Innovating the Future of Energy Storage: An Interview with Leon, one of phelas’ Co-Founders
September 7, 2023 – Munich (Germany)
In the series of a closer look into phelas’ team and their personal stories, we spoke to Leon. We discussed how phelas came into existence, sparked by his academic work, personal motivation and about the joys of helping clients to innovate on energy storage – no matter where on this planet they are.
Q: How did the idea for phelas first come up? Can you take us back to the moment of inspiration?
A: The idea for phelas evolved from my master’s thesis, which highlighted the challenges of the power grid in the energy transition. We understood the need for energy storage in 2018 when I wrote my master’s thesis about techno-economic optimization of energy storage. We realized that we were going to need a lot of energy storage or flexibility in the grid. However, neither the market incentives nor the technology, in terms of cost and performance, were at that point giving us that opportunity. So, we understood at that point already, that what we need is a novel long-duration energy storage technology. At that time, the concept of long-duration energy storage was not coined; it was kind of new, and vague. We said, “OK, let’s look for technologies that can be scaled up in a resource-friendly way, which are incredibly low-cost on the energy side, and lastly, also sustainable in terms of recycling, being able to close the cycle and not make the same mistake again of using something only one time and then having to take care of it at the end of its life.”
Justin is a long-term friend; he proofread my master’s thesis, and from that point on, it started the conversation. He’s not in the energy field, but he was intrigued and interested because it’s a high-impact sector that connects everything. So, the understanding and the idea to do something in that field was something I always wanted. I wanted to work in the energy sector, just like he wanted to start something on his own. Then we joined forces and said, “Why don’t we do something together in the energy field?” He pushed it forward the most in the beginning; he was the keenest on starting something. Then, we got on board Justin’s and my previous thesis supervisor Pit Sippel. He holds a Ph.D. in physics and focused on energy storage technologies throughout his academic career. He understood immediately that we had to do something in the energy transition. But, of course, it was tricky to have people on board without long-term commitment or being able to pay someone. We then had Christopher on board; a long-term friend of Justin. Christopher’s brother founded his company with Justin during their studies, so they knew each other well. At this point, we were four people, and we started specifically to look for a chemical engineer, our CTO. We had a hiring process, we interviewed dozens of people from all over the world, and we got to know Masoud. It clicked early on, also on a personal level, and vision-wise. We decided to get him on board, and he jumped even into the unknown. At that time, we had some talks with investors, but the first money wasn’t there to pay everyone. However, he was already committed, and eventually, we got the money in, got him to immigrate to Europe, and now we’re a team of five founders. Ever since, we have been working on pursuing that vision.
Q: Where did the name of the company come from?
A: It’s quite an unspectacular story because, at any given time, you want to give a project a name, whether you’re funded or not. I don’t know who came up with it; I guess it was Justin or Pit. The name has to be universally applicable, and the domain has to still be available. If you search for the name, you should find the company first, and it should not be an insult in any kind of language all over the world because we are thinking about our solution globally, and we do not want to restrict ourselves. So, phelas stands for Power Heat Electricity Liquid Air Storage, but we never really formalized it, I guess.
Q: What challenges or obstacles did you expect before founding phelas? Did you face these challenges, or were they different from what you expected?
A: Well.. we had a lot of challenges and setbacks from the very beginning. We had another CTO at one point, and then, unfortunately, our paths separated. This was a significant setback at that time because we were relying on the CTO. However, this occurred during our early stages when we were still in the idea phase. We applied for several different grants in Germany for founders, but unfortunately, we did not secure them due to various misunderstandings and complications. There were moments when we were on the brink, thinking, “Okay, if people are not ready for it, and we don’t want to beat a dead horse.” However, each time we faced such obstacles, we found solutions to keep moving forward. I believe this is also attributed to Justin, who is the initiator but also the driving force to get through these phases. There are ongoing challenges, and I believe the next few months will be challenging. In deep tech, they call it the “valley of death for hardware” as we are getting to the point of having a commercial product. This is the most significant obstacle we see. Nevertheless, I think we have really good cards to tackle this challenge. The technology has matured across various levels, and we already have traction with customers. So I foresee that we can master the challenge of the valley of death.
“We wouldn’t be where we are today without growing the team to its current size.“
Q: Can you briefly describe your team dynamics? What makes phelas unique and special?
A: There are different points of view on having five founders in a team. I think, the most important thing to understand is, that we would not be here if we were not five people. There are so many different aspects of a startup that require domain expertise, and we need to separate the work effectively. Justin handles investor relations and fundraising, which is a full-time job in that field. Christopher acts as a Swiss army knife, managing operations, hiring, development, people development, and finance accounting. I focus on market and sales, looking at customers, and managing key accounts to build trust with our first customers. Pit and Masoud are in charge of technology and product development, which is complex in itself. Building hardware at this scale involves various challenges and aspects, and having this separation is crucial; otherwise, we would be overwhelmed. Unlike a software product where a one-person founder’s team might be sufficient, our product demands expertise across different disciplines. As we see our limitations with just five people, we acknowledge the need to expand our team. We wouldn’t be where we are today without growing the team to its current size.
Q: Great to hear! How are you planning to expand your team further? What are the open positions, and what do you expect from newcomers?
A: Well, now, being on the brink of closing the seed round, we are enthusiastic about growing the team. Of course, the technology will remain the driving point. We are actively seeking experienced engineers, particularly those specialized in chemical engineering, thermal, as well as compression and expansion hardware. On the other hand, since we are already involved in software development, we are also in search of data scientists in the energy field. Additionally, we are looking for software engineers who can assist us in building and scaling up the software side of our business, particularly with Catalyst. Furthermore, we are on the lookout for individuals in various roles. Nobody should shy to explore other responsibilities because, in the early stages, every set of hands is needed to establish structures, and processes, and gain an understanding of how companies grow. So, it’s quite a diverse mix of people we are seeking, and our team is expanding. We anticipate growing to around 15, 16, or even 17 members initially, including working students, full-timers, interns, and so on, possibly even reaching 20 people in the next year.
“We must be able to crunch the numbers and provide evidence that our energy storage systems will add value for the customer.“
Q: What inspired the development of Catalyst? Could you share the story behind its concept and the driving force behind its creation?
A: I think this is one of the most interesting questions because we often get asked from the outside about how it all works together. Are we a hardware startup or a software startup? Again, we wouldn’t be here if we weren’t both, and we see it this way: as a hardware deep tech startup, one of the most critical things to navigate on the path to commercialization is securing the first customers. The real challenge lies in how to acquire those initial customers in an industry that is still evolving, particularly in the field of energy. The long-duration energy storage market hasn’t reached the point where it will be in five or ten years. So, our approach involves building the necessary know-how internally and being capable of engaging in meaningful conversations with customers. We must be able to crunch the numbers and provide evidence that our energy storage systems will add value for them. This is where Catalyst comes in as a necessity, addressing these early questions and doubts for customers. We’ve all come to understand that we now have a tool at hand, one that helps us not only sell our hardware business but also assist customers with other solutions, such as lithium-ion or redox flow. We use these tools to address various questions posed by customers. Essentially, we are in the process of building our own business and product based on the foundation of this sales tool we already have.
Someone put it nicely, the same way AWS (Amazon Web Services) evolved from a tool originally designed to run the Amazon shop. It began as a necessity and remains one, particularly for selling Aurora and bringing those crucial first customers on board. However, we’re now asking, why limit ourselves to just that? Why not expand our impact and assist customers in the early planning and decision-making process? We aim to help them compare different technologies for various use cases and build an investment case.
Q: You said that it’s going to be different for energy storage systems in the upcoming five or ten years. Are you considering combining Aurora and Catalyst and selling combined products for your customers?
A: I mean, they are integrated, but if you look at the process flow from the perspective of a renewable energy developer or a commercial industry wanting to build energy storage to the point where it selects the hardware, implements, and deploys, I think it serves different aspects. Catalyst is helping to get the foot in the door for these companies, helping them understand what value energy storage, in general, can add for them. It’s in this very early stage of the deal flow and project flow where it adds value. Then, our Aurora system will compete against all these other technologies, and we will see projects where we might not be the best solution for the customers, which is okay. But these use cases are evolving, and we want to be the ones capable of closing the deal with Aurora our liquid air energy storage system being the solution there. So, it’s addressing different times and different problems for the customers, but they also complement each other because the information we gain right now from all these projects, even though they’re not Aurora-related projects, we can feed that back into the product development. We can ensure that we get the information needed to ensure a good product-market fit for our liquid energy storage system. So, they complement each other, and the long-term future is really about having energy management intelligence in the storage system, which will be based on Catalyst, but that’s a future work.
“Seeing that what you’re doing creates value, regardless of whether the software is perfect, is a pure milestone.”
Q: Catalyst has already achieved successful projects and reached customers. Were you expecting this quick success when you started developing it?
A: In any case, having customers is a huge passion for any company. Seeing that what you’re doing creates value, regardless of whether the software is perfect, is a pure milestone. Having a customer invest in your product, saying, “Yes, we see the value; we want to use this,” is a huge boost for the team and the company, a validation point. Of course, you then work on improving it, and that’s precisely what we’re doing. We have closed, I think, around 10 different customers using our tool in various circumstances. Now, we’re thinking about how we can do even better. How can we use the feedback we received from these projects to build a product that is also scalable? Up to this point, it has been project-based, and now we want to create it as a service that doesn’t require our attention every time to deliver value to customers.
Q: How has customer feedback and real-world application shaped the ongoing development of Catalyst? Are there any specific success stories or lessons learned that stand out?
A: The first customers are the key, and we are maintaining a close relationship with them. Being customer-centric is one of the most important sources for developing features. Of course, I have a lot of ideas stemming from my experience, but ultimately, I’m not the end user of the tool. Having these cross-references and firsthand conversations is crucial. We’re conducting workshops, and we’re eager to invite our customers to participate. In these workshops, we aim to dive deep into understanding how we can assist them in making the entire process easier. This feedback directly influences our feature development and the prioritization of what we tackle first because it’s the essence of growth – keeping in mind what’s best.
On one hand, it’s essential to understand what the customer wants. But on the other hand, there’s an analogy from Henry Ford that says, “They want faster horses”. So, it’s our job to understand the big trends and figure out what we can fundamentally do differently to make a significant leap in the entire planning process. That’s precisely what we’re working on – trying to comprehend why we are conducting these simulations and why we bring all the stakeholders on board, not only the developers but also the investors and the operators. We want to understand what’s vital for them and find a way to solve these aspects much better and quicker from the very beginning. We aim to expedite the entire process from the initial decision to invest in energy storage to commissioning it and securing financing. This is how we can accelerate and reduce the energy per outcome, becoming the catalyst for the entire planning process, which is what Catalyst is all about.
Q: What does the future hold for phelas? Are there any upcoming advancements, collaborations, or projects that you’re particularly excited about?
A: Overall, I believe the two most important milestones were the collaborations with Wien Energie and Ørsted. The collaboration with Wien Energie opened up many aspects of our development, especially on the Catalyst side. Additionally, our collaboration with Ørsted, the largest offshore wind company globally, was significant. They have a clear focus on energy storage technologies, aiming to integrate a considerable amount of offshore wind into the Dutch market. We are currently working on two projects with Wien Energie and are about to begin projects with Ørsted. I’m genuinely excited about these developments because they further demonstrate that we are working on the right things at the right time, and we are even addressing the challenges faced by these large corporations.
“I think setbacks are quite normal; it’s the experience of how you deal with them that matters.”
Q: Have you ever lost your passion or motivation? How did you come back from that?
A: I believe it’s only true if I say yes. Of course, you have ups and downs, and I guess, sometimes in fundraising, it was challenging when we didn’t receive enough customer traction, and investors weren’t coming through as we had anticipated. But, looking back, it’s quite a common state for startups to experience these kinds of moments. There were times when we were on the brink, and we even considered whether, back in the beginning when we didn’t secure grants, we were just beating a dead horse. You don’t have any reference points, and this is exactly what makes it so hard, especially as a first-time founder. You might lack the confidence to trust the process, but you have to continue because that’s a normal part of the journey.
Having gone through these setbacks once and then twice, and now seeing that we could close the partnership with Ørsted, garnering interest from leading investors, and being on the verge of closing the round, it’s bringing back our passion and motivation. External validation like this is crucial. I think setbacks are quite normal; it’s the experience of how you deal with them that matters. Dealing with setbacks for the first time can be one of the toughest challenges you face.
Q: Thank you for the interview.