Solugen co-founder Gaurab Chakrabarti on decentralizing US chemical manufacturing with modular, enzyme-based plants

uh our next guest is from Soligen. Uh Solugen is solen. Oh, we'll ask him. Welcome to the show. How are you doing? Would you mind introducing yourself so we can get the pronunciation correct so we don't mess it up? We hate messing up pronunciations on this show. How are you doing? Good. It's It's Solen. Solugen. Okay.

Yeah. You want to know how we got it? Is it? Yeah, please. It's a stupid name. A hydrogen peroxide soluble hydrogen peroxide generators. There we go. You know, the port the port manto era in in Silicon Valley deeply underrated. There was there was a time when everyone would had a port manto name.

Then we went to the ly name. You could have been bringing it back. You had Bitly and all these different names. I think there was a sy like Syrian domain name for a while. Oh yeah, that was a big one. A lot of it was driven by like what country is open to selling their TLD. Notion. Yeah, notion war torn countries. Yeah.

Yeah. Yeah. Notion inspired theso domain. That was a big movement. Uh and then I remember uh TV was Touvalu which is a tiny tiny island nation of like 5,000 people. I might be getting that wrong, but I'm pretty sure at one point they were making like half of their GDP off of selling. tv domain names.

Soai domains represent 20% of the government's total revenue for an Ang and Anguila. Wow. There you go. That's that's fascinating. Anyway, we're not here to talk domains. We're here to talk uh industrialization, making massive things, chemicals.

Uh can you give us a a brief overview of the company and the shape of your business? And then I have a bunch of questions about how you actually like build this stuff. Absolutely.

So solen pronounced solen we got started in 2017 spun out of MIT and then went through Y Combinator um raised a significant amount of capital to basically decentralize chemicals production. If you look at chemicals production today it's like these massive facilities. I I grew up in Houston.

My backyard was effectively a refinery. These are the size of islands. like Galveastston is an island. It's largely a refinery. What we said was like what if we can marry my background and my co-founder's background, Sean, to basically make a better process. And we did.

Uh we we invented basically I I guess you can call it the world's smallest chemical factories uh is how we think about it.

And the whole point of that is that instead of having these massive centralized facilities, you've got decentralized production where you can put these facilities anywhere in the world and actually have your product be closer to the chemical. We started the business with hydrogen peroxide.

Um, very dangerous to ship hydrogen peroxide. So the whole premise of of the company and the name as we discussed is basically creating peroxide uh on demand near the end customer. We've since expanded quite a bit out of not just peroxide, but added multiple chemicals into our portfolio.

So, yeah, that's that's kind of the background. Well, I mean, I'm familiar with using hydrogen peroxide. If I get a little cut on my hand, like I imagine that that's not the vast majority of customers you're selling. Yeah.

No, it's a it's a good question because the when we started, everyone was like, "You mean like the little brown bottles on the shelves? " We're like, "Yes. " And uh there's a huge market for peroxide for water treatment. So, it's a really good antimicrobial, so it kills bacteria. Uh, but also for rockets.

So, like if you look at like rocket propellant, a lot of it can contain high concentration peroxide. It's called HTP peroxide. Uh, that basically gives you pretty good thrust. It's like liquid oxygen but more powerful.

Uh, and then the other applications are like in paper and pulp and all the things that no one talks about. It's like this invisible multi-billion dollar industry that we went after. Wow.

Uh, I mean, you said the the the plants are smaller, like not an entire island, but I imagine that it's not something I can put on my desk. How big are we talking? Yeah. No, unfortunately, your intern cannot make one of these at his standing desk like the iPhone. Not yet. I don't know. I don't know. Look at him.

Look at him. This guy can do anything American iPhone. I think he's he's doing well. He's making He's making the first USA made iPhone. He's doing well. Well, he had to take it back apart to put the battery in. Oh, the batter is going in now. It's looking good. The battery's in. He's doing great. Uh, yeah.

So, how how big are these plants? Yes. It's like 10,000 square feet. So, basically the size of like a small warehouse, you can say. Great. Yeah. So, that's that's the idea. Got it. And then and then, uh, walk me through the chemical supply chain in America.

Are there I mean, we hear a ton about we don't have enough uh tool and die makers in America. If we're talking about Apple, we don't have enough rare earth mineral extraction. I I I there's this uh there's this deja vu.

Anytime you find out about a new thing in the supply chain, it's always bad news and America's not leading in it. Uh maybe give me the bad news and we can end with um I'm not going to shock you guys here. 80% of chemicals that we consume in the US come from China or a different country. Sorry.

Sorry, they're not booing you. They're just they're just patriots. They're just patriots. You know, it makes sense though because it's the cheapest cost of capital and the cheapest cost of labor out there.

So, what we're saying is we want to go after chemicals that give the United States an edge that China can't make easily, that are difficult to ship from other countries beyond China and that the United States is uniquely capable because of the technology we're developing to produce.

So if you look at the supply chain today, it's a producer um basically a giant chemical factory, makes the chemical, concentrates it into a dangerous um mix of something that can fit into a tanker truck that then goes to a middleman who then sells that to another middleman and then to another middleman.

There's about five middlemen in this chain. They're called distributors who then sell that to the end user. What we've done at Solision is said, "Hey, like what if what if we kind of collapse this whole middleman chain and put one of these units near our sites. " Our I'm actually I'm pointing to my plant.

We have a plant behind me right now. That plant, our biggest customer is 10 minutes down the road. They take most of the volume of the plant. And basically, that's the the premise of what we're trying to go after and the business. Yeah. Yeah.

I mean, talk to me about the early go to sales motion because like selling chemicals does not feel like, oh yeah, you're a YC company. You're just going to sell to the other companies in your batch. Like, yeah, we do a lot actually. No, I'm kidding. We'll buy a million dollars of your CRM.

You buy a million dollars of hydrogen peroxide perox. We both have a million dollars in ARR. But you're really you're really breaking the YC narrative. I mean, now YC obviously does a lot more hard, but you were you were early to that party for sure.

We we were early to that party and the way we went to market um it's kind of a bizarre story. So we started in um what was called float spas. Have you guys heard of these? These are like these isolation things. Yeah. That are like 25 weight% salt and you float in it and you're completely isolated from from the world.

Turns out they use a lot of peroxide to clean that water. Oh, that makes sense. But when we started we weren't at scale. So we couldn't like we couldn't make industrial quantities product. We can make small artisal batches of peroxide. is how we kind of pitched it.

But then if you look at the these float spas, they're not using that much, but they were paying a lot per gallon for this product. So we just said, "Okay, let's just go a little bit cheaper than what everyone else is doing and sell it to the float spas. " We got 80% of the market share uh within two years.

Congratulations. Not a big market, but we we were able to kind of like dominate it. That's a YC. That's a YC thing. That's great. That's a YC that's a founders fund thing. You know, that's our kind of uh entree into that world. And then from there once we had that win uh we of course went to consumer products.

We actually launched a brand which like not many people know the story. We actually uh launched a brand called Ode to Clean. So basically we said okay we did this whole float spa thing. We sold off um basic we had a partner that we just got a contract with and sold on the volume.

Then we said what's the next what's the next highest leverage point we can get as we scale the technology and it was wipes because everybody wipes. And so if you have these wipes that have just a little bit of peroxide in it, you have a pretty high dollar per per gallon of peroxide.

So we launched this brand, a cleaning wipes brand called O to Clean that got bought out by uh the nation's biggest wipes manufacturer and we got a supply contract out of that and that really kicked off our, you know, our B2B sales motion. Yeah, that's Yeah, that's amazing.

Um now, uh get me up to speed on the fundraising side.

I'm interested to know uh the like the the you raised a lot of capital but this the use of capital has to be different because there's capex in the business um there's R&D but but uh talk to me about the mix of venture and debt and and how you think about uh deploying capital not getting over your skis because you're raising big rounds probably ahead of of huge profits how are you underwriting these investments as they happen yeah it's a great question I think fundamentally we look at this metric called return on invested capital or ROIC that is like our north star where any asset that we go after has to pass an RO ROIC filter and so we only go after the top two ROIC assets at any given time at Cian.

So fundamentally where we are today we've raised about 700 in growth in venture capital. It's fantastic. Um and then uh we we've uh also we got a Department of Energy loan program um offer for $214 million um at 6% but that program is in this administration a little bit challenged uh just because it's a Biden era thing.

No big deal. Uh we were going to private banks to for for the debt side of it. Now that we've proven out commercial scale, we can basically show that these this is the unit economics on one of these assets. This is how big it can get. Let's go after multiple ones. Yep.

I've talked to a couple of hard tech investors or industrial industrial founders, hard- techch founders where when they have to build something, there's a whole bunch of different structures. Like, do they want to own the land?

Do they even want to own the the building that they're building or do they want to set up a a different LLC for that and raise different investors for that? Have you gotten into that game? Do you see that that's coming down the pipe?

thing like I a lot of people say if you're doing project financing should put it into a project financing entity. Yep. What we fundamentally believe is like we can move a lot faster if there's no one else kind of involved at the table that's going to dictate how fast we can move. Got it.

Traditionally like I would even say like even the LPO they wanted us to work with like this white shoe engineering firm that would have taken three years to build our factory when we we did ours in 11 months. So we said we're not we don't really want to work with those folks. We're going to do it ourselves.

And so that's why we own everything outright. Got it. Um, talk to me about automation and uh just getting more value out of the capital assets that you're deploying. Uh, humanoids are in the news.

That seems pretty far off, but what what else is is is valuable to you right now in terms of uh are there things that you can design to make the uh the plants more efficient? I wish I could sit here and tell you like the automation piece is going to be big for us. It's not guys I'm like not for what we're doing.

The fundamentals of chemicals is all about yield and yield comes down to chemistry. So if you look at a traditional petrochemical process, the yield is about 60% which means 40% of your initial carbon is either a waste product or has to go into the environment as CO2.

What we're saying is let's actually engineer that first before we try to optimize or automate anything because that's the tree bottleneck for the the cycle time of these products. So that's where we're focusing on the yield side. I will say there are opportunities for automation that are popping up that are exciting.

Um that's on the defense work that we're doing that is going to be quite important because we are making products that will go boom and it's important to have a lot of automation and control around that. Yeah. Yeah. Well, uh I imagine that that's more Yeah.

I mean, I'd love to hear more about that to the extent that you can talk about it, but also um in terms of any of the uh any of the advances on technology in terms of uh understanding chemistry, we've seen alpha fold and there's amazing things you can do when you have a lot of data.

Is is that something that's coming down the pipe or is that just uh not really? We actually just released a paper got published last week called uh our algorithms called badass. Um, so basically what it does is it basically figures out a sequence for an enzyme. So we use enzymes as as catalyst.

It figures out a sequence uh that's most likely to have the function that you're going after. And that paper showed 75% predictability based on the sequence itself. That in itself is important, but what's more important is really the reactor design itself. How we think about how the chemicals interacting.

It's a very it's truly an engineering problem versus a science fair problem, I'd say. Yeah. Jordy, anything else? If you're successful, is there a specific vintage car that you would develop? Uh, if you know Anos, the Enos Grenadier. Oh, yeah. Another fourth largest chemical manufacturer.

They've redesigned and rebuilt the Land Rover Defender. Land Rover Defender is their car. You would look to a Camry or a Subaru. That's how we start. That's great. We're rebuilding a 2005 Camry. It was the perfect car. It was the perfect car. That's amazing. Uh, thank you so much for hopping on. Awesome. This is great.

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