When you think about the craziest moonshot projects that come out of Silicon Valley, they seldom originate far from X, a semi-secret research subsidiary of Google’s parent company, Alphabet. From self-driving cars to a network of balloons that fly around to deliver internet access to people in remote areas, X incubates projects that push the bounds of possibility.
Though Waymo and Loon are somewhat well-known projects, a lesser-known project that came out of Alphabet's X Lab is Dandelion Energy, a company looking to utilize geothermal energy systems to revolutionize the way consumers power their homes.
Recently, I had the chance to chat with Kathy Hannun, Co-Founder and CEO of Dandelion Energy, to break down the company’s journey from the idea stage to where it is now: a multi-million-dollar geothermal business with over $20 million in venture funding and over 70 employees. To get a clear idea of how the journey started, we have to go back to May 2017, when it all started.
Geothermal shows itself as an interesting opportunity
In 2017, Kathy was a Product Manager on the Rapid Evaluation team at X; Kathy tells me that in her role, she reviewed hundreds of project proposals and often led product development for those projects at their earliest stages.
But importantly, geothermal stood out from the rest of the opportunities for three main reasons. Specifically, she refers to:
- Market Size: “The market size is huge, as American homeowners spend hundreds of billions of dollars on heating annually. Globally, this number is in the trillions.”
- There Existed An Unnecessary Hassle: “Homeowners haven’t widely adopted geothermal in the past because it’s very expensive upfront and a hassle to install. That said, there is no fundamental reason geothermal needs to be expensive. It’s a combination of the way the industry is structured and limitations of the products available in the past, and we saw we could invest in drilling R&D to make the installation much less of a hassle. In other words, it was clear that with technology and business model innovation, we could mainstream geothermal.
- Huge Societal Payoff: “Success in bringing geothermal into the mainstream would be hugely beneficial: to homeowners, by saving them vast sums of money, to utilities, and to society at large by eliminating the greenhouse gas emissions associated with heating.
With these three factors in mind, Kathy could think of few opportunities like geothermal that were giant, tractable and great for the world. So she doubled down on tackling challenges in the space, fortunately backed by staff and resources at X at this point.
X proves to be an invaluable asset in Dandelion’s earliest days
With a massive market to tackle and a project proposal to run with, there are few positions to be in that are better than having the support of X, an employer to some of the smartest talent in the world. In Dandelion’s earliest days, having this support made all the difference.
More specifically, Kathy tells me:
“We had a world class team of mechanical engineers working on the design of our heat pump and drilling technologies. We had a world class team of software engineers outlining our monitoring and controls platform. And we had extremely talented business people supporting our evaluation of market size, customer positioning, and go to market plans.”
This team was clearly an unfair advantage; most startups, at day zero, would never be able to afford the kind of staff Dandelion had access to, and this access fueled a lot of the early-stage traction the company was able to gain as a result of its people. But as Dandelion’s mission wouldn’t be consistent with the work that Alphabet does, it eventually came time to spin out of X.
Needing to raise money to sustain growth and acquiring resources
Though Dandelion didn’t need a large pool of capital to reach the market, the company still looked for support from investors. Shortly after spinning out of X, Dandelion raised a $2 million Seed Round led by Collaborative Fund, which helped the company sustain its rapid growth.
Just a few months later, Dandelion would acquire Geo-Connections, a software company focused on helping companies design geothermal ground loops. But for Dandelion, Geo-Connections would be useful far beyond its software; the company would acqui-hire the Geo-Connections team too.
Doing so, Dandelion would be able to make its geothermal installations faster and easier while maintaining the highest quality. Shortly after, the company would raise a second larger Seed Round from 8 investors, led by venture firm NEA, and over the course of the next year (until February 2019), would close out a Series A with new investors Comcast Ventures and GV.
Kathy tells me that though Dandelion’s earliest investors “were unfamiliar [with geothermal] and [it] certainly wasn’t the technology these investors were used to hearing about day to day,” their expertise in early-stage companies and finding product-market fit made a huge difference for Dandelion. And as for Comcast Ventures and GV, “both firms are associated with world class, consumer-facing companies,” but like Dandelion’s earlier stage investors, these firms hadn’t formerly put money in geothermal.
But it’s not just investors who don’t have direct expertise in geothermal; their lack of former experience operating in the space really just echoes how few competitors there are in home geothermal.
Few to no competitors stand in the way
Though geothermal heating isn’t new, there are (surprisingly) still few to no competitors in the home geothermal space. For instance, there are a number of companies that provide electricity using deep earth active volcanic hot spots -- the type of geothermal that you find in Ireland, for example, but that’s a very different type of geothermal than what Dandelion does.
Though it’s often a blessing to be an early mover in an emerging market, these markets often also come with difficulties in getting consumers to adopt new solutions. Dandelion clearly is no exception.
Large-scale consumer adoption becomes tough, among other challenges
Specific to Dandelion’s mission to universalize home geothermal, Kathy tells me: “very few homeowners are familiar with geothermal, and until homeowners know geothermal heating and cooling is an option for them, we can’t expect to see uptake.” But geothermal adoption isn’t just capped by awareness-related hurdles.
For instance, other obstacles include training the workforce to install geothermal heating and cooling systems, and continuing to develop even better products and technologies to continue to bring down the cost of geothermal and streamline the installation process, Kathy says.
Next steps for Dandelion
Although addressing these challenges will be far from trivial for Dandelion, the company currently tackles the consumer awareness issue through marketing and awareness campaigns, and continues to work towards driving down the costs of its services and reduce hassle on the consumer side by hiring drillers, excavators and installers as well as the customer service, supply chain, and operations personnel to support them.
Kathy tells me that Dandelion is on pace to growth four times this year, and the company is far from done. As a promising company just two years in, Dandelion is a company that will be worth watching for the years to come.
