sustainability from, from that perspective, which has a hundred requirements, and we've got to really focus on that to be, be good at it."

So I think there's always a constant lesson around uh what are you good at, where do you see the, the best customer value, what are you going to uh or force yourself not to do that somebody's trying to get you to do that may be tangential to what, you know, what your core values are. So there's, there's always a constant, you know, and we've got 50 things in the development queue. And so we're trying to prioritize those and to, to rationalize what, what are the customer requirements, what can we generically deploy, what's a one-off that we just shouldn't be doing. So those kinds of things almost every day, it's a, it's a, trying to, to fine tune that process. And there's been times when we've overreached and there's been other times when we said, "Geez, we, we shouldn't uh have done what we did, uh or we should have uh focused on it."

Um, you know, like I said, we started the greenhouse gas emissions uh, uh, uh protocols and compliance in 2017. Uh and then we sat there for three years with virtually no sales around it. So tinkered with it, we were begging people, we had to do beta tests with customers, we were trying to get it engaged. We really had to wait for the market to catch up and say, "Okay, this is now important, we got to go do this," and we would have thought that would have occurred, you know, five years prior to, to when it actually did. But so, being able to be disciplined around what your product fit is and, and what you're good at and what you need to be focused around versus what might be, you know, what somebody wants but maybe you're not the best at it. So I don't know if that makes sense, but that, that's something that we are always trying to rationalize.

Jake Aaron Villarreal: Yeah, that makes a lot of sense. And I think, you know, I think it happens to a lot of founders where you, you build something, you hope they come, and I think it should be the reverse, where, or you sit down with your customers or prospects and truly understand what is it they want, what's not working today, what could you do differently that would make your business run better? What solution can then you create that can help them? And takes a lot of the guesswork out of it. You also have to have the right prospects you're talking to that are open to sharing, you know, what problems they're facing, but I think that you've, it sounds like you've done a really good job of being clear about what it is that they eventually did want, now you're serving that to them. So that's really good.

If you're a founder or a aspiring startup leader in the market today, what's a couple words of advice that you would share with someone who's maybe just thinking about bootstrapping, or maybe they just got their funding and they're on their early stage of trying to make something happen? What's uh, what's the advice you could share?

Daniel Frey: You know, I, I tell people I'm on the 10th year of my three-year business plan. So, you know, it had I, if I were to like rewind all this, I would have spent a lot more time just what you talked about, is getting in front of customers and trying to truly understand where their value proposition is. I think a lot of, I see a lot of, of people in our space that maybe they, they were in a uh, you know, some college class that they thought that they should be able to fix sustainability or, or they wanted to build a product that, that, you know, helped this, and, and there's 300 of them, you know, that we see every day that uh, they, they're not going to get to uh a customer solution that people are willing to pay for. Uh and, and so being able to understand that. And, and luckily we, we've been able to work with some really smart customers uh, and some really uh professional experienced teams of people to help us kind of fine-tune what that offering is.

If I were to do this all over again, I would have spent a lot more time testing out my beliefs and concepts and, and not being... I think everybody's afraid of sharing an idea because somebody might steal it or you don't want to talk about it too much or whatever. I, I would say look, you know, spend as much time with as many people as you can around what your product ideas are, especially if they're in the business that you're trying to get in. And, and you know, really try to rationalize and hone down uh what, what are the essential elements of that? And is there a business plan that you can actually sell and, and, and collect on, and somebody's willing to pay for where they see value? Because a lot of, a lot of these guys, and I was guilty of the same thing, is they've got a good idea, but the, the market integration of that and being able to get it to scale is just impossible. Uh and, and they don't have a viable strategy for getting there. So I would say, you know, if I were to go back, I would, I would give a lot more thought to, you know, how are we going to get this to scale uh, and, and what are the, you know, not, not what I think, but what are, you know, key customers that I hope to sell to, what are their thoughts around this? And, and that's uh, you know, so talk to more people that are in the space that can help you and, and don't feel like, "Hey, I've got to just uh, you know, take my own beliefs and, and turn that into a business plan." Um you've got to have both, got to have some commitment, got to be stubborn around things, you've got to just push through things for sure. But um, you know, starting out with a really solid idea uh that, that is as much market testing as, as you can do.

Jake Aaron Villarreal: Yeah, that's great. I think that really rings true for a lot of companies and you know a lot of innovation that happens, you have to really understand what you're trying to build to solve the problem, then you go build it. So that's great. Dan, you've had an amazing career and I love the company you're creating and building, and it sounds like you're past the startup phase for sure, and uh you're continuing to scale it out, which is really cool. Love to hear how things go over the next couple years, but thanks for joining our podcast today here. We will uh look forward to the future and what that brings for you and for our listeners. Um sounds like if they want to find you they can go to a specific website, or what's the best way for them to learn more about you?

Daniel Frey: Yeah, there's a "contact me" at thgenergy.com. Uh, you know, happy to, you know, reach out to people. We're pretty small, so you know, pretty easy to find me. I'm on LinkedIn as well, so uh, feel free. But, but thgenergy.com and a "contact me" is, is a really good way, and we're really responsive to that. So, got a great team of folks and uh we're excited about uh being able to, to work with, with a lot of customers. Uh so good, good opportunities in the energy, energy management, sustainability space right now, and, and we're happy to be a part of it.

Jake Aaron Villarreal: Great. Well, thanks for joining, and until the next time we'll keep plugging away here.

Daniel Frey: Thank you, Jake. I appreciate your time.

Jake Aaron Villarreal: Okay, see you Dan, bye.

Daniel Frey: Thank you.

Jake Aaron Villarreal: Before we wrap up, I want to give a big shout out to all the entrepreneurs that have joined to make this podcast possible, and for all the listeners for listening. It means the world to me that you chose to spend your time with us today. I'm your host, Jake Aaron Villarreal, signing off for now. We can't wait to connect with you all soon on the next episode. Take care. This show is sponsored by Match Relevant, a company that helps venture-backed startups find the best people in the market. And they do it in three simple steps. First, they sit down with founders to understand their story. Second, they tell their story into multiple candidate channels. And third, they schedule interviews within 48 hours. Find us at matchrelevant.com to learn more about how we do it.

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