The Entrepreneurs for Impact Podcast: Transcripts
#152:
Serial Founder Tackles $80B Renewable Energy Tax Equity Finance Market — Andy Moon, CEO of Reunion
PODCAST INTRODUCTION
Chris Wedding:
My guest today is Andy Moon, CEO and Co-founder of Reunion. Reunion's mission is to accelerate investment into clean energy. The Inflation Reduction Act created a simpler way to finance solar, wind, battery storage, and other clean energy projects through the sale of tax credits. In July 2023, Reunion launched a marketplace for corporations to identify, due diligence, and purchase tax credits from leading project developers. Reunion raised corporate funding from leading clean energy investors in January of 2023, and their founding team previously has raised over $2 billion to finance solar energy projects around the world.
01:57
Andy is the former CEO of SunFarmer, a Y Combinator-backed social enterprise that has completed over 1,500 solar energy installations in Asia. Previously, he raised over $200 million from institutional investors to finance solar energy projects in the US and Europe, and worked as a consultant in the energy and building practice at McKinsey. He was also an early advisor to Possible Health, a leading public health nonprofit and he holds a Phi Beta Kappa honors degree from Stanford University and was named a 2016 Young Global Leader by the World Economic Forum.
In this episode, we talked about our shared experience of the friction required to use tax equity to finance solar projects going back to 2009 and 2010, when we both started. How those high transaction costs and bottlenecks are still a part of this financing mechanism today. The drastic increase expected in tax equity funding from around $20 billion or so today to perhaps over $80 billion in a few years. We also covered the process he used to pick his new venture. Why his co-founder selection was so important. What he learned from building SunFarmer. His 90/10 rule on focus. What his managed marketplace at Reunion does to make tax credit transferability easier between these renewable energy project developers and corporate buyers.
How tax credits are basically so important to funding these projects, possibly covering 30, maybe even 50% of the project capital cost. And the cost that corporates must consider when they buy these credits. Finally, we talked about the role of newer technologies in the tax credit landscape, such as hydrogen and biogas. Why his team uses the two-week sprint model to manage performance. How the book Radical Candor has shaped their culture and a whole lot more. Hope you enjoy it and please give Andy and Reunion a shout-out on LinkedIn, Slack, or Twitter by sharing this podcast with your people.
Dot, dot, dot, if you have interest in joining a peer group of growth stage climate CEOs, guess what? We got you covered. Here at Entrepreneurs for Impact, that is our core mission. 30 plus CEOs and founders and investors across North America getting together monthly, as well as annually, in person, on Zoom, one-on-one, small group, guest speakers, you name it, the goal is supporting each other's growth, having the humility to realize there's constantly more to learn. If you're the smartest person in the room, you are in the wrong room. Anyway, it's tough building these companies. Here's a group to make it easier for you to grow and for your company to grow as well. All right, y'all. That's it. Talk soon.
PODCAST INTERVIEW
05:13
Chris Wedding:
Andy Moon, Co-founder and CEO of Reunion, welcome to the podcast.
Andy Moon:
Thanks Chris. It's great to be here.
Chris Wedding:
As I was reminding myself of the friction and opportunity in the tax equity finance space for renewables in America, I think I saw the following stat and you'll correct me if I get it wrong. The size of the tax equity financing market for things like solar and wind in the US, currently, it’s something like $20 billion per year, mostly controlled by a few large banks.
Historically, deal size being a huge barrier to projects getting their funding, but the market is expected to grow to some $80 billion, maybe or more, in the next three, four, five years through much better economics of renewables versus conventional and things like tax credit transferability which is the focus of your business. Does that sound about right? If not, please correct me.
Andy Moon:
That's right, Chris. Financing has always been a bottleneck for getting renewable energy projects built. Tax equity has always been a challenge for clean energy developers, and it has only gotten more difficult because with the Inflation Reduction Act, there is a much higher volume of tax credits and many more tax credits that are now eligible to monetize tax credits. Therefore, we're expecting a flood of credits that will reach 80 billion plus by 2027 annually.
Chris Wedding:
Well, if folks haven't already read your origin story, your founder's story, along with really your co-founder from SunEdison back in the day, we were laughing in kind of a painful way before hitting record that back when you all were financing projects in ‘09, I was at the private equity firm, we were financing projects in 2010. I recall in a very visceral way, just the headache and complexity and transaction fees of tax equity. Yet loving it as well, because it was a quarter percent of the capital stack or whatever it was, so we share that pain, which makes it even more enjoyable to have you on the podcast.
Like here, there's a solution like Reunion, which you're going to tell us all about in a second, but I think in so many words, it makes it much easier for smaller projects and boy, there are lots of them to get this important source of funding. Not just the biggest projects going to the biggest banks, is that right?
Andy Moon:
That's right. Yeah. Historically, because tax equity has been so scarce, it has gravitated towards very large projects. And so, many worthy projects such as commercial rooftops, standalone battery storage, just is very difficult for these projects to get financing. I think on the flip side, we've also pitched the idea of investing in tax equity to large corporates for over 10 years. And despite all of these efforts, the tax equity market on the investor side is still very, very concentrated.
08:27
Bank of American and JP Morgan are more than 50% of the tax equity market. The entire market is not more than 40 institutions that are willing to endure the complexity and the headache of investing in tax equity. And so, we are very excited about transferability being a much simpler way to invest in clean energy. Really one of Congress's goals here was to broaden the pool of investors to really enable the energy transition because it's not possible to grow clean energy with just 40 investors.
Chris Wedding:
That's a shocking statistic. Clearly, you could see my mouth agape. Listeners could not, but to think that something as important as the energy transition of our power grid, had them in the hands of two firms, God bless them both, seems like not the greatest plan as a country. So, nice to hear that more solutions. I can't help but think about parallels, perhaps between the problem you're solving and what the loan program office is trying to do to go from, it takes 12 or 24 months to get through a process to know whether you're getting loan program office dollars. And if you are, you need to be applying for whatever the number is, 100, 150 million bucks at a minimum. I'm not sure what your building transfers to LPO, but clearly a similar problem for sure.
I mean, when you and I first met, I think it might've been 2020, COVID days, I believe you were at Carbon180 as an entrepreneur in residence, figuring out where the biggest bottlenecks were to tackle. Maybe the criteria that you were thinking about as you picked your next focus, or perhaps things that you considered and said no to and why you passed those up.
Andy Moon:
I think that it's taken me a while to land on this idea and I'm very excited to have a wonderful co-founder and also an area where I think we have really great founder market fit. My business partner and I have worked on clean energy financing for more than 15 years each, and we feel very confident and comfortable that we know this area as well as anybody. That's really given us a confidence to move forward and really go all in on this.
I think that also having a co-founder has been really great because in those early days, when you're not sure -- If an idea is really obvious, then there's many, many people that have that same idea and are working on it. And so, I think in the early days, you have to have the conviction to really say, “I believe so much in this idea that I'm willing to drop everything else and put all my eggs in that basket.” Having a co-founder that I trusted, where we could bounce ideas off each other, and keep the momentum moving forward has just been invaluable in making that happen.
So, for me, being a solo founder, searching for an idea in a theoretical sense was very challenging and that was very hard to develop the conviction to really go all in on something. Whereas having the team and having the right fit between my expertise and what we are currently working on has just been really fantastic for the momentum for us.
The final piece for us that's very interesting is there's a very clear why now for our business. The Inflation Reduction Act essentially created a large new opportunity overnight, where there's this new financing mechanism called transferability that did not exist prior to, essentially June 2023. That’s really created an interesting opportunity where we're all starting from a blank slate and it's really all about, how can we build a marketplace and a transaction structure that really makes sense for buyers and sellers and can really enable much more clean energy financing?
12:27
Chris Wedding:
Right. I wonder if you could also go back a little further than your Carbon180 days and just talk about your work co-founding and leading SunFarmer. You got the attention of Y Combinator. I think that the numbers were maybe 1,500 solar installations developed, I think Southeast Asia was your focus, but maybe just a high level of what SunFarmer is, I suppose, not was, but is. And maybe some lessons you took from there that you're bringing to the process of building Reunion.
Andy Moon:
Absolutely. So, the story behind how I started SunFarmer, I was at SunEdison, which was a leading solar developer and while I was there, I was volunteering at a public health nonprofit that ran two hospitals and a couple dozen health clinics in Nepal. They approached me one day and said, “Look, energy is actually one of our largest problems.”
Their hospital was in a very remote area where they had to use diesel generators, but diesel is very expensive. It's unreliable and it's hard to get fuel into remote parts of the country. For them, without reliable electricity, they felt they just couldn't move forward in terms of having ambitious plans for operations and other medical procedures. You can imagine without electricity, there's not a whole lot you can do in a hospital.
So, I worked with a group of engineers and we planned and raised money for the first 3.5-kilowatt solar installation at the hospital. That opened my eyes to how transformative access to electricity could be in these critical settings such as healthcare facilities, but also schools, manufacturing, farms, the list goes on. And so, I ended up raising a few million dollars. We went through Y Combinator and we started a locally run company based in Kathmandu, Nepal that's now built over 1,500 solar installations. A lot of them are at farms, and also other critical infrastructure.
We learned a lot of lessons from that, and I think it goes into one of the other questions that you had let me know about, which I really do think that focus is one of the key elements of success in a company. What I came to believe at SunFarmer is that it's very hard for a startup to do one thing really well. I think it's almost impossible to do multiple things well at the same time.
I've seen many companies that try to do too many things at the same time and what happens is they don't become great at anything and this can really kill companies. So, we really, after some trial and error, realized at SunFarmer that we had to really determine what we wanted to be great at and focus on that 90% of the time. I do think it's fine to run limited and controlled experiments with the other 10%, but I think the 90% really has to be focused on becoming the absolute best at one thing.
Chris Wedding:
Well, I know listeners, many of whom are entrepreneurs were relieved that you threw in the 10% there. “Wait a second, a hundred percent on one thing? I'm a builder. I'm a creator. This is my art, baby.” That feels better. It feels better.
Andy Moon:
Yeah. I think it's always important to be experimenting and really seeing what might catch on. I mean, you can't have the blinders on such that you don't know what's coming down the pipe, but I do think that having focus is something that I've come to believe is very, very important.
I think people do come and say, “Oh, well, there's a counter example of X or there's a counter example of Y. Like, what about this company that did many things?” But I think if you look closely at how those companies evolved, usually they have a very clear roadmap or a clear goal where they're taking things one at a time to really master and be world-class at each piece.
Chris Wedding:
Let's drill deeper into, of course, the business of Reunion. I bet some listeners who are in probably the clean energy space at least, or other beneficiaries of the Inflation Reduction Act, I think they are experiencing and therefore they're wondering as it relates to this conversation, “Hey look, IRA had a great headline, big numbers, but I'm just not seeing the capital flowing just yet because there is this friction to go from a bill passing to now we have the team and infrastructure in place to dole it out as a better government responsibly.” With tax credit transferability, is there any lag on that functionality if you will? If so, does that impair your-all’s ability to do deals, facilitate transactions now or not so much?
Andy Moon:
The market is open for business now. There are zero barriers to getting deals done at this point. There was a lag. The Inflation Reduction Act passed in August 2022, and the Treasury released the guidance on how the mechanism actually works in mid-June, June 14th to be precise, 2023. And so, June 14th, 2023 is really when the market opened for business, and there are no barriers. Deals are closing. We're very deep on about a dozen transactions at the moment, so yeah, real capital is starting to flow now.
Chris Wedding:
What is maybe an analogy to what Reunion does, but outside of the wonky, but wonderful renewable energy world?
Andy Moon:
So, our business model is a classic managed marketplace business model where we're connecting buyers and sellers and facilitating a transaction. The transactions happen directly between, say a corporate finance team that's looking to purchase tax credits from a clean energy project, such as wind, solar, or battery storage. And really what our role is, is we help the buyer identify the right projects for them. We help them purchase the projects and we facilitate the transaction between the two parties, which ultimately is between the two.
One thing that we're very focused on is managing risk at every step of the process. So, there are some narrow pieces of risk, which makes sense given that this is a purchase of a tax credit. And so, we really ensure that items like due diligence, legal documentation, and also insurance if it's required by the buyer are properly put into place.
Chris Wedding:
19:09
We alluded to this earlier, but what size projects, maybe let's put it in various metrics, either in megawatts, but probably in dollar amounts as well, what size project is maybe the sweet spot range for Reunion?
Andy Moon:
What's been really fascinating is that developers from very small developers all the way to the largest IPPs and clean energy developers are all realizing that because of the gap between tax equity at 20 billion and the projected demand for tax credits, which is 80 to 100 billion annually, they've all realized that transferability will be an important part of how they finance their projects. It might not be all, it might be a portion of their portfolio, but if you go to any solar conference, wind conference, biogas conference, every developer wants to talk about, how will they monetize their tax credits and how will they transfer credits?
So, I would say that in the early days, from buyers there's been demand for what I'll call larger projects. I'd say at a minimum, $10 million in transfer volume, but it could go up to $50 million, $100 million or even higher than that. And so, I would say that in general, in 2023, we're dealing with a lot of discrete transactions that are, yeah, at the 10 to even hundred-million-dollar range.
We are very excited about over time helping smaller projects gain financing that have never been able to get financing before. So, portfolios of 10, three million dollar, four million dollar, five-million-dollar projects I think will be very exciting because those are very worthy projects that historically have not been able to attract financing.
Chris Wedding:
When you list numbers like the 10 to 100 million dollars, is that total capital cost for the project or just the tax credit or transfer value?
Andy Moon:
That's a great question. That is the tax credit transfer value. When a buyer comes to our marketplace and is looking at making a transaction, they're less concerned about the total CapEx of the project. They're curious. A CFO or a tax team at a medium to large corporation wants to know, if I want to offset $50 million of my tax liabilities, how much do I have to pay for that? That's kind of what their question is.
Chris Wedding:
For those folks that don't live in the renewable’s world, what's the conversion essentially? So, you say 10 to 100 million bucks of tax credit value, what's the total CapEx for those projects?
Andy Moon:
Yeah, that's a great question. So, I'll give a very simple example. If you have an investment tax credit and the cost basis of the project is $100 million, in other words, it costs $100 million to build that project, with an investment tax credit, historically, you would get 22-30% of that value in the form of a tax credit. With the IRA, you now have a base credit level of 30%, assuming that you've met all prevailing wage and apprenticeship requirements. So, you have a $30 million tax credit, and there's various adders that you can add on top of that, depending on if the project uses domestic content, if it's located in a low-income area, if it's located in an energy community, which previously had fossil fuel infrastructure, that can increase the amount of tax credit available to the project.
22:41
So, a simple example, I would say, if you have a $100 million CapEx projects, you have the 30% base credit, plus call it 10% for say the project was located in an area of Texas that previously had relied on fossil fuel infrastructure, that would basically generate $40 million worth of tax credits.
Now, typically, a clean energy developer doesn't have $40 million of tax liabilities that they're able to offset. And therefore, what they need to do is find a third party that's willing to absorb those tax liabilities or tax credits and pay them for that. Historically, the way to do that was to partner with a very large bank in a structure called tax equity, where the bank would also be an owner of the project and they would monetize those tax credits.
The big change with transferability is, instead of setting up that complex partnership, you can now just sell your 40-million-dollar tax credit to virtually any corporation and they can buy it for a market price.
Chris Wedding:
Got it. So, if 30% is a new base and you have these various adders to get a larger portion of your project paid for through tax credits, what is the upper limit either theoretically or practically? Is it like 50% is the max you can have with all your adders from in there?
Andy Moon:
The theoretical upper limit is actually 70% on an investment tax credit, because you could have a 10% adder from energy community. You can have a 10% adder for domestic content if the components were manufactured in the United States. And you can have 10-20% if your project is located in a low-income area and/or if it's located on low-income housing.
Now, there's limitations to those. I think the domestic content adder, the guidance has been complex and so we're not seeing many projects that currently fulfill the domestic content requirements. With the low middle income adder, that requires an application and that's applicable to projects that are under five megawatts in size. So, I would say that it is rare that there will be projects that have a 60 or 70% tax credit, but there are various adders that theoretically could add up to that amount.
Chris Wedding:
I see. Okay. Maybe this is too nerdy, but often when there's a tax equity investor, they get the tax credit. I think ITC, investment tax credit per solar usually, or PTC, production tax credit again, historically for when the uses of those things have changed a little bit. But the tax equity investor also, as you know, but I want to bring the conversation topic up also got the depreciation driven losses as ways to reduce their taxable income. Do you all also facilitate the losses as a tax benefit or is that separate?
Andy Moon:
So, typically, the depreciation and the losses will stay with the sponsor of the project or the developer. If they have some taxable liabilities they need to offset, that depreciation will offset their liabilities. There are also hybrid tax equity structures that are emerging and we've talked to a number of the tax equity banks. We do believe that many tax equity banks will continue investing in tax equity, but they will also sell credits out of the tax equity partnership. What that will do is that will enable a sponsor to monetize the depreciation because the tax equity investor will also pay for depreciation.
26:23
Chris Wedding:
Oh, I see. Interesting. So, the developer has to do the math of the value of those depreciation driven losses versus the friction or bottleneck, if you will, of traditional, bank driven tax equity partnership flip structures, let's say.
Andy Moon:
For sure. Tax equity is not going anywhere. Tax equity will be oversubscribed and there will be projects where the developer will want to pursue tax equity to really optimize every last cent of the structure and take advantage of the tax equity monetization. That typically is applicable to larger projects. For the larger tax equity players, they really wouldn't consider a tax equity investment of under 100 million. So, I think that structure will absolutely continue.
But I think going back to our earlier conversation, there is a fundamental shortage of tax equity dollars available. If that is more or less plateaued at $20 billion a year and there's 80 to $100 billion of demand in the market for tax credit monetization, I think that there are developers that will have no other option, but to use transferability to get 80 cents or 90 cents or 92 cents on the dollar per dollar of tax credit versus getting zero.
Chris Wedding:
Mm-hmm. I'm glad you referenced those percentages. I'm sure there's some secret sauce into the exact percentage, but how should private developers think about that percentage? That is, I've got a credit worth a dollar, how many cents can I sell that for in this pretty efficient managed marketplace or just in general in a managed marketplace, let's say?
Andy Moon:
So, a buyer will need to receive a discount on the tax credit to motivate them to want to enter into a purchase of a tax credit. We are seeing some data emerging on the pricing and I think there's quite a bit of range depending on the type of credit, the type of technology, but I'll give a high level.
So, the smallest discount tends to be for production tax credits, which is, Chris, as you mentioned, a production tax credit is based on the amount of electricity generated by a wind or a solar or other clean energy projects. Those projects tend to trade at, in the mid-90 cents per $1 tax credit and that's because those transactions tend to be very straightforward, and there is no what's called recapture risk after the fact.
In other words, once the credit is validated, that it was generated and electricity was sold to a third party, there are some risks that the credit could be reduced, but in general, there's no recapture provision that increases complexity of the deal.
For investment tax credits, we are seeing high quality projects from well-capitalized sponsors in solar and wind traded in the low 90s, so call it 91, 92, 93 cents per dollar of tax credit. Then I think it goes down from there. There's technologies that buyers are less comfortable with such as biogas that carries a bit of a larger discount. If there's complexity on a project or if there's smaller projects that are say less than $10 million or $5 million in transfer volume, then those spreads could be even wider, it could be in the mid-80s per dollar of tax credit.
Chris Wedding:
Yep. Here comes the challenge of running a podcast is, how do I take great notes so I know what to say for the show notes and also have the next question ready to go? Let's pick up on your reference to other technologies there. Again, I think historically, solar, wind have been the main beneficiaries for sure, with these federal tax credits. To what extent do you see that changing? Not that solar won’t receive the largest, but again, the mixed changing. Then to what extent does that broadening of technologies, they receive tax credits, to what degree is that a driver of you-all’s differentiation or growth in a market, let's say?
30:40
Andy Moon:
That's a great question. In the short-term, we are seeing a lot of demand also from standalone storage, battery storage, because that previously did not have an investment tax credit available. Biogas also has an investment tax credit for the first time, and so there's a lot of demand from biogas developers as well.
Now, I think as we get into 2024, 2025 and beyond, there are many newer technologies such as hydrogen, advanced manufacturing, nuclear, CCUS, there's many, many technologies that previously did not have as rich of a tax credit, where those can be potentially very large tax credit volumes. And so, we're not seeing too much activity on those alternative technologies right now in the marketplace, but those will absolutely grow significantly as we get to 2024, 2025 and beyond.
Chris Wedding:
Given how startups often need to carve out a niche in a world of bigger players that have been around doing this for a long time, have you all considered -- And as I ask it, I think, “Oh, this is recorded for everyone to listen to,” have you consider whether you say like, “Look, the fundamentals around hydrogen growth look like X, Y, Z, and therefore we're going to serve solar, wind today because there's tons of volume,” but the real game is to be the leading tax credit transfer solution for hydrogen in five years? I'm making it up, but to get them go big, go long, one unexpected sector to carve out your place, is that needed or not needed I wonder?
Andy Moon:
There is so much opportunity today in solar, wind, battery storage, and also in biogas that we believe it's important for us to be out in the market, transacting and doing work in the real world. And so, that's where we're very focused right now is on making those transactions happen.
We absolutely will be involved in other technologies as they become prominent. And so, I think going back to the thoughts about focus earlier, I think that will come, it's not so much on the radar at this moment in time.
Chris Wedding:
A question I often ask guests is, how have you attracted outside capital to grow? I'll ask that question and may be related is, what does growth do you think look like going forward given that this market is ready to go? As of June 14th this year, you get 12 deals, indeed, [inaudible – 00:33:19] to close, et cetera. Anyway, thoughts for those listening who are always thinking about growth capital solutions, what maybe lessons or advice might you extract from you all’s processes so far right now?
Andy Moon:
Yeah, I think we consider ourselves very lucky. I mean, we raised very quickly and very early. We closed our seed funding in January, 2023, which at that point was little more than a slide deck. I think that for us, what we knew is that we had a very unique perspective on the market because we've been doing clean energy finance transactions for a collective 40 years between our founding team. We felt very confident that this was something that we have differentiated knowledge and experience in that will be hard for others to necessarily replicate. I think marrying that experience with bringing technology and streamlined processes to the fore, we felt a compelling combination.
34:26
We will definitely go back to market to raise additional capital because we think there's value in expanding our investor base, as well as there's value in being aggressive to capture this market opportunity. Because as mentioned, it's a new market that was created overnight and so I think there's a lot of interest from many parties in trying to figure out how to crack the nut on making tax credit transfers work.
Chris Wedding:
Yeah. Let me ask you one more question on the Reunion front then we're going to switch to the Andy Moon portion of the podcast.
Andy Moon:
Sure.
Chris Wedding:
Is there a misconception or something you'd like to maybe clarify for either the buyers or sellers of these tax credits so that they know they should come check out your platform as a solution? This is still pretty new, right?
Andy Moon:
Yeah. One important point is that, the early transactions in 2023 and 2024 will require a lot of handhold and we're prepared for that. The automation and actually a lot of the technology gets very interesting over time once there's volume of transactions. In the early days of any new market, any new financial product, which we've brought many new financial products to market in the past, it's all about risk mitigation, risk management, and really ensuring that there is a well-documented process for getting the deals closed. I would say that's where we focus.
The majority of our time is on, how do we ensure for our buyers that when they buy a tax credit, we have mitigated risk in every way possible and made it something that they can really trust? And so, that's where we spend a lot of our time and where we get very excited is that, if you want to enable new projects that previously didn't have financing, small projects continue to be overlooked.
We don't want the transferability market to become another tax equity market where only the largest and simplest projects get financed. We think there's a lot of opportunity in smaller projects where there's a larger yield as well for the buyers. There's an opportunity to get a larger discount and be a win-win for both the buyer and the seller. And so, we are very focused on, again, risk management, how do you make that a proposition that makes sense for both the buyer and the seller and enable new projects?
Chris Wedding:
Roger that. Where would folks find you online?
Andy Moon:
So, we are at reunioninfra.com, and we also have a pretty active LinkedIn presence where we are updating. We do try to put out very technical and relevant content that will be helpful for real practitioners of folks that are looking to purchase or sell tax credits. So, we have a very high bar for putting out very high-quality content to help the whole ecosystem figure out how to get these transactions done.
37:27
We firmly believe that all boats will rise in the sense that it's important that these transactions are done well and cleanly. If we have a lot of badly documented transactions or there's a lot of stories in the press of fraud or recapture of tax credits, that's not good for anybody, that's not good for us. And so, we have a strong incentive to really want everybody to be successful and really do the transactions in a proper way.
Chris Wedding:
Perfect. All right, so for listeners, don't leave, but I am going to repeat the website and then go to part two here. Reunion, reunion like your company name and then infra as in infrastructure, but shortened to infra. So, reunioninfra.com. Yeah?
Andy Moon:
Thank you, Chris.
Chris Wedding:
Cool. All right. So, let's go to Andy. Andy, tell us something that you strongly believe in as a leader, as a builder that informs the culture maybe of what you and Billy are building at Reunion.
Andy Moon:
I think I touched on this earlier about the power of focus and I'll just come back to that because I think in this day and age, so maybe I'll take it to the individual level, we're constantly bombarded by information, by distractions, by really about noise about what everybody else is doing. And I think the ability to be able to push those distractions aside and focus and do deep work really is a superpower. Both for company as well as for individual.
And so, the way that manifests itself for us as a company is that, given how early we are, we plan our company with sprints. So, we use two-week sprint planning where it's very clear for each individual on the team, what the most important priorities are and what has to get done within a sprint. That way there's no ambiguity on who's working on what, and there's no ambiguity on what the most important items are for us, for each individual to work on. That creates enormous clarity for each person that they know what's most important, and that's been working very, very well for us. We’ve seen a marketing increase in output since we implemented that system.
Chris Wedding:
Yeah, that resonates. Just yesterday in a meeting of one of the cohorts of CEOs in our CEO peer group program, the conversation was around performance management and several members talked about using quarterly OKRs that were fully transparent. Everyone knew what they were and others said, “Yeah, that's cool, but we need more like weekly, or every two-week goals,” more like sprints in the software building world. So, for listeners thinking about when is the best timeframe, it isn't necessarily that it's got to be quarterly or even monthly that depending on your stage or the nature of what you're building, it could be these two weeks sprints like you're [inaudible – 00:40:25].
Andy Moon:
Yeah, we previously had two-month goal setting, but that did not work as well for us. What we love about the two-week sprint is that the feedback cycle is much quicker. So, we really decide and we're very thoughtful about deciding what goes on the sprint versus what doesn't and then we have a check in at two weeks. The beauty of it is that people appreciate the clarity.
40:48
A lot of new managers are afraid to micromanage and I would say this is the opposite because everybody on the team wants clarity on what to work on and having that feedback loop where nobody's day by day saying, “Did you do this? Did you do that?” It's really, “Hey, you have two weeks to really make meaningful progress on the goals that we agreed on as a team.”
Chris Wedding:
Right on. Andy, if you're in a situation of hanging out with a younger Andy, what advice might you give him to be more effective, let's say, or happier on this path of building a career, that means something?
Andy Moon:
My advice to my younger self and to early career folks always would be to maximize learning, to really put yourself in a position to learn as much as you possibly can. And one way to do this is by finding great people to learn from, so people who you both respect and also who are willing to take the time to invest in you. One big advantage for folks starting their career is that people are willing to help and really give you a chance because you're early in your career, and I would encourage young folks to take advantage of that. I still keep in touch with people who mentored and helped me when I was getting started.
The reason for this is, I mean, if you look at my career right now, Reunion is a direct result of things that I learned when I was 24 years old, my second job out of college. That's when I really did a lot of this innovative financing work, doing some of the first private equity and bond investments into solar projects back in 2010. That really has informed a lot of the pathways and the choices I've made in my subsequent career, because I have developed some true expertise on this subject matter and I've seen that work really well.
I have many friends from college actually, who, when they graduated, they didn't focus on chasing the most prestigious or highest paying jobs. They really chased opportunities to learn and become true experts at their craft and it's been cool to watch them five, six years later, just really reap the benefits of that and other successful entrepreneurs or filmmakers or have other professions.
Chris Wedding:
Well, it also typically leads to a more fun and interesting life too. If you're constantly choosing or hopefully choosing or being forced to learn new things, you're less complacent, stuck in rods forming fun new neural pathways, et cetera. How about a different topic here, but related, tell us some specifics, some habits or routines that keep you healthy, sane and focused as an entrepreneur, as a builder.
Andy Moon:
So, going back to focus, I'm always trying to figure out ways to block out the distractions. One thing that's been really great is, I haven't been looking at my phone or checking email for the first couple hours of the day. I find that before I get bombarded with so much information and items, it's just really good to have a clear mind and approach the day before I pick up my phone. So, that's been really great. I do have a one-year-old now, so my days are pretty busy. And so, trying to find ways to maximize time spent with family is always a priority for me as well.
44:21
Chris Wedding:
Again, in this climate CEO peer group discussion yesterday I said, “Well, folks, for our next agenda week, we could talk about ideal morning routines,” and I looked around the room and one of our members, Series B stage, CEO, their family had twins six months ago and the other child in their house is two years old. I think all of us laughed and thought, “Your morning routine is survival, I believe. So, we'll pass on to the next topic for a conversation.”
Andy Moon:
Sure.
Chris Wedding:
But you're right, the not checking phone or email in the morning, I'm a big fan of that as well. I think the way I've heard it phrased is, you start the morning with what you think is important versus letting someone else determine your priorities for the morning. I will say sometimes though, that, if I don't check the email before 11:00 or even noon, sometimes it comes to that meeting and someone says, “You didn't see the change?” You can't miss things, but I think it's worth that sacrifice for the focus, the deep work you get in the mornings.
Andy Moon:
Yeah, that's right. I mean, if I was just reactive to what was coming in my email box, I would spend all day just answering emails. I don't think I would get anything else done.
Chris Wedding:
That's true. Let's go to the last question here. Maybe if you can suggest some books, podcasts, quotes, tools, et cetera, that you think other entrepreneurs or investors in this space would find value.
Andy Moon:
Yeah, absolutely. Well, I was making a joke earlier that, I feel like I read parenting books and business books and I think they have a lot in common. I think having a small child at home, it's like running a small nonprofit, so I think there's a lot in common. On the business front, well, I've liked the book Radical Candor, that has a great message about being direct, but also, being caring at the same time.
In our culture at Reunion, we try to be very direct, especially because many of our employees are remote. It's very important to be direct with folks and for people to feel the confidence to say and give feedback to other people at the company, but we also make sure to do it in a very caring way. It's meant to be in the spirit of improving as a company and improving as individuals.
One of the books I enjoyed recently was Working Backwards, which talks about Amazon's culture and values. I live in Seattle and some of my friends here work at Amazon. I'm surprised with how hard they work. It's uncommon at a company of that size to really have people that are really hustling and that's a testament to some of the culture that they've built there.
And so, it's been interesting to read about their core values and how that permeates day to day interactions, all the way up to their interview process and how that's evaluated when they're picking who to join the company.
47:30
Chris Wedding:
Let's end, Andy, with you having the microphone. Any final message? A message to those you want to maybe come out and knock on your door perhaps beyond just the buyers and sellers, maybe it’s the talent or other stakeholders that will make this marketplace, this scaling the tax equity market from 20 to $80 billion not possible.
Andy Moon:
Yeah, absolutely. We're always looking to speak to corporate finance teams, so CFOs, tax directors, treasurers, because corporations will play such a key role in enabling the energy transition. We would encourage all corporate finance professionals to get in touch with us. We are very, very interested in providing more information, answering questions, and really, our expertise is in helping first-time investors into this asset class learn more about how transactions get done. And so, we are always happy to have conversations.
We're also growing, so we have a number of open roles across sales, project finance, and engineering. If our mission resonates with you, we love to get people involved in the clean energy transition, and would love to hear from any applications.
Chris Wedding:
Well, Andy, I'm excited based on our conversation three years ago that this is the solution that you and Billy are focused on. Again, I think both of us felt it 13, 14 years ago and it's incredible to see the planned growth in tax equity to cover based on our prior notes, 30 to maybe 50% of the cost of these projects. Anyway, no pressure, but your solution has to work, Andy. Get to work, man.
Andy Moon:
We'll do our best. Thank you, Chris.
Chris Wedding:
Thanks for listening and if you want more intel on climate tech, better habits and deep work, then join the thousands of others who have subscribed to our Substack newsletter at entrepreneursforimpact.com or drop me a note on LinkedIn. All right, that's all y'all. Take care.
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