Future of Sustainable Fuels with Rob McGinnis, Founder and CEO of Prometheus

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Transcription of our conversation with Rob McGinnis, Founder and CEO of Prometheus Fuels

Immad Akhund: Welcome to the Curiosity Podcast, where we go deep on a wide variety of technical topics with the smartest leaders in the world. I'm Immad Akhund, co-founder and CEO of Mercury.

Rajat Suri: And I'm Raj Suri, co-founder of Lima, Presto and Lyft. And today we're going to be talking to Rob McGinnis, who is the co-founder and CEO of Prometheus Fuels. Prometheus Fuels is developing a really exciting and innovative way of converting carbon dioxide from the air into electrofuels, or fuels that can be used for all sorts of transportation and heating, etc. So it's really cool technology and Rob is super knowledgeable. Immad, what are you excited to talk to Rob about today?

Immad Akhund: Yeah I think this is kind of the holy grail if we can make this work we can really make a dent in kind of reducing our carbon output and climate change so yeah I'm actually an investor in Rob I was pretty excited about his pitch he's kind of subsequently raised 50 million and yeah he's had BMW and Musk who are potential kind of buyers invest in his company so it's a really cool idea and Rob is really willing to go technical and go deep on it which is what this is all about.

Rajat Suri: Yeah, I mean, this idea of like being able to just recycle carbon from the air and put into fuels that we can reuse. So it's kind of a zero carbon fuel is really, really cool. Really curious to hear about how it all works. It sounds like it should have existed for a long time. So excited to dive deep in with Rob. And so let's welcome Rob to the show.

Immad Akhund: Welcome, Rob. Excited to have you here. My pleasure. Tell us your path to kind of starting Prometheus Fuels. And I guess just give us a little bit of background on what it is and how it works.

Rob McGinnis: Yeah, so what Prometheus is, is we capture CO2 from the air and we use electricity from renewable resources like solar and wind and we turn that CO2 and electricity into fuels, liquid fuels and gas fuels. So we can make everything from methane to wax or coal and the liquid fuels in between like gasoline, diesel and jet fuel. And these are stores of energy. You can think of them as a battery in a way, because once you've made the liquid fuel, you've stored all the electricity that you used to make them, and they're quite stable. And you can use them in a wide variety of engines. Jet engines, you can use them in internal combustion, spark ignition engines for gasoline, diesel engines for trucks or ships, trains, what have you. And you can do that without actually changing any of the infrastructure. You don't have to change all the cars and all the trucks and all the planes. You just change the fuel, and now you're completely decarbonized. And the fuel is superior in a lot of ways. So that's what Prometheus does. This is my third startup. The first one I started out of my PhD at Yale. I did environmental engineering, chemical engineering kind of focus. And I started a company called Oasys Water. And what that company did is we used a new kind of desalination process and a new kind of membrane to enable it, and we cut the energy and costs of desalinating by half for zero-liquid-discharge industrial wastewaters, which did quite well technically. It did mildly well commercially, mostly in China. I believe there are five very large factories there that use the process that I developed in that company. I left there for about four years after I had proven the tech worked. And in order to do that, I had to pass in a tenure track teaching position that I was going to take. I was flirting with being an academic. And after that, I went back and interviewed for academic jobs again. And I realized that I had just kind of been culturally ruined for academia. I was way too into starting companies. So I started a second company. I made another membrane. And membranes are really interesting and really cool. If you think about chemical engineering, you're used to looking at things like distillation or really high-pressure, high-temperature processes. They are really inefficient. The thermodynamic efficiency of distillation, for example, is less than 10%. When you change those to a membrane-based process, you typically will increase the efficiency by a factor of 10. So this is something that I wanted to do more broadly. And I wanted to also just take on a really cool technical challenge that I thought that you really couldn't do in academia, but you could do in a startup, which is a commercial carbon nanotube membrane. And so all the membranes people have used to date have been like porous polymer. So they do like filtration through pores or they've been dense films and then you do desalination with that, right? If you have one under your sink, that's a dense film. It's a polyimide. And so what I wanted to do was, was take a step change in like a third generation membrane where this one would be based on nanotechnology.

Immad Akhund: A membrane is literally just a thing that you put in the way between like liquids passing through it. Is that the definition?

Rob McGinnis: Yeah, it separates things and separations has always been super interesting to me. And so if you have like, say, water with contaminants, right, the membrane will let the water go through and block the contaminants. And then you have clean, pure water and you can separate much more complex things than water and salts. And so this membrane can do a lot of really exciting things. And so I developed it. It's a carbon nanotube membrane. All the pores are the interior of a carbon nanotube, which is about one nanometer in diameter. And that was a huge achievement because these things are like a thousand times longer than they are wide. They're floppy. They're kind of, they're at nano scale. And to get those into a macro scale device that does super interesting nanotechnology things is really hard. And so I succeeded at it though. I got a commercial carbon nanotube membrane. And then people would ask me, well, what is that? And what is it for? I would say that's the dominant two questions I got about it. It was, what is that? And what is it for? When that's what people are asking you, you know, you really haven't got product market fit.

Immad Akhund: So this is your second company where you develop this technology but don't have like a strong use case for it?

Rob McGinnis: Yeah, it was sort of like make it for the sake of making it and then figure out what it's for. And so I had to kind of face the fact that I had this, what academics and material science would call a holy grail achievement, but everyone in the regular world was like, I don't know what that's for. I don't need it. And so I had to ask myself, what's the most interesting, exciting thing I could do with this new technology? And what I realized is that I could use it to replace distillation in a CO2 to fuels pathway. So if I wanted to capture CO2 from the air and turn it into like alcohols, for example, Normally you have to use distillation and that would be like a huge problem for the efficiency of the process. It wouldn't allow you to match intermittency. It wouldn't allow you to use electricity only. A whole bunch of things. I thought that if you got rid of distillation, then you could do CO2 to ethanol and you could have a whole process. And so I decided to start Prometheus. to essentially test that theory. And the reason I did it was in 2018, which is when I founded Prometheus, the cost of electricity fell below two cents per kilowatt hour for the first time. And that fall, the city of Los Angeles did a contract for a power purchase agreement, PPA, for two cents a kilowatt hour. And then two years later in the Middle East, it's one cent per kilowatt hour. So once you get below two cents a kilowatt hour, then I think a lot of people realize that e-fuels was something you could do. You could turn electricity from just being electromagnetic energy on a wire into being stored chemical energy. in liquid fuel, and then all of a sudden you would have completely different energy infrastructure globally, you know, and decarbonize very, very rapidly. You'd also really take a lot of the cost out of energy for most people, because the price of oil has been kind of set artificially through cartels for 100 years, and it's pretty expensive. Right now I think it's trying to push up against $100 a barrel again, as it often does. And that's like a tax on every consumer. But if you take electricity that's down below one cent per kilowatt hour and you turn it into liquid fuel, you're going to be like looking at $1, $1.50 per gallon liquid fuels. And it's going to stay that way in a very stable way. So it's hugely transformative and totally worth doing. And it turns out the carbon nanotube membrane was perfect for it. So that's not my most exciting narrative on Prometheus, but you asked me how I came to it. It's through those three companies and that train of thought.

Rajat Suri: Yeah, that makes sense. I'm really interested if you can go into detail about the Prometheus process, how it works, how it strips, how it converts carbon dioxide to these fuels. I had a look at your website, which is really cool. It's like probably one of the best websites I've seen just in terms of like creativity and how you describe the process and really go deep into it. Thank you. But yeah, I would love to explain to our audience kind of how it works because it's a pretty creative process.

Rob McGinnis: Yeah, it's pretty cool. I mean, e-fuels have existed before, right? We consider our stuff to be a second generation e-fuels. And the first generation has been around for about 100 years. And that is like Fischer-Tropsch, or later in 1970s, you had methanol to gasoline. But basically, these are high pressure, high temperature ways of making fuel. So, I mean, even in the 1930s, you could take coal, you could gasify it into syngas, you could turn that into gasoline or diesel. It's really expensive to do it that way. It's about a thousand degrees Celsius, you know, and about a hundred times atmospheric pressure. And so those things are always going to give you like $10 per gallon or more, no matter what scale they're at, they're never going to be good enough. But what we're doing is second generation is based on electrochemistry and electrochemistry can be done at room temperature and atmospheric pressure. So I literally build these things out of Home Depot parts. I go and buy a PVC valves and stuff like that. They're really cheap at 50 cents for like a T valve or something. And so the way we do it is we capture CO2 from water into water, right, from the air into water. And it wants to do that because CO2 is an acid gas. If it encounters water, if you have like a glass of water out on the table, the CO2 will go into it and form bicarbonate.

Rajat Suri: You're carbonating water, yeah.

Rob McGinnis: Yeah, we're carbonating water. We're making it fizzy, essentially, or salty. And I've always been fascinated with carbonate chemistry. In my first company, we use ammonia and carbon dioxide to sort of create thermally liable salts to create osmotic pressure. The CO2 is this thing can kind of go back and forth between being a gas and being a salt. It's pretty cool. And it has a lot of affinity for ammonia groups, which is why most people who do direct or capture use some sort of like amine, functionalized amine or something like that. But it turns out the water is good enough if the pH of the water is high. And so you have alkaline water, The CO2 really wants to get into it. It's super easy. Thermodynamically it's downhill. We've got a really simple setup in the back of our shop that just uses like this really cheap cooling tower packing. You have the water flow down from a sprayer and have a fan pull the air from the side and up. And with less than a three square meter footprint, we can pull out like one and a half kilograms of CO2 per hour in that thing. And the energy is just minimal because all you're doing is you're pumping liquid and you're running your fan. It's less than 1% of our total energy use. Where most people spend all their energy and all their costs is in trying to get the CO2 back out of the water as a gas. So if you look at the companies who do direct or capture and they're using like solid adsorbents or they're using amines or even hydroxide water with high pH, they end up putting all their energy in to get the CO2 back out again because they want to go into a first generation e-fuel process that requires gaseous CO2. We don't do that. We actually use the bicarbonate as the carbon donor in our electrolyzer. And so let me kind of describe what that means. So we've taken an electrolyzer like you would use to make hydrogen. And we've added a feature. So it has a cathode and it has an anode, it has a separator and the anode, it makes oxygen the same as a regular hydrogen electrolyzer. The cathode makes hydrogen in ours as well, but it also makes hydrocarbons. And so it's a slightly different catalyst, slightly different environment, but it turns out that on the cathode, we can actually add electrons to the carbonate and bicarbonate, you know, it's certain to have them form carbon, carbon chains, and we split water, but a lot of it doesn't turn into hydrogen. It actually ends up getting bonded to the carbon as a hydrocarbon. And so in this system, we can make methane, ethylene, propane. We make ethanol.

Immad Akhund: And to make the different things, you just have to change the anode in the… What do you have to change?

Rob McGinnis: You can modify the cathode a little bit. You can modify the chemistry, the temperature, the voltage, the pH, and the flow rates, and a bunch of different things. It's fairly sensitive. It's sort of like baking a souffle, right? I don't know who the first person was that made like a souffle, but there's a lot of ways to not do it right. But once you know how to do it, you have the recipe, you can do it all day, right? So yeah, in the cathode, we can make all those things. We make butanol, octanol, and we've even shown we can make like 30 carbon hydrocarbons that are like waxy and solid.

Immad Akhund: Is this stuff novel or was it all kind of well understood before you got here?

Rob McGinnis: A lot of what we've done is novel, and people are starting to catch up to some of what we've done in the academic literature. When we started out, I mean, I looked at the landscape and I said, OK, I think I know how to do the direct air capture. I think I have a novel insight there. Most people at the time, and even today, don't think that carbonate can be your carbon donor. Carbonate actually is a great carbon donor, but a lot of people thought you couldn't do it. They were focusing on systems that use pure CO2, so you'd bubble CO2 in the water. And if you form carbonate, they thought that was bad. And what I realized is that you could use it as a donor. So that made the direct air capture super simple and super inexpensive. And then the next thing was that we licensed a catalyst from Oak Ridge National Laboratories that was like a second generation of something they had shown could turn CO2 into ethanol. And so we started using that. And since then, we've dramatically improved on and kind of moved on from it. But we found that surprisingly, we can make very large hydrocarbons in water at room temperature and atmospheric pressure. Most people thought you could maybe make formate, maybe make some ethanol. And then you can take the ethanol, you could do like an ethanol to jet, right? Something that people do with bioethanol. And we found that we didn't need to do that. We could actually do all the oligomerization, all the technical upgrading in the electrochemical stack. And then the third step is if you have things like ethanol and butanol in water, they like to be in water. And normally you'd have to use distillation to get them out. And what we found is we could use the nanotube membrane to get them out. And it does that job really well. If you have like 1% ethanol and water and you want to get that out as a fuel, that's 99.9% ethanol. Normally you'd have to use three distillation columns or 40 feet tall each. You'd have to run those 24-7. You'd have to use methane or maybe hydrogen to heat them. You'd have to boil all the water. We don't have to do that. So we can take 1% ethanol and water and go to over 80% in a single pass through these membranes just based on the fact that the ethanol wants to absorb in the interior of the carbon nanotubes. And so you can just pull a vacuum on it and you get it out. And then going for the rest of the way is trivial.

Immad Akhund: I kind of assumed the membrane worked because one of these is bigger than the other, like water is smaller or bigger than the ethanol is. But you're saying it's not that, it's actually some other process?

Rob McGinnis: That's one of the things that's pretty cool about this membrane is that if you want to use it for filtration, you can do it based on size because it has a very narrow aperture. You can get nanotubes down below one nanometer. And so then you can do softening, desalination because salts would be too big. But the way we're using is based on a totally different mechanism. It's called preferential pore filling. It's based on absorption. So if you have something that will partition out of water into this substance, that could be a zeolite, it could be like a graphitic substance like a carbonate tube or graphene, then it'll absorb onto that graphene, it'll leave the water, right? So the R is kind of like a continuous conduit. So if it absorbs, it goes all the way through and comes out the other side, instead of just being stuck there. So it's based on absorption mechanisms.

Immad Akhund: There's no energy differential here, it's just pressure differential? Like there's no like more heat on one side?

Rob McGinnis: If you put some heat on the feed side, you can get a faster throughput because you'll have a higher vapor pressure. It's a gas phase separation. And then downstream, you just have vacuum to like a cold trap, the same temperature of like a refrigerator in your house. And that's enough to get it to condense back down again into a liquid fuel. And we found that we could actually separate things like butanol that have a higher boiling point than water does. Which normally, if you were to try and separate butanol or octanol from water in distillation, you'd have to boil all the water off. And you'd have those liquids at the bottom. We call them bottoms of the distillation. But we can actually get them through in the vapor phase. There's all these things we found that were surprisingly better in function than we expected. So we thought we'd be able to make ethanol. In fact, we can make jet fuel range hydrocarbons and diesel range hydrocarbons. We thought that we'd be able to separate things like ethanol and methanol, but we'd have to do something different, maybe for octanol. It turns out we can get all these through in the vapor phase. So, you know, one of the questions I think you asked me when we were kind of getting ready to talk is what was surprising about this. And I would say the most surprising thing is how well the technology has performed. And then in parallel to that, what has been the most maddening in terms of the problems we faced. And it turns out the technology is over-performed and the problems have been the small things that drive you crazy, like, you know, which glue will actually glue right, or, you know, the dimensional tolerances. We're doing all of our stack parts in injection molding. to make them really really cheap and getting someone who can actually make that part so it's flat takes them back and forth so we spend like an inordinate amount of time on things that are like crafts like cutting straight lines and having things be flat.

Immad Akhund: This step three is the last step or is there another step to get the feel out?

Rob McGinnis: We realize we don't have to do a fourth step to upgrade. The only exception to that is the regulations. So, for example, we could make something a little burn in a jet engine and it would be just fine. But you have to get an ASTM certification for that fuel and that composition specifically. Or we can make something that'll burn in an internal combustion spark engine designed for gasoline or in a compression engine designed for diesel. But you have to get California Air Resources Board called CARB and EPA permission to do that. And so that requires you to go through often a year's long process to get their permission for the fuel you're making. For jet fuel, it's an ASTM annex. And so you have to go through several years of sending samples and getting tests. And we haven't really gotten into that process very far because as we've been improving what we do, the composition is changing all the time. We thought we'd make ethanol, then we'd go ethanol to jet. Then we realized we could actually make butanol and octanol. And we're like, oh, wait, butanol's drop in for gasoline. Octanol's drop in and replace it for diesel. You can blend the octanol in jet fuel up to like 20%. We certainly make things that are in like the 15, 16 carbon range that could be jet fuel. But we're like, when do we say that that's the final composition and then go into the ASTM process? So the point we're at now is that we've gotten good at making everything from methane, which is renewable natural gas, to wax and coal. But we need to figure out which of those to start making commercially first. And we need to start doing that next year. And so we're going to build our first commercial systems. And we've already started to build in the automation to make all these parts. So the electrochemical stack is the majority of the equipment. It's like 80% of the equipment. And you have to stack these pieces on top of one another in a very specific sequence, right? Cathode, separator, anode. You've got to get them all taped or glued or sealed or welded in such a way that they're all flat and they don't leak. And you have many layers and there's no bulges and a bunch of, like I said, crafts. We're in the process of doing that now. When I'm going out and talking to everybody, who uses petroleum fuels now, which is everybody, right? So you talk to people who use renewable natural gas, which is a lot of people for heating, for industry, right? If you're going to make glass, you're going to make steel, you're going to make pharmaceuticals even, you're going to use methane for heating your vessels typically. And then I talk to people who are using gasoline, so car companies, I talk to people who are using diesel, which would be like trucking companies and maritime shipping companies, you talk to people who use jet fuel, the airlines, and trying to figure out kind of who is ready for those fuels now, who wants them, who has them as part of their plan. And you think it'd be obvious because they're so cool, but people are uncertain about some of the ones in the middle range. So, for example, gasoline. We can make gasoline. We can make it high octane. It's zero carbon. It has just the right degree of oxygenation. If we go through a process of carbon EPA, I'm sure we can show that we have something that fits into one of the STMs for gasoline. But if you ask most people today, should you be making gasoline? out of solar and wind, people would say no, because the consensus is that batteries are going to solve cars, right? And that we should focus on the things that batteries can't solve. Like batteries are just the good, and you should kind of do everything batteries can't do, right? And I think that's not giving credit to how useful liquid e-fuels are. If you make them out of electricity, I don't see that they're inferior to batteries, but that's kind of what everyone's decided. So I don't really think we'll go out with commercial gasoline first, although there's a lot of people who'd be unhappy to hear that. A lot of people want that gasoline, I think.

Immad Akhund: Just to talk about the process a little bit more before we, I guess, talk about the commercialization. You said step one takes like 1% of the energy. Yeah, that's right. Is I guess the 99% of the energy step three or step two, or is it a mixture?

Rob McGinnis: It's all the electrochemical stack. Like 98% of the energy is the electrochemical stack. Is that step two or step three? Step two. Yeah. Step two. That's the, the electrochemical.

Immad Akhund: Oh, so step three of like passing it through the, this kind of membrane is like almost free.

Rob McGinnis: Less than 1%. Yeah, it's like super cheap. It would be like 5% or more if it was distillation, but it's less than 1% for us.

Immad Akhund: And what's the efficiency loss, right? Like you're going from electricity to a biofuel that you, I guess there's like a 60% efficiency on the biofuel itself. Like what's the, I guess not biofuel, it's just fuel.

Rob McGinnis: It's just E-fuel. Electrofuel is one thing people call it. We can do over 50% overall efficiency for everything, including the direct air capture and the separation. And so you can get as high as 60%, but then you start looking at the fact that electricity prices are falling, but the cost of materials are going up. So the place to set the dial is on capital efficiency, I think, at the moment. So an economic optimum, if you're trying, if you have like, if you're less than two cents a kilowatt hour, you're behind the meter utility scale power, which is the only places we want to do this, then you're already below two cents. You're like one and a half cent driving down to one cent. And if that's the case, it's better to be like 45% efficiency or 50% efficiency and really drive down the cost of your capital, especially in a high interest rate environment and for new technology.

Immad Akhund: And if you had like let's just say medium scale right now without like inventing like new technology or whatever like how much would fuel cost for a car like based on what you're doing now?

Rob McGinnis: Less than three dollars a gallon without any subsidies. Wow. Cheaper than you're paying now. So that's I think should be really exciting.

Immad Akhund: It's exciting to me.

Rob McGinnis: Excellent, that's great. There's a lot going on with electric cars right now. I mean, just today the chairman of Toyota was saying, hey, people aren't buying them. Like everybody wants them to. The demand for EVs is falling. But then subsidies are increasing. Prices are also falling. I don't know how that's going to play out. It doesn't really affect our plans, because if all we wanted to do was just make diesel for ships, we'd be so busy doing that. Oh, yeah. Right? And everybody agrees that that's a good thing to do, right? The batteries are not going to solve massive container ships. And then also sustainable aviation fuel or SAF is what they call it, right? Jet fuel. You're not going to fly from here to Paris on batteries. So that's something that everyone agrees on. And it's really difficult to push a company uphill on consensus narratives over what everyone should be doing. You can do it, but it's better to find something that everybody definitively wants, product-market fit, no question. And I think we've had product-market fit on e-fuels from the very beginning. There's been no doubt that the demand is there. Because it's a commodity, it's based on price. It has to be carbon neutral as sort of a floor. But then if you can compete with fossil fuel on price, then there's no question of product-market fit. The only question is production. Prove to us you can make it at that price.

Rajat Suri: What kind of volumes are you producing today? Where are you in the process?

Rob McGinnis: I put a post in about a year and a half ago called, Dude, Where's My Fuel? Because people were frustrated we weren't shipping. And I was talking about the fact that what we've done is we've scaled up everything to full size components. And so, for example, that'd be like one cell, one cathode, one anode, one separator. And then what you do is you run that under different conditions and you take a sample of your electrolyte and your gas stream and you put it into an instrument and it tells you what you've made and how much. But that's not enough to get out of the system, right? It's just analytical qualities. And so then we change the conditions, or we change the stack, and you iterate. And we're on our seventh generation electrochemical stack now. The stack is actually really important. And I think we're the first people to design a new electrochemical stack, with the exception of maybe one or two companies that sprung up very recently, in a very long time. The electrolyzer design is like 100 years old. But it turns out it's important to do, because if you want to make the cost of this system be really low, you have to make the stack really low. It's 80% of the equipment. easily. And so that means that you have to go to many cells and many stacks and you have to fix with one thing. And so if you do that, you kind of stop progress to go into production. And I tried to do that in the fall of 2022. And we ended up pushing too early and we made atmospheric coal. I put a post on that like not that long ago where essentially we found out as we were making 30 and 40 carbon products that that would burn before they would melt. And so you'd have to shovel them into like a boiler. And I don't think we want to take people back to the steam age. So we decided to retool, went back to single cell. And now I think we're ready to push again into production. But it's time to do full commercial systems. So one of those is like a 40-foot container. And it'll probably do something around 50,000 gallons a year in a 40-foot container footprint for less than $3 a gallon. And we also make really cheap hydrogen. So our hydrogen is less than $2 per kilogram. And so I think that's, at the moment, the cheapest in the world. But we have to demonstrate that in production. And these are all containerized systems. So if we were to do, say, a 100-megawatt project, you'd have probably 100 of these fuel forges, these 40-foot containers. And then you'd be making probably 5 or 6 million gallons of liquid fuel a year and 5 or 6 million kilograms of hydrogen, if you wanted to split it that way. That split makes sense, because there's so much more subsidy for hydrogen than there is for everything else. Because the consensus narrative is that batteries will solve everything, and everything that batteries don't solve will do with hydrogen. Right. That's what everyone's decided. And so hydrogen is actually really hard to ship to places. And if you want to use hydrogen instead of liquid fuels or methane, you've got to change your equipment. And so a lot of people are saying, well, all the steel makers should change to furnaces that can run on hydrogen and all people's homes should either change the heat pumps or they should change the hydrogen power. We should convert all the natural gas pipelines to hydrogen. And there's these new hydrogen hubs, one of which is in California. But there are, I think, seven in the United States and they're all focused on hydrogen. And so we will certainly supply that demand at less than $2 per kilogram. And I think at that price, you can do all the things people said they wanted to do with hydrogen. But when they find out we can also give them renewable natural gas instead at the same price, I think they would prefer that. It's just something that only we can do. And so people are just not familiar with it yet.

Rajat Suri: Is anyone using hydrogen today? Like is anyone using it for industrial processes, transportation, any of these things?

Rob McGinnis: 98% of the hydrogen market today is for oil hydrogenation and fertilizer, and it all comes from methane. It all comes from methane. Less than 2% of it is for any other purpose, and I think less than 1% of it is actually from hydrogen electrolyzers. The green hydrogen market is largely hypothetical. What we're trying to do is make it real with industrial policy. If that's the future, we're going to supply hydrogen to it. But we're also going to say, hey, would you also like renewable natural gas and maybe some diesel and jet fuel? And I think that people would prefer those things over hydrogen. And I think in many cases they prefer them over batteries.

Rajat Suri: 50 million gallons. What was the number?

Rob McGinnis: It depends on what you're using for energy. If you're using solar, you only operate a third of the day. If you're on hydro or nuclear, you're 100% of the time. So nameplate capacity would be probably like 12 to 13 million gallons of gas equivalent. You can split that between hydrogen and liquid fuel, kind of however you want.

Rajat Suri: And is that your main bottleneck is going to be how you get the input electricity like a wind, solar, hydro?

Rob McGinnis: It's not a problem. I think we actually solved the problem. Because if you want to build, let's say, 10 gigawatts of new solar today, you've got to find a grid interconnect. If you're in the United States, there's over a terawatt of power waiting for permission to connect to the grid. So you have to go somewhere that's not too close to a city because people won't want to see it, NIMBYism, and not too far away because it won't be a transmission line. You have to wait years to get access to that transmission line. In some cases, they try and make you pay for upgrades to the grid to take the power. These are problems that are playing out now. We solve all those problems because we should not be connected to the grid at all. We should be out in the middle of nowhere where the sun shines the brightest, the wind blows the best, and there's no transmission line. There's no one living there, right? Say somewhere in the middle of Utah. If you've driven through Utah on a road trip, there's like one gas station every hundred miles. So that's an example where you should be. So another place would be like Northwest Australia. That would obviously service all of Asia with e-fuels. There's so much sunlight there. You could do that in Northern Africa. You could do it in the Southwest United States. Just for example, the Middle East has the cheapest sunlight in the world. They're less than one cent per kilowatt hour. They're always leading everybody else. Usually when they get to a price, everyone else catches up like three to five years later with that price. I know there's been like some increase in supply chain costs for solar panels. You know, there's been some tariffs and there's been some conflict over solar panels, where they're coming from, how they're made. But the long term price for solar is still going down, I think below one cent. And once you start doing that, then I mean, it feels it gets so cheap. You start getting below one cent per kilowatt hour, you're less than a dollar fifty a gallon. You'd have to go back to like the 1960s when we made big cars.

Immad Akhund: Is there any other kind of material that's like an output from this? Like it's always everything else reusable is like your cathode kind of pin. Like, is there anything like that, that like is a waste product from this process?

Rob McGinnis: No, what's cool about it is the only inputs are air and electricity, which I often have to say a couple of times is so mind boggling. It's just air and electricity. And then the only outputs are oxygen and fuel.

Immad Akhund: But you also have to input water, right?

Rob McGinnis: Well, that comes from the air. Oh, really? So we're capturing something that is like 0.04% in the air. Even in the Mojave Desert, there's actually five times more water in the air than there is CO2 on a mass basis. So if you're already mining the air for carbon, you might as well get the water you need to. Now, water is pretty cheap where it's available, right? Even desalinated water is, you get 264 gallons for like a dollar, but it's a question of capital investment. So if you're going to build a carbon capture tower, you might as well get your water from the air as well.

Immad Akhund: That's cool. I guess, like, I'm still struggling with, like, if you can make cheaper fuel, how can anyone stop you from just, like, selling it and just going for it, right? Like, is it, like, a massive capital investment to, like, get a production?

Rob McGinnis: No. These things are really cheap. We have almost two years of runway left, and we could build these first systems on our balance sheet of what we raised already. Yeah. They're very inexpensive. So one of these fuel forges probably costs, you know, if we start doing any moderate, like, automation, less than $150,000 for one of these. So there's a lot of people that like to have one like on their ranch or on their island or whatever. But we don't want to be feeding these devices great electricity. And I don't know if you looked at like your home electricity bill. In California, it's like you could be paying 15 cents a kilowatt hour pretty easily. If you go to like an industrial setting, it could be between 10 and 15 cents or more. If you're buying electricity to charge your car, you're paying like 35 cents per kilowatt hour, a lot of chargers. So, but if you're behind the meter, if you're taking DC power, right, you're not converting it to AC power. There's no transmission lines. There's no transmission losses. You're going to be in this like sub 1.5 cent world. That's super, super cheap. What prevents you from doing it? Well, for the first projects we're going to do, we want to go with solar and wind that already exists. Right. So we don't want to ask someone to build new stuff or wait for new stuff to get built. We want to go out and use some stuff that maybe is being underutilized. So in many places, these these resources are curtailed. So, for example, you might have a solar plant in like West Texas or in California that, you know, could be making 10 megawatts, but the transmission line can only take seven. And you've been waiting for an increase in allocation or maybe an upgrade or something, and it's just not happening. So that extra is essentially just going to waste. And so we can turn that into liquid fuels at zero opportunity cost. If you have a nuclear reactor in Canada, you'd love to sell that electricity down to New York City, but there's no transmission line. Maybe you're running your plant at 70%. The marginal cost of going from 70% to 90% is like a fraction of a cent. You don't have to increase the number of people on site. You don't have to do anything. So there's a lot of power we can use for our first projects that has almost no cost and almost no opportunity cost. And so then we just have to cover the cost of building our systems and like the GNA of our company, right? Yeah. Just to operate. And that's not very expensive. And so what we're doing is we're starting to talk to people now about doing these first commercial projects with the idea being that we use some financing for stuff that's not new equipment. Like, for example, if you want to put in like a storage tank for the fuel we're going to make in a rack to fuel trucks, you could finance that. You just get a bank loan for that. But for our systems, It's a new first of a kind technology. So we're either going to have to use venture capital for it or we're going to have to get a loan that has a higher interest rate. But the costs are so low and the credits, the subsidies are so high right now that the balance sheet on these projects looks amazing. Right. Internal rates of return of like over 20%. So there's nothing to keep us from doing it, actually, other than just go out and execute. So if we can find the right regulatory environment for it, then there's no reason to stop. So for example, you can go to the racetrack and you can sell racing fuel without asking anyone for permission. It's exempt from the CARB and EPA regulations. And I could sell marine diesel without asking CARB or EPA for permission because essentially there's an international shipping standard for what fuel is and those ships will run on anything. The joke is they'll run on broken furniture. You can feed sofas in there. We're trying to identify the right place to start. Also, renewable natural gas, so RNG, has a bunch of people who are looking for it and can't find it. And what's going on with RNG is that, say you run a campus, like a Google campus or like a university campus or some sort of industrial facility. And let's say you use over half your energy is natural gas. It's really hard to find something to replace it that's carbon neutral right now, because all the landfills are kind of tapped already. The ones that are big enough, all the agricultural waste, all the wastewater treatment plants, that stuff's all tapped. And so as you start to try and add more resources to RNG, the cost is going up and we can actually add resources while the cost goes down. It's the opposite curve. Now, RNG is tough because it's the lowest money per kilowatt hour. So one kilogram of hydrogen has about 33 kilowatt hours of energy in it. But one million BTU of natural gas has 293 kilowatt hours. And they often will sell for about the same price, which is kind of crazy. But we can actually compete on cost. We can be cheaper than new bio RNG. And then we can get, I think with a little bit of scale, down to cost parity with fossil RNG. So if you're fracking natural gas or getting natural gas from some sort of fossil resource, we could actually end up beating that in a lot of contexts. Not every one. If you're right next to a well in Texas, we're not going to be able to probably beat that. But if you're getting LNG, definitely can beat it.

Rajat Suri: What's your biggest bottleneck then? What's stopping you? You have the money, you can build these things for 150k. So why not?

Rob McGinnis: Well, we're a small team. That's why we're still here. We spent money very slowly. And so if we had a lot more resources, we could go a lot faster, for example. So part of what makes us slow is because that's smart for us is to be cheap. If I had twice the people, I wouldn't be twice as fast, but I would burn twice as much money. Right. And so I think we got that size right. So we can only do one thing at a time. You can't make the team any smaller than it is. We've got like 23 people, something like that. It's very small. And what we're trying to do is we're trying to go into automation on the stack. So we have our first robot. We're programming the robot. We're getting all the sort of sub tools that go into it to glue and to clamp and to stack. And that takes a little while to do. So it's just a matter of how long will it take to execute into automated stack assembly, which I think by the end of the year, we should have it pretty good.

Rajat Suri: So by the end of the year, you're going to start making the fuel. Like when do you plan to actually start making like your first fuel forges at the goal? Like what's the big milestone?

Rob McGinnis: The way it works is you make the stacks first, right? So you have to make all the raw materials. You've got to coat your catalysts under your substrates and you've got to injection mold all your parts. You know, you get those coming out on a pallet and then you start assembling them. So if we start assembling them by the end of the year, let's say in January, we're now starting to get stacks built and assembled, sitting on a shelf. And we're already going to start building the frame for the first fuel forge. And then what you want to do is go out and find your commercial site ahead of time. Let's say we want to do 100 megawatts of e-fuels. You have to choose which e-fuels are going to be. Is it going to be diesel? Is it going to be RNG? Is it going to be jet fuel? And you get someone to partner with you who has the solar already or the hydro and you get somebody who wants the fuel and they say, okay, we'll take it for 10 years. And then you have these things converge into like next summer where the first systems on site, it's hooked up to power and it's starting to produce. And when that first system, the first 40 foot box is doing what it's supposed to do for some number of months, let's say three months, then you hit a trigger and you build the next 10. And then when they do what they're supposed to do for the next three months, you build the next 50 or the rest, you get to 100. And you might be doing that on multiple sites at once. We might do several of those at once with different partners for different fuels. And so by next year, if everything goes well, and there's always something that doesn't go well, but we should be able to start shipping fuel next year. And I've said that before, but I said it in the middle of COVID and I had no way of knowing when we could do things in the middle of COVID.

Rajat Suri: So by middle of next year, we start shipping fuel and how much are you expecting to ship?

Rob McGinnis: Well, I mean, it'll be scaling up, right? That first one might only make 50,000 gallons a year and then we'll go to 500,000 and then we'll go to 5 million as we scale up the projects. And if we have like three of those going, there will be a 15 million gallons a year. You know, that's a fairly meaningful quantity. But then the plan is once you do those first demonstrations, then you go to gigawatt projects. Right. So now you're 10 times that. So now you're 50 million gallons a year for one project. So because we can deep bottleneck deploying new capital into renewables, because you don't have to wait for transmission lines and there's no nimbyism to shut it down, we should be able to actually scale up renewables around the world much faster than you could do without e-fuels. And so that will require developers who want to develop solar and wind resources. We're not going to be solar developers, right? It'll require people who want to purchase the fuel. I think that's obviously fine. People want the fuel. So I think it's just, but it's a matter of kind of getting all those people working together. And then you can see a very rapid scale up into billions of gallons per year in less than five years from now.

Rajat Suri: Is this demonstrated at pilot scale or lab scale so far? Like what kind of scale has it been demonstrated at?

Rob McGinnis: I'd say it's pilot scale because it's all full-size components, but it's not packaged into a box yet.

Rajat Suri: Aren't you able to find like just unlimited funding for this? Like, isn't it like, if that's the bottleneck, I mean, this seems like the U.S. government should be funding you, you know, to help build another strategic, you know, reserve. Don't you think so? It's like, it should be unlimited funding.

Rob McGinnis: Well, we haven't applied for any government grants in the lifetime of our company, you know, and I've always said that we would when we go into production. So I think now we're going to see, is there support for these production projects? And you read the headlines and it says, yes, but the way that government subsidies tend to flow is they tend to not flow to startups. They tend to flow into large companies. So we'll see if we can get some sort of support for these production projects, that'll make it go faster for sure. As far as raising, we're not raising now. We've only, you know, we only raised the series A and B. We did our series C on a Y Combinator. And that went really well. We got some amazing angel investors. And then we raised our Series A, led by BMW, in March of 2020. But it was March of 2020. So for like the next two years was sort of unusual, right, in terms of recruiting and getting people to come to your shop to install equipment and stuff like that. And the supply chain fell apart. All of a sudden, everyone was buying, I don't know, pickleball sets and televisions. That's all it was filling the containers and you're waiting for your electric motor and power supplies. It took me like nine months to get one when normally it would take you three weeks. It was a weird time, but we managed to get a third party engineering validation of our technology in 2021. So we had an engineering firm come in and essentially assigned what they thought our cost production would be and they did a life cycle assessment to say, what's the carbon intensity? Carbon intensity is approximately zero. There's no agricultural inputs. There's no land use and stuff like that. It's complicated. It's very simple. And the cost was like, they estimated at the time, it was 2021, it was about $2.50 a gallon and less than $2 a kilogram for hydrogen. And on the strength of that, and the demonstrations we were able to do of the technology, we raised a Series B led by Marisk. And that got us to a $1.5 billion valuation. So in less than two and a half years from launching a Y Combinator with less than a dozen people, we got to over a billion dollar valuation on the strength of our demonstrations and of third party engineering analysis. How much have you raised? About 50 million. So pretty modest for as far as we come and what we're going to be able to do. So we might end up raising again, or it's also possible these first commercial products we want to do could just start making us cash flow positive, just based on shipping product. That would be my preferred choice. Doing what we're here to do and making money doing it.

Immad Akhund: Yeah. Why didn't you raise more like a 1.5 billion valuation? It feels like I would have gone for like at least 150 million.

Rob McGinnis: We kind of stand so far apart from what everybody else is doing that we were the only ones who are saying what we're doing is even possible. And there were a lot of people saying that what we're doing is not possible. And even though we were demonstrating what we're doing, even though we had third party engineering reports, there's a lot of other people who had put money into this space in bets that were not going to look so great if we were right. It created the kind of a contentious fundraising raising atmosphere, I would say, in the Series B. And so we decided to raise enough and to just get back to work. There's like a narrative battle over the future, like, you know, why are you guys talking about gasoline when everybody knows it's batteries? And all these people say all they can do is make carbon monoxide. How can you say you can make jet fuel? That's all become a lot clearer now because a lot of the companies that were doing things that were less ambitious are running out of money or they're already done. And here we are doing the things we said we would do. And so I think if we were to go out and raise around now, I think it could be quite popular. But you never know. The IPO market's not good. Funding for startups right now generally is not good. I'd much rather go out and actually do some commercial partnerships and start making money than go out and raise money again. But we'll do what we need to do. Obviously, having a bigger team that can move faster would be awesome.

Immad Akhund: I mean, I think the importance of what you're doing became even more so after kind of the Russia-Ukraine war started. It's not just about climate, it's also energy independence and security.

Rob McGinnis: Energy security became a lot more apparent. The academic literature sort of caught up with a lot of things we were doing and saying. So people have validated a lot of stuff that we were saying that other people didn't think you could do, like the way we integrate direct air capture and use carbonate as a carbon source. That's now been proven by leading laboratories. And that was counter consensus when we first did it. So I think the climate has changed in our favor. I think the world has sort of come towards us in a lot of ways and yeah part of it's energy security because you know if you can make your own fuel with just solar panels and you decouple from like the oil market I mean that's as secure as you could hope to be.

Immad Akhund: Yeah. I feel like, you know, I'm actually a seed investor and Rob, so I didn't want to say it, but yeah, you've done very well. It's not a secret. I'm proud of being a seed investor. I think the novel thing, at least, you know, I've heard a reasonable number of pitches, but I've never heard of people kind of like using carbon nanotubes in like a novel kind of application. And that was the you know, to me, the novel thing, it sounds like you've done a bunch more novel things since then. I guess, like, I've been hearing about carbon nanotubes for, like, a decade plus. Like, what are the current applications for carbon nanotubes in production?

Rob McGinnis: So nanotechnology generally has not lived up to its early promise, right? There's this idea of the Gardner hype cycle for materials, right? It'd be carbon nanotubes went through and then graphene and then metal organic frameworks and pyrolyzed membranes, but they never seem to go anywhere. And I think that has a lot to do with the way that academics and academia functions is that you get published in Science and Nature and Cell based on the novelty of your work and sort of this competitive thing like to the best of our knowledge what we did is better than all the rest of you guys, right? But then once that paper gets published there's no incentive to do any of the work to take it into production or practice. So that has to be like a startup because big companies don't typically go down to an academic lab and license some sort of thing that it worked one out of 100 times. And it requires a very sophisticated analysis to understand it. And it's very hard to reproduce it. There's only one person in the lab who can make it. So that's not something big companies tend to want to do. And big companies also don't tend to spend a lot of R&D money the way Bell Labs used to. on just the early stuff. And so you have to have a startup want to do it, but startups are often not rewarded for being too ambitious. So what people want you to do is to take on a small challenge, take on one part of a challenge and kind of fit into the world the way everyone kind of understands it. But if you're doing that, what are the chances that you're going to do something really exciting and really valuable? If you agree with everybody else, What's your competitive advantage? You've got to be disagreeing on something. You gotta say, I think you guys are all wrong about this. And so Elon Musk did that with electric vehicles, right, for example. He paid a lot of heavy prices. I mean, he almost went bankrupt in 2009, I believe. It's been hard for him. But few other people besides someone like that have been going out and taking on really hard, ambitious challenges like this. I think that we've gotten through most of the difficulties of developing the technology, but still in front of us is we have to go and take on the oil and gas industry. So they're not going to like that.

Immad Akhund: Well, they might be supportive over it. It's like it's some ways less disruptive than electric vehicles, right? Like it's still on the infrastructure. You're just competing on price.

Rob McGinnis: I think that they're warming to it. Some are and some are not. We have not gone to raise money from anybody in oil and gas. We've always said we wanted to go to our customers and form relations with them. So that's why a car company and a shipping company, for example. And we did LOIs with airlines. The ones that got published was with American Airlines. We said we'd give them 10 million gallons of jet fuel for one cent less than the spot price of Jet A. I still intend to do that. So I think what we're going to do is shake things up quite a bit. There probably are people who are in the oil and gas industry today who would want to join our company. or who would want to invest in projects with us, or who want to be project development managers for this. And so if that's the case, then we'll find each other and do projects together. But we don't need somebody from oil and gas to do it, unless we need a pipeline.

Immad Akhund: Going back to the carbon nanotubes, I guess, you would say there isn't really much application right now of carbon nanotube technology.

Rob McGinnis: I think that I took it into a commercial membrane and that was a really hard slog. And it does amazing things at macro scale that really only be predicted at nanoscale. And there's just not many examples of that in nanotechnology. I think that quantum dots in televisions are an example of something that's in nanotechnology that's been scaled up, but there are not a lot of examples of it. Nano zinc oxide, I guess, and sunscreen would be another example of, you know, nanotechnology, but it's not as good as those sunscreens are. It's not very exciting. So I think that our nanotube membrane does kind of stand apart as being one of the few examples of commercializing something that's special to nanoscale and having it actually be special to macroscale as well. What that membrane can do is quite phenomenal. So we can make a version that could do desalination, for example, better than any existing membrane today. The membrane can remove PFOA and PFOS from water. For example, it can soften water very well. It can remove uranium from water while letting like calcium and magnesium get through. I mean, you can choose the size of the standard tubes very precisely and do really amazing things with them. And you can also separate fuels from water. And it turns out that's really, really useful for Prometheus. So I still have both companies, I run both companies. I have a general manager for ManaShift and we're trying to push into other markets with the membrane because I think it's going to replace a lot of the membranes that exist today. But I learned from my first company that trying to go and be an entrepreneur in water is, you know, that's a low margin business and you can't point to a lot of like unicorns in the water space. So best to do it really carefully. and not get over your skis if you're trying to do something in membranes and water. I think we could also replace distillation in a lot of industrial processes. Certainly for bioethanol, you could replace all your distillation. For a lot of pharmaceutical processing, you could replace your distillation. So yeah, I think it's a really, really cool advance. But I had to ask myself, if I could only do one thing, what would I do? And I think this is the best use of it at the moment.

Rajat Suri: So yeah, I was going to ask you, what kind of protection do you have on your IP? I mean, you kind of have it all on there on the website. And that's another reason, by the way, to go fast is like, you know, there are other people who might want to do this.

Rob McGinnis: Well, we live in a time where as soon as you show something can be done, someone copies you like right away.

Rajat Suri: Yeah, it's industrial revolutions.

Rob McGinnis: Yeah. You think about the hoverboards, remember the hoverboards? Whoever made them first, we don't know because all of a sudden everyone made them and then they made them poorly and they caught on fire and then they cancelled the whole thing and you couldn't bring them on airplanes. Yeah, we have a really strong patent portfolio. One of the benefits of disagreeing with everybody else is that you can file new patents, right? Because you're like, hey, this is how you do it. And everybody else is like, no, that doesn't work. You can't do it that way. Everybody knows you do it this way. And then you end up getting a really early priority date on a really foundational patent. And that's what we did. The first patent I filed for this company, we put in an accelerator track and it granted in less than nine months. Because what we're doing is really groundbreaking. How many patents do you have? We have six families. We're expanding. If I wanted to go back into a back room and just write patents all day, we could have a lot more. But it's not the number, it's what's in them. And I think that we've got some really broad, very, very powerful filings, some of which are already granted and others are going into international phases and getting granted there. And so if we wanted to, we probably could have fairly broad blocking power on a lot of CO2 fuels.

Rajat Suri: There's definitely a case to be made of going faster, but I love the approach of building these commercial partnerships. There's always a ton of funding I find from customers who want your product. And actually a lot of that funding can be dilution free because like they just want the product. So they're willing to pay up front as long as you deliver. So I think companies, I believe it'll be like Boom Arrow are doing that as well.

Rob McGinnis: It's a great way to find out what the demand really is. There's sort of a famous section of Adam Smith's book that everyone wants like a coach and six, but not everyone's willing to pay for one. It's what you're willing to pay for that actually defines the demand curve. And so when I go out to people and say, do you want these fuels for that? Are you saying that these fuels are good for you and for your industry? Because not everyone's saying that, like some people in the car industry are like, we're all batteries, right? And then also like, will you invest in projects? Would you invest in us? Do you see a future that's different than the future you would have with these fuels versus not? And so the ones who step forward the way you're describing and they say, I love this, you know, I think this drives our growth. I think this is the most exciting thing we could do. And we're willing to invest in projects. And by the way, can we invest in you? Usually those people ask me if they can invest, right? I don't bring it up. And so those are the people we're going towards, because they see us as being essential to their best future. But people who are ambivalent, you know, people who are like, have a hard time understanding technology, maybe, or all you give you is like a skepticism vibe, like they don't really have demand.

Immad Akhund: We talked to Peter from Charm Industrial a month or so ago. You know, he's kind of doing this interesting thing where it's a different process to you, but he's taking stuff and just burying it in the ground, like burying carbon in the ground. Have you thought about doing that? Like just, if you can capture some carbon from the air, just like bury it and like charge for that.

Rob McGinnis: We can't do that. I mean, so along the way, we developed a couple of other director capture technology offshoots for what we do. So we can do electrochemical director capture to produce pure CO2 gas, and we could also mineralize CO2 into carbonate rocks. And we could put those in the ground. But we haven't really pursued them because I'm not really sure what the business model is. If I can capture CO2 and put them into fuels, then that means we turn off the spigot on new emissions. If I can take CO2 and turn it into, say, plastics like polyethylene, which we can do, then you've got durable goods. And not only have you turned off the spigot, but now you've stored carbon in that way. People are starting to make diamonds with captured carbon, right, and using them in industry and in jewelry. So, I think capture carbon into useful products is something that can scale. A lot of the stuff that people have done around sort of climate, climate tech startups, we don't really consider ourselves a climate tech startup. We see ourselves as a fuel company, right? That's what we want to sell, what you can use from us. If you think of yourself as a climate company, that means you're kind of saying, I'm going to get paid to take CO2 there and get rid of it for somebody else. And right now, the only market for that is 45Q.

Immad Akhund: What is the dollars per ton of carbon that you get out of the air?

Rob McGinnis: So our cost is less than $40 per ton of CO2 captured, which is an order of magnitude less than anybody else. And what's nice is there's a paper came out this summer that actually validated that number. That was an academic lab not affiliated with us.

Immad Akhund: I mean, I think there is enough, not to get into a business model conversation here, but I think there is enough demand out there, like billions of dollars of demand to just like take carbon out. And there's not that much methods of doing it. And I guess the benefit would be then you don't have to go transport it somewhere. You just have to like dump it in the ground somewhere deep.

Rob McGinnis: In practice, a lot of that isn't going into enhanced oil recovery. If you look at one of our competitors, we thought they were a competitor, Carbon Engineering. They, for a long time, talked about making sustainable aviation fuel, but what they ended up doing is enhanced oil recovery. They got bought by Occidental Petroleum recently for $1.1 billion, just based on their direct-to-capture technology. which is much more expensive than ours. And so I agree the DAC is obviously valuable. I mean, there's even like a market comp now for it being a billion dollar technology. And we've got three versions that are all better than that. So it's not like we wouldn't do it, but we have such a small team and we can make these commodity products that go into a $2 trillion market. So the question is sort of when. If we start taking CO2 out of the air and turning it into rocks, you know, you have to do a lot of that to make a bunch of money. And then now your whole team is making rocks. what people would really like us to make jet fuel. It's a bit of an opportunity cost for us. It's like, when do we do that? Now, if we start, you know, becoming cash flow positive on the fuel products and the fuels that everybody wants that they're not ambiguous or ambivalent about like gasoline, then we can start to bring some of these other projects to the fore and then these will be other cash generating activities. The FortiFact Q Credits can be more than $85. But the way the IRA is written, the Inflation Reduction Act is written, is that on the same project, I believe, if I understand this correctly, it's difficult to get paid for the hydrogen and for carbon capture at the same time. I'm not sure why that's the case. Maybe we're the only ones who are doing both. And so 45Q credits are going to enhance oil recovery, right? They're going into stuff like that. And there's some people who are doing sequestration, right? Carbon capture and sequestration to mine those credits. You're doing something which is entirely dependent on a subsidy program and doesn't necessarily have intrinsic value. Maybe it has a moral value, but it doesn't have intrinsic value beyond that. If the IRA gets shut down, then that activity has no future. Now, it's true that some companies who are very, very prosperous are willing to pay for mitigation. A lot of that money has gone into planting forests or protecting forests, and there's a lot of skepticism that those are real sequestration activities. So I think that turning off the new CO2 is the fastest and most effective way to go out doing it. And you can make a lot of money doing it. Our gross margins of these fuels are going to be very high, software level gross margins. Once the subsidies go away, we'll have oil and gas industry margins, which will be like double digits still, but we won't have like the crazy, crazy margins. So we're actually doing what I think the subsidy programs are for, which is to get the first of a kind projects done. so that if the subjects go away, you can still scale very rapidly. But I just don't see that happening with carbon capture and sequestration by itself.

Rajat Suri: Is your goal here to go big, be like a major provider, like an ExxonMobil type of company, you know, just a clean ExxonMobil?

Rob McGinnis: We're going to be a lot more valuable than ExxonMobil.

Rajat Suri: Why do you say that?

Rob McGinnis: Any company that was able to replace oil and gas products right across the spectrum in a $2 trillion market, they could do it by competing on price and it's carbon neutral. What do you think that company would be worth if we had 100 gigawatts of production? be worth a lot. I think ExxonMobil is only worth like 200, 300 billion. They're down from their peak.

Rajat Suri: Yeah, obviously be very valuable. This type of thing does seem strategic to the United States. Have you had senior level conversations with people there like DOD and DOE and stuff like that?

Rob McGinnis: So a lot of the conversations I've had, most conversations I've had, I can't talk about. You can imagine that people are aware of us. And a lot of people are curious to see if we're going to be able to start shipping. I think I'm going to start, I don't have to tell you guys, I mean, you've been through this grind, right? It's all about timing. It's all about pace. It's all about managing resources. I don't think today it's obvious to everybody that we are the future of fuel or energy. I think there'll come a time when that's obvious, but only if we're still standing and still have money. right? So what we have to do is we have to hit our proof points. For us, it's not that we can make the fuel because we've been able to show that from the very beginning. I think I did a demonstration of CO2 from the air to ethanol in 2019. We were featured in like a four-page feature in Science, which is a huge achievement for me personally. I was really excited about it. We've been showing we can make larger products than anyone else thought you could do from CO2 capture. We showed we had the lowest CO2 capture cost. We've done all these like demonstrations But when it comes down to it, the thing that makes us relevant to anybody is if we're in commercial production of cost competitive commodity fuels. And so we've just got to do it. But if I go running out there or if I had gone running out there like two years ago, trying to go too fast into, say, gasoline, you know, we might have to run out of resources. And 2021, when we raised the last round was it was like August, September 2021 was like the perfect moment to raise a Series B, right? Everybody was raising. It was just a crazy good environment. Now is like the opposite. And so the question is, what's the right pacing? I think increasingly, based on the conversation we're having and the proof we're able to show people, the demonstrations, the data, when we show people like our own internal metrics for what the fuel costs, they're always super excited about it. But I think we haven't hit this inflection point where it's obvious yet that we're right. And I think we have to get there and we have to get there with our first commercial system. And if we do that next year, then it all flows very rapidly after that. Because if people conclude that actually what we're doing works and it's right, then as you say, a whole lot of capital will flow into these projects. We won't be slow anymore.

Rajat Suri: I understand the priority is surviving long enough to make the dream a reality.

Rob McGinnis: That's right. Something always goes wrong, right? Yeah. And for us, it's been really simple things like the glue will fail. And you're like, hey, I was told this was good glue, you know, and you just have to get around it.

Rajat Suri: No, I get it. It makes sense. And you know, congrats on all your conviction to date and sounds like you've been, you've had a period where nobody believed you and you're kind of excited to prove them wrong. So it's always a fun thing for an entrepreneur.

Rob McGinnis: Everyone needs a chip in the shoulder, right? But I think it wasn't so much that people looked at the data and didn't agree with it, because I think the data is very strong. It was that people were hearing contradictory information from other people. And there's a lot of motivated reasoning and there are a lot of incentives. So for all the people who are trying to get into this, if we were right, they were wrong. And they had a really high interest in establishing that wasn't the case. What's happened, though, is that we're still standing and we're doing it better than we've ever have. And a lot of the people who were motivated to disagree are kind of fading out, run out of money. I think the fog is clearing a little bit. It's more that in every startup's life, there comes a time for a narrative battle, right? And sometimes that's the whole time where you have to describe the future in a way that that narrative is more compelling, more convincing, more persuasive, more consistent with people's beliefs and observations independently of you than the competing narratives. And if there's a lot of money to be made, then there's a lot of contention around that narrative battle. I think that we did that successfully, but it's not that it was free of contention, right? Then that's the nature of it.

Rajat Suri: And you mentioned that a couple of times. There are folks out there who have a different narrative to you. I think you mentioned the battery people. Obviously, we know that there's a lot of people betting on electrification and batteries. Are there any other folks or people who are just saying that your thing is not going to work or they're just like, what are the other detractors saying?

Rob McGinnis: Well, I often hear about these things secondhand without names associated with them. They're like, no one thinks you can do this with carbonate. And of course, then it becomes clear that you can do with carbonate. Well, no one thinks you can get electricity that cheap. And then we see people getting electricity that cheap. It's not unique to us, I think. It's every startup doing something new and something valuable has detractors in the shadows who are… trying to slow them down or counter their narratives. And I think that we're talking about doing is it's geopolitical from the very beginning, right? It's global from the very beginning. It's incredibly valuable. And there's a lot of people who'd like to be successful in this. And I think even in the academic labs, you have people who are working on this problem and would like to be the ones to solve it. And I'm not from the electrochemist academic community. I came from membranes, water and membranes. So when somebody from like a different discipline sort of comes in, starts saying dramatic things about your discipline, you're going to resist it. I've tried to outreach to people. I've gone to conferences and I've tried to meet people who are in this field and talk to them and explain what we're doing. there's not good incentives around it. I don't fault them for it, but they're thinking, like, I'm the best at this. If this were true, I would have heard of it, right? Or it would have been out of my lab. And then other people who are asking, who maybe are not experts in this field, are trying to say, like, what's up with Prometheus? Or what's up with these other companies that are competing with them? Or what's with all the companies in this space? And they go and ask the experts, and the experts are like, well, this is what all of us believe. This is what we've done. What we've done is state of the art. They're saying they can go past it, so we don't believe it. That, of course, makes perfect sense. But those extraordinary claims require extraordinary demonstrations. And we've been doing that. But what we find is people who want to see the data are not hard to persuade. But people who are kind of like deeply skeptical, they're not even interested in seeing the data. That's motivated reasoning, I think. I'm not sure exactly what's driving it. Maybe you never get to the bottom of it exactly. But every time we've had a chance to show people what we do, it's very strong.

Rajat Suri: So what do you think the world looks like 10 years from now? You know, like in terms of energy usage, assuming obviously you're successful and like, do you think this battery trend, electrification trend is kind of peaking and do you think it's kind of like it's going to mature at some point and then basically cap out? You kind of mentioned that earlier. What do you think the mix of energy use looks like?

Rob McGinnis: I think batteries are going to get a new breath of wind because there's going to be another generation of solid-state batteries coming out. So Toyota's announced that. I know QuantumScape has one. BYD says they have one. I think CATL maybe has one. So I think if you really do get like 1,000 kilometer ranges and faster charging times, like 10 minutes or whatever, that's going to breathe new life into it, as long as they're cheaper, right? But I think even if battery electric vehicles end up hitting price parity, which maybe they could do in the next couple of years, not everyone's going to prefer them because of infrastructure problems and because of the range anxiety that persists and whatever. But I think that probably 10 years from now, most cars and trucks on the road are still going to be running on liquid fuels. And that's just actually that's almost certainly true because we only replace about between 3 and 5% of the stock every year and only about 5% of the cars being sold are electric. Maybe that number has increased now and in some places like in Norway, it's much higher. But if you're only replacing 5% of 5% every year, then in 10 years, it's self demonstrably true that most cars are running on gasoline. That's true even until like 2040. If those liquid fuels are e-fuels, then they're decarbonizing very rapidly. And so it's hard for me to prognosticate on the future of battery electric vehicles versus e-fuels, because like I said, gasoline people have decided batteries are the answer. I don't think the consumers decided that, but maybe they will be persuaded by cheaper prices. And so that's it's a little hard to say exactly. But my guess is by 2040, still a super majority of cars will still run on liquid fuels because of how slowly they're replaced. So we'll probably need to fill that demand for gasoline, but we're going to try and do jet fuel and marine diesel and RNG and stuff first. So I think 10 years from now, if we're successful, then it's become obvious that this is a good thing to do and that it offers a great return on capital and that it unlocks deploying renewables in places where you couldn't do it before. You've solved NIMBYism, You've solved transmission lines, and now people can go in there, they can get like, I don't know, 15% IRR in new solar and wind facilities that make e-fuels, and they're going to want to do that a lot. And so in order to facilitate that, we're going to have to build a factory, right? The same size, like a gigafactory. But if we do that, then we can start to replace, you know, 30 million cars worth of fuel per year of production. That can move pretty fast. And if you look at renewable natural gas, we can do it and we can actually get the price parity. And so if you look at, say, a large organization like in California might use 15 million in BTU, we could replace all of that in like less than five years. A regional kind of like a heating district for like a medium sized city might use like a hundred. million BTU, we could probably replace that in like less than 10 years. So I think you start to see what the energy transition actually looks like is renewables having much more reach because they can be turned into better stored energy sources like e-fuels. It's funny because we talk about it and it's really exciting, but it doesn't always feel exciting because it's in the language of economics and commodity markets. But it's really transformative insofar as that it will allow you to decarbonize a lot of things people do without having them have to make sacrifices personally. Almost every solution people are putting forward to decarbonization requires the consumer to pay more taxes or to give something up or to travel less or not drive. It's not just battery electric vehicles. It's generally this kind of pushback on the idea of having a car at all.

Immad Akhund: If you describe what you do as almost like a magic tree, you're like taking solar energy and you're like producing fuel and you're just skipping all the other things a tree does and like on its way to like being crushed for thousands of years.

Rob McGinnis: That's what oil is, right?

Immad Akhund: Yeah, I mean that's what oil is, yeah. But it takes, it's a long process though.

Rob McGinnis: Oil and coal are historic photosynthesis, right? So all the energy that hits the planet is either from fission in its crust or core or solar radiation. That's the energy flowing. And so being able to take that solar energy and turn it into liquid fuels, right, it's just faster.

Immad Akhund: So this is way tangent. There's fission in the Earth's core?

Rob McGinnis: Yeah, I mean, there's uranium and there's heat.

Immad Akhund: I mean… Not fusion, just fission, like uranium kind of breaking down.

Rob McGinnis: Yeah, like, well, I mean, geothermal heat is coming from the molten core, right? That's not from the sunlight. And it's not from like tidal fluxing or something like that. It's from… Well, now you've got me questioning myself. I'm pretty sure that's where it's from. It's from fission.

Immad Akhund: I thought it's just from gravitational effects.

Rob McGinnis: No, that'd be true for like moons around Venus, I think. You get some gravitational effects.

Immad Akhund: I think Europa… Let me just Google it.

Rob McGinnis: Yeah, just Google it. Europa is like a liquid core because of tidal sort of frictions. But I think we have something else. Help me out.

Immad Akhund: Google confirms it. The main source of heat and decay of radioactive elements. Wow.

Rob McGinnis: Little known fact. So those are the two energy sources. And you know, if you're like an archaic bacteria at the bottom of the ocean, like that's what you're feeding off of is you're feeding off of like essentially fission, right? Sort of metals coming out of a hot vent. And that's probably how we all started. Although recently, it's really interesting that a lot of, I think the asteroid samples coming back have complex organic molecules. Did you see that? No. It's pretty cool. It's essentially like asteroids would impact the Earth and they would bring not just water, a lot of water and minerals, but also the basic building blocks of life. I mean, we're talking about like things that have been out in deep space for millions and millions and millions of years and they have organic molecules on them.

Immad Akhund: Oh, that's cool. You believe in the whole Earth's life came from an asteroid kind of theory?

Rob McGinnis: Well, I mean not necessarily like formed life. I think that the dominant theory that I've read that seems to be something that people consider to be feasible is that you got your basic proteins and your basic organic building blocks that if in a hot salty pool with sunlight somehow self-assembled. People are trying to figure out exactly how that happened, you know, but I don't think like you had like bacteria riding on it on like an asteroid and surviving impact and then just like populating that seems not likely.

Immad Akhund: Well, the Prometheus story is kind of like that, right? Like genetic life being implanted.

Rob McGinnis: The reason I chose the name is because of the symbolism of fire representing technology. That's what set us apart from all the other animals on the planet. We're so much like other animals in so many respects, but with this technology, which is symbolized by fire, fire actually allowed us to eat a lot more plants and a lot more animals and other kinds of food sources than we otherwise could because we were not ruminants, right? But it also represents technology. And also, in particular, I thought it was interesting that we've essentially used it too much. We burn too much stuff and there's too much CO2 in the air from all the burning we've been doing. So you can see that symbolism is obvious there. But it's also the truth that the technology continues to be the thing that allows us to solve our problems. If you look at the things going on in the world today, human nature does not, in and of itself, cause less conflict. It seems like it's just driven towards conflict. Culture can change, right? Artists can come and they can introduce new narratives. Those new narratives can be beneficial. But technology changes the structure of life. And so I think that solving climate change is a technology solution. And that's why I chose Prometheus, because it's the simplest around technology. I think that you replace fossil fuel with sunlight. And when you do that, you decarbonize. And then you actually enter into an era of abundance. That's why we talk about cars that were designed in the 1960s, when gas was cheap, before the oil embargo in the 70s. People were designing things to be big and beautiful and fast. And I think that we could enter a new era like that. But the prevailing narratives are degrowth, that we should not have cars, we should live in 15-minute cities, we should just walk everywhere, we should not eat meat, we should do less, grow less. There's sort of this push against it, but people who are in the valley who are entrepreneurs or technology entrepreneurs tend not to see the world that way, right? We tend to be techno-optimists and think, show me a problem and I'll come up with a technology that can fix it and then we'll all be better off and we'll have more prosperity. And I think that's what we're talking about.

Immad Akhund: Well, maybe that's a great note to end it. I think the world would definitely be a better place once this is scaled up.

Rob McGinnis: You're going to be able to fly around jetpacks, you'll be able to go hypersonic aircraft, you're going to be able to do all this amazing stuff, and you're not going to be making the world worse by doing it.

Immad Akhund: Nice. Cool. Thanks for coming on, Rob.

Rob McGinnis: My pleasure.

Rajat Suri: Great meeting you, Rob. All the best.

Rob McGinnis: Thank you. Bye bye.

Rajat Suri: All right. Well, that was very interesting. I didn't know you were an investor. It sounds like you've been following the story from the beginning.

Immad Akhund: Yeah, definitely. I think to some extent with technology, sometimes you can have your cake and eat it too. I know there's this other narrative that technology always has a downside. But yeah, I think that's what gets me excited with Prometheus. Like, hey, why can't we keep our fuel sources and our infrastructure and still be carbon neutral. And obviously there's some things where I don't know if it's really realistic to get jet fuel from electric vehicles, right? I know there's some electric planes, but yeah, I've heard a lot of those pitches. I'm skeptical we'll get there. So if we want to get to like carbon zero, we need something like Prometheus where we can get e-fuels and get zero carbon fuels.

Rajat Suri: It sounds, you know, almost too good to be true. You know, when you hear about it, it's like, you know, wow, how is this even possible? Taking a carbon from the air, putting into fuels that we can use. I mean, it's, it sounds like, wow, you know, it kind of hard to imagine that a 23 person startup is like, you're figuring out the future of liquid fuels, you know, which is kind of what it should be like, you know, and I'm sure there's some details that are still tricky with it. I mean, there's still, you know, cutting behind production. They trying to figure it out. Sounds like by next year. But the fact that they were able to make so much progress, you know, to date is very promising. And you kind of wonder why they're not going faster. I'm sure there's some details that we're not getting a full story on.

Immad Akhund: You can kind of hear in Rob's kind of tone, like he's been at this problem for, I think, like five years already. So he's, you know, as an entrepreneur, he's pushing hard, but like he's definitely going through it. As an entrepreneur, I kind of sympathize with that. I can just imagine kind of working on this problem for five years. And it's in the physical world, right? It's not software. You can't just like press a button and deploy it.

Rajat Suri: It's extremely difficult, there's no revenue, you know, it's life and death, right, for the company, right, at every moment, right, because they haven't, you know, their funding is their only source of capital. And the narrative actually is very important for these companies, right, because they don't have revenue. The thing they really depend on is their narrative and their demonstrations, which it sounds like both of those are quite good. I mean, you know, it sounds like, you know, they're going well and have, some people who see a lot of promise in that. And it is very important for the world that these types of technology, technology endeavors, I would call them, exist because we need to be trying these things. It's obvious, right? We need to be taking a swing. And if it works, it's going to dramatically change, you know, how we produce fuels.

Immad Akhund: I do worry that 2021 had a lot of abundance in capital and a lot of these types of things were funded, like people willing to, you know, if this works, it's going to be a hundred billion dollar plus outcome, but the probability is obviously small and people willing to take these kind of very far future bets. I think we have seen less of that in 2023 and I think we'll see less of that in the next couple of years at least. Which is a little sad, you know, I think there was a lot of like really exciting things that were funded in 2021, but it'll take a while for them to play out.

Rajat Suri: Yeah, you mentioned that before, you miss the optimistic environment of 2021. It just takes a few of these things to work. And then you kind of think that, well, maybe a looser capital environment is better for humanity. We will take more swings, you know, and maybe some of these things will have a massive impact.

Immad Akhund: Yeah. I mean, maybe you need to be in cycles because obviously, to some extent, things were funded that seemed ridiculous and were ridiculous or had bad junior economics. Maybe the cycle is the best way. You create abundance, get lots of funding, and then you pull out the tide and the people that survive are the ones that really deserve it and are good for humanity.

Rajat Suri: Like maybe like back in the day when food, for example, you know, came in boom, you know, boom and bust cycles, literally feast and famine cycles. Some people, you know, were like, Oh, maybe it's a good thing that we have cycles.

Immad Akhund: So we don't eat too much, you know, in one time, but maybe it was, but yes, people used to die. That was not good.

Rajat Suri: Exactly. It was a world of abundance is not that bad. You know, folks in the tech world want total abundance, total prosperity all the time for everyone. Is that a bad thing? I don't know.

Immad Akhund: I mean, in some ways, even now, we've been entrepreneurs for a long time. I remember when I started in 2006, no one had ever raised a hundred million dollars. I mean, they had in the bubble, but it was just not happening. Whereas now, even in 2023, raising a ten million dollar round pre-revenue is doable and people are doing it. In AI, people are doing it with a hundred million. Maybe that will be the case in like, yeah, whatever, 10, 20 years time, like the capital is abundant enough. So like $50 million or $100 million rounds are being done and more ambitious things are being tried.

Rajat Suri: Has anything worked so far that you can think of like from these like big swings, like you hear of all the failures all the time, but like what has worked do you think that like, you know, a big funding round probably enabled that is having a huge difference to society.

Immad Akhund: I think the most obvious recent ones is like cruise and I guess Waymo. I mean I don't know it depends how you define one or works but you know I've sat in a cruise and it's a self-driving car and it's mostly been fueled by capital initially by VCs and then GM and then VCs again, so it's real, I've sat in it, I don't know if it becomes production. Obviously Tesla and SpaceX are also both examples, but they were also done by Elon Musk's determination and his own capital.

Rajat Suri: Yeah, a lot of the hardware companies that exist today, like I would say Rivian maybe, probably has raised a lot of capital along the way. It's hard to think of too many other energy companies yet, but it's still early because really the energy funding boom came just a few years ago, right? 2019 to 2021 is probably the energy funding boom.

Immad Akhund: Like around nuclear and things like that?

Rajat Suri: Yeah, nuclear and all of these like climate tech and stuff was really, that was the time that they got funded in bigger sums.

Immad Akhund: Do you remember there was a KP and Koestler had like this kind of green tech funds and they mostly actually like I was listening to another podcast about it and it turned out that it was the Koestler fund turned out to be a positive fund or was it the KP one but it wasn't a big hit like it was like barely kind of scraped by with a couple of companies.

Rajat Suri: It would be great to look at that and see what can we learn from that. Obviously, we know developing new technologies is hard, but it's hard. We should still do it as a society. I just don't know if venture is the right way to do it.

Immad Akhund: Yeah, I was really surprised that Rob has not got a grant. A lot of companies actually, I have seen that a lot of things, especially if they have a military application or this kind of energy applications, like the government is willing to give the money here and there. I mean, a lot of space companies are funded by government grants. So that does seem like something Rob should pursue.

Rajat Suri: Yeah, I think Anduril is another example of a company that's raised a lot of money and seems to be doing pretty well.

Immad Akhund: And they've got a lot of money from the government, from my understanding.

Rajat Suri: Yeah, I think government needs to be a partner for these strategic technologies. Obviously, they have a huge budget for defense and energy. It makes no sense that they wouldn't be involved. VCs can play along, but they shouldn't be the main source. And the fact that these guys are going slow because they're worried about running out of capital, that doesn't seem right.

Immad Akhund: Yeah, that seems crazy. Yeah, it's like we're dealing with urgent world problems that we should we should get on with it.

Rajat Suri: Yeah, maybe they need to hire a few government affairs people or business development people, government development people, something like that. Cool. Well, that was a lot of fun.

Immad Akhund: Yeah, definitely.