00:00:55 · Kevin Hettrich, CJ Gustafson
[00:00:55] S0: Yesterday's price is not today's price. [00:01:06] S1: Most of the CFOs I talked to have a pretty good idea of what their company is going to sell next year. Kevin Hettrich is trying to figure out the economics of a product is, quite frankly, still being invented. Kevin is the CFO of QuantumScape, a company developing solid state batteries for electric vehicles. He's a Stanford trained engineer who originally joined the company in product management before moving over to the business side. We spent a lot of time talking about capital allocation, which gets considerably more complicated when you're funding scientific breakthroughs with uncertain timelines and no guarantee that they'll actually work. Kevin told me about an early manufacturing approach where the technology looked promising, but the economics were so far off it would never make sense for the auto industry. We also talked about QuantumScape's decision to pursue licensing rather than owning all the factories itself, how you convince investors to fund a company years before meaningful revenue, and his philosophy that finance and product management are both in the business of deciding what not to do. I'm CJ Gustafson, and this is Run the Numbers. Kevin, thank you so much for joining me on the pod. [00:02:06] S0: Thank you very much, CJ. Pleasure to be here. [00:02:08] S1: Maybe just to start things off, can you explain what QuantumScape does?
00:02:08 · CJ Gustafson, Kevin Hettrich
[00:02:08] S1: Maybe just to start things off, can you explain what QuantumScape does? [00:02:12] S0: We are developing and commercializing significantly better batteries. All dimensions you care about, smaller, lighter, faster charging, safer, and at scale maturity, also lower cost. And then we take those batteries, and we put them in the world's most important products. Just about everything has a battery these days, and candidly, the things that don't would be better products. We target things like electric vehicles, AI data AI data centers, consumer electronics, aerospace and defense, medical devices, robotics, etcetera. I was digging through your background. [00:02:44] S1: You're a Stanford engineer by trade, and you started as a product manager at QuantumScape. I'm curious what the first business role you took on at the company was.
00:02:44 · CJ Gustafson, Kevin Hettrich
[00:02:44] S1: You're a Stanford engineer by trade, and you started as a product manager at QuantumScape. I'm curious what the first business role you took on at the company was. [00:02:54] S0: I was our first product manager, and one of my first tasks was to put on paper what is the product that we're developing in great detail. It's called the the the product requirements document. I chose that because it's a really neat intersection between engineering and the rest of the business. And together with finance, I think it's one of the the functions where you try to take in all the information from the four global functions of the company, which I think of as development, sales, operations, and finance. You're trying to optimize, like, what is the sweet spot of the product that they can develop, that the development team can develop, the sales team can sell at a certain kind of price point, margin, and volume that the manufacturing team can make, where the finance makes sense for everyone. And as you get new information with different development cycles, conversations with customers, the financing climate changes, you're always tweaking that to try to keep it in the optimum space. So that... That's the view from the product requirements document. I think you can actually make a a very similar lens from the the finance space. Spoiler, end up becoming the CFO. So that's the other space that I think is a a really neat job.
00:02:54 · Kevin Hettrich, CJ Gustafson
[00:02:54] S0: I was our first product manager, and one of my first tasks was to put on paper what is the product that we're developing in great detail. It's called the the the product requirements document. I chose that because it's a really neat intersection between engineering and the rest of the business. And together with finance, I think it's one of the the functions where you try to take in all the information from the four global functions of the company, which I think of as development, sales, operations, and finance. You're trying to optimize, like, what is the sweet spot of the product that they can develop, that the development team can develop, the sales team can sell at a certain kind of price point, margin, and volume that the manufacturing team can make, where the finance makes sense for everyone. And as you get new information with different development cycles, conversations with customers, the financing climate changes, you're always tweaking that to try to keep it in the optimum space. So that... That's the view from the product requirements document. I think you can actually make a a very similar lens from the the finance space. Spoiler, end up becoming the CFO. So that's the other space that I think is a a really neat job. [00:04:03] S1: Two reflections. The first one is I've worked with so many PMs, Kevin, over the years, and they're always saying the PRD, the PRD. It literally just click now what PRD stands for.
00:04:03 · CJ Gustafson, Kevin Hettrich
[00:04:03] S1: Two reflections. The first one is I've worked with so many PMs, Kevin, over the years, and they're always saying the PRD, the PRD. It literally just click now what PRD stands for. [00:04:12] S0: Having been a consultant during one of those chapters, I was trained to try to not use a lot of jargon, so thank thank you, McKinsey, for that training. I'm glad. I'm glad that I've I've given you that. [00:04:23] S1: I was today years old. Well, second thing just to reflect on, I've done over 300 of these interviews. I think you're the first CFO I've had on who's at the company before you could sell it.
00:04:23 · CJ Gustafson, Kevin Hettrich
[00:04:23] S1: I was today years old. Well, second thing just to reflect on, I've done over 300 of these interviews. I think you're the first CFO I've had on who's at the company before you could sell it. [00:04:33] S0: Some people consider better batteries one of the greatest unmet kinda science and engineering challenges on the planet, and we are doing something quite ambitious. Lithium ion is kinda the the workhorse chemistry that we use in the world to power our phones and cars, and that... Those were commercialized in the early eighties. Our company is at the point of the spear trying to bring the nest... The next chemistry to market, is called solid state lithium metal. We weren't even sure if the materials even existed that would allow us to develop these batteries. So truly a deep science, deep tech innovation company where our science and engineering teams are going to, like, the limits of what is kinda known in terms of human knowledge and, like, peering over the side and trying to push push it further. So it's a very, very ambitious company when we started. Individual battery markets can be measured in hundreds of billions of dollars, which is, like, EV and grid, and that's little bit of color and context on that. [00:05:33] S1: That's super helpful because I I mean, everybody listening uses batteries in some way, shape, or form, and we probably hear about it with all these cars going electric, even motorcycles going electric. I think I saw something like you were riding a Ducati across this stage.