CarbiCrete: The Sequel
The Unicorn GTM Pathway
Two weeks ago we wrote about CarbiCrete, the Montreal startup producing an innovative, new concrete formulation that sequesters carbon at scale, as well as avoiding the considerable emissions (concrete is ~8% of global CO2), from the traditional product.
In the aftermath of writing the piece, we kept coming back to a question; Why is the company so cheap? CarbiCrete’s most recent funding round was $23m CAD, bringing their total raised to $40m CAD, about $30m USD at current exchange rates. We’ve written about a lot of concrete companies before, and two things stand out;
They raise more than $30m USD to get to a small-production capacity and licensable product, as CarbiCrete has, and…
Their products are generally oriented to making concrete less of a problem, rather than a high-permanence sequestration pathway, again as CarbiCrete does.
CarbiCrete is technologically advanced, scaling efficiently, and offers an impactful product. Why isn’t it already a unicorn?
In today’s piece, our first direct sequel, we’re going to take another look at the company, its business, obstacles to success, and what we’d do differently if offered the chance to shape CarbiCrete’s GTM. Let’s dive in.
Licenses, Tigers, and Bears, Oh My!
CarbiCrete’s current GTM model is based around licensing its technology to industrial makers of concrete, on the promise of lower materials and production costs. The company also sells carbon offsets from the production of carbon-negative materials on the standard offset marketplaces, and has used the proceeds thereof to fund product development. The split between these revenue sources are not readily apparent and the company publishes little information, understandably so.
We think both approaches are problematic. Licenses give up control of the brand and value-proposition, instead burying technological differentiation into someone else’s product book. We note again that CarbiCrete’s solution is objectively and considerably better than industry standard, and that their market position fails to reflect this reality. Imagine, for a second, a version of the company that had started in San Jose. Would they be quietly licensing, or marketing carbon-negative prefab construction through a series of over-directed 4K YouTube videos? We are certainly not saying that the US breeds better businesses (it doesn’t), but it does create louder ones.
About the offsets; Coral has written before about offsets, and the need for the US government to issue a climate bond in order to anchor the carbon markets. We endorse having a price on carbon, and a market for the resulting financial products. We just hate the current-state execution, especially since CarbiCrete’s products offer superior sequestration characteristics to most of the profoundly crappy carbon-removing grifts products on the market today.
How to do it instead?
Bollards, Speed-Bumps, and Benches
There are 5.9 million commercial office properties in the United States, per the EIA. They use a lot of concrete; For walls, floors, planters, fountains, and pretty much everything else. For our purposes, let’s focus on the three products above. Bollards (the waist-high pillars that separate roadways from pedestrian spaces), detachable speedbumps in parking lots and at the front of spaces, and the cast-concrete benches adorning the front of many entrances. If we’re going to advocate that CarbiCrete move to a direct-sales model, which we are, then we need product lines that are small, simple in design, straightforward to ship, and bought at large volume.
Concrete is heavy. Benches weigh between 400-800 pounds (let’s say 500 for our math), bollards are 200-500 depending on height (we’ll say 300), and speed bumps are 50-200lb per space (let’s use 50).
Let’s assume one bench, five bollards, and 10 speed bumps per building. 2,500 lbs of concrete X 5.9m buildings = 15bn lb of concrete.
Precast concrete costs about $0.25 per lb. 15bn of concrete X $0.25 = $3.25bn, using conservative volume estimates. Not bad.
But wait, there’s more.
LEED is the industry-standard scale of green-building construction and property management practices, used by buildings worldwide. LEED certification has an achievement scale (Bronze, Silver, Gold, Platinum), which corresponds to the collection of points for adopting environmental best practices, ranging from multi-million dollar HVAC replacements to adding bike racks in a parking garage.
Higher-certified LEED properties lease faster and fuller (although estimates for the swing vary widely), which effect we expect to see continue and strengthen over the next decade, especially as the work-from-home crunch in office occupancy leads to an overall flight to quality within the industry. We also see a wide variety of per-property demand for CarbiCrete products. A 1m sq ft urban office tower, with a large garage and interior courtyard, might use 20X the products of our initial estimate. Let’s say 50k lb of concrete, sequestering about 75 tons of CO2, per CarbiCrete estimates.
Cranking the Cement Mixer
We suggest the following model for CarbiCrete;
Form partnerships with the largest, franchised providers of commercial property management services in the US. CBRE, Jones Lang LaSalle, Cushman / Wakefield, Hines, and NAI control the vast majority of the market. Start there. Staff each account heavily, provide no discounts whatsoever for subsidiary signups, but do split the resulting offsets with the parent company. Guaranteed minimums are for children, aligned incentives are for adults.
Partner with LEED to have the CarbiCrete products lines certified for LEED points. Paint them green. Engrave in each that “this bench holds 250lbs of CO2 permanently out of the atmosphere.” Take lots of photos. Put plaques in lobbies, and prepare ROI cases so that property managers can demonstrate the utility of these assets in their leaseups.
Make money. Lots and lots of money.
Use the revenue to self-fund further product development, onshore production, and scale profitably.
Expand into parking garage structural elements. Take on infrastructure projects in Quebec to stay close to home and provide public benefit.
Make more money.
Produce prefab homes for the Californian leisure class, marketed by influencers starring in 4k YouTube videos.
IPO.
Conclusion
“You mustn’t be afraid to dream a little bigger, darling.” - Eames, Inception.
We’ve spent the past few weeks studying Canadian climate tech companies, and they’re truly superb. Innovative, scalable, and mission-driven is a hell of a combination. What we wonder is whether they’re too ruthlessly efficient, and too damn well-run to become iconic. A little swagger goes a long way, and given Quebec’s regional focus on standing up an innovation economy as a replacement to housing prices as the vehicle for population-wide wealth creation, we think it’s sorely needed here.
Dear CarbiCrete - We’re fans, and would love to come help as consultants, advisors, investors, or jack-of-all-trades builders. #callusmaybe