00:30:15 · Kevin Hettrich
[00:30:15] S0: There's two interesting kind of points by your question. So one is we had a data point that Volkswagen was excited to do it, but the question is, are our other partners kind of up for that? And we took some risk in moving to that business model before we had, like, kinda hard proof points from the others. What we since found, other people are also equally excited to do that. So there there was certainly a risk when we moved there. Would would the would the other customers come along? And the second point is, like, what do you keep kinda core, or what... Versus what do you kinda rely on partners? A good question is, what are we uniquely positioned to do combined with some, like, strategic elements? So certainly at the the innovation on the materials as it trans... And with the the modifications of a cell design for anything that's novel that's touching equipment and materials, that's core to us certainly through the pilot line scale. We don't think there's another group or team on the face of the earth that can do that as as well as we can in this chemistry. As soon as you get to a pilot line scale, like, yeah, we have a lot of smart, hardworking kinda scientists, engineers, and technicians, etcetera. But once it's kinda demonstrated on a pipeline scale and it's about doing this at kind of multiple orders of magnitude higher, then you're like, okay. Actually, even though this partner doesn't know the core technology, they're very good the rest of that cost curve. So to use an example here, we started working with the two top ceramics players in the world, being kind of Corning in The United States and Murata in Japan, who expressed interest in doing exactly that. They're like, wow. This technology is fascinating. They're both excited for the end market that kinda gets opened up to them in in participating in making our specialized component. And then how we do the ceramic is different. We believe we do it probably two orders of magnitude faster than conventional ceramics processes. We gave a a name, Cobra. And in fact, one of them didn't believe that it could be done. That's what they get. And what we get is the top ceramic partners who know how to take a technology to scale, to drive down the cost as they move up volume, and who are reliable suppliers to our end customers already. So that's like kind of the best of both worlds.
00:32:21 · Kevin Hettrich, CJ Gustafson
To your question, like, do you put it in that... In kinda one bin or the other? Are we uniquely uniquely positioned to do it, then we should do it, or is there someone else on the planet who's probably better at it? Then it kinda goes goes to to the other side. And there... There's a bit of a strategic overlay, like, around the the protection of intellectual property. We always have to under a licensing business model. We always have to own that core. We wanna keep that for the ability to work across industries and also across the product road map in time. So that's something where we are unflinching. Ad[00:32:53] S1: Remember when pricing was simple? One product, one subscription, one invoice every month. Those days are over. Ad[00:32:59] S0: The
00:32:59 · CJ Gustafson
Ad[00:32:59] S1: AI economy is changing how everything gets bought and sold. We're seeing usage based pricing, hybrid contracts, and something called a credit. The finance systems built for vanilla subscriptions weren't designed for this. This isn't just a RevRec problem anymore because outdated revenue architecture can kill a great pricing idea before it ever reaches the market. RightRev lets you recognize revenue in whatever shape it comes in. Whether you're launching consumption credits or testing entirely new commercial models, RightRev gives finance the flexibility to support whatever pricing model comes next. So product teams can keep on innovating and finance teams can keep pace. If you're architecting revenue for AI economy, learn how RightRev can help. Visit rightrev.com/cj. That's me. That's rightrev.com/cj. A wise man once told me that every startup is really just a loosely functioning disaster. Ain't that the truth? If your startup needs a little extra support, and let's be honest, who doesn't need a little help now and then, you're in for a pleasant surprise with Fidelity. Fidelity Private Shares helps early and growth stage companies stay investor ready with cap table, data room, and scenario modeling all in one place. A messy or missing cap table might not just slow you down, it could cost you your next fundraising round. VCs are flooded with pitches, and if your equity is confusing or missing, they'll move on fast. Fidelity private shares gives founders the structure and simplicity to focus on what actually matters, building your company. If you stay investor ready, you don't have to get investor ready. Check out fidelityprivateshares.com to learn more. That's fidelityprivateshares.com. I got news for you. The ERP category is finally getting disrupted. And if you haven't heard of Rillet yet, please pay attention. It's the AI native ERP built specifically to replace NetSuite, and it's already won over hundreds of finance teams. Their mission is to make these zero day close a reality, and they're actually doing it. We're talking teams closing the books at 01:35PM on the first day of the month. Companies like Windsurf, Mercor, and hundreds of others run their entire finance stack on Rillet. Revenue recognition, closed management, multi entity, native Stripe, and Salesforce integrations. Whoo. Everything a scaling company needs.
00:35:17 · CJ Gustafson, Kevin Hettrich
AdThey've got 5.0 start... Five zero. Wow. Five zero stars on g two. They're backed by a 16 z and Sequoia, heard of them, and CPA led implementations that get you live in forty five days. That is simply unheard of in the ERP space. If your books aren't running as fast as your business, check out Rillet. Book a demo at rillet.com/cj. That is rillet.com/cj. That's me. Is there a point where being asset light becomes we gave away too much? [00:35:42] S0: It can be, and kind of the devil's in the detail. If you think about the first kind of partner or partners who are building those first of a kind type levels of scale, candidly, they should be compensated more. [00:35:56] S1: Yeah. Gotta incentivize them, otherwise they're not gonna get out of bed in the morning. [00:35:59] S0: At any given time, the whole thing has to work. We need to create enough value so that each partner has a very compelling risk adjusted business case, and that can also change over time. I use the example of someone who's early to commercialize. After several years in the marketplace as the differentiation on an individual product node falls, our command of that should fall too. So it's dynamic, and you try to be fair, and ultimately it's tied to what the next person can do. To the extent that it's, like, differentiated and compelling, we're in a strong position to kinda capture value. To the extent that it's proven, all the more so, and then the opposites, of course, are true.
00:35:59 · Kevin Hettrich, CJ Gustafson
[00:35:59] S0: At any given time, the whole thing has to work. We need to create enough value so that each partner has a very compelling risk adjusted business case, and that can also change over time. I use the example of someone who's early to commercialize. After several years in the marketplace as the differentiation on an individual product node falls, our command of that should fall too. So it's dynamic, and you try to be fair, and ultimately it's tied to what the next person can do. To the extent that it's, like, differentiated and compelling, we're in a strong position to kinda capture value. To the extent that it's proven, all the more so, and then the opposites, of course, are true. [00:36:39] S1: Kevin, a lot of our listeners are familiar with ARR type businesses where it's recurring revenue over time. Does a licensing business at scale effectively become a royalty business where you can depend on this recurring revenue stream? [00:36:54] S0: In automotive, that's certainly the case just because of the high investment to first develop a model and then to put the factory infrastructure to make it. Often, those contracts are for five to seven type years. So once you have a win, if the technology works and you're able to kind of produce it to plan, you have pretty good visibility into that factory ramping up and then to continue to produce for a set of years.
00:36:54 · Kevin Hettrich, CJ Gustafson
[00:36:54] S0: In automotive, that's certainly the case just because of the high investment to first develop a model and then to put the factory infrastructure to make it. Often, those contracts are for five to seven type years. So once you have a win, if the technology works and you're able to kind of produce it to plan, you have pretty good visibility into that factory ramping up and then to continue to produce for a set of years. [00:37:21] S1: I got a question for you just on capital allocation because most people aren't building batteries. Right? But I do think that everyone is making bigger bets than they were five years ago because of AI. What is building a capital intensive business like this one taught you about capital allocation? [00:37:39] S0: It's kinda from the eye of the of the beholder. We've been spending something in the ZIP code of, like, $40,000,000 on initial kinda research and then later stage develop and kinda pilot line. I would hope that listeners can demystify that, that those types of expenditure levels, and especially when you also add our longer product cycle, that these are possible if you're pointing to a big market and what you're doing is compelling. I [00:38:04] S1: wanna switch gears for a second just to talk about the relationship between product and finance because you... You've seen both sides of that coin. And you had an apt term for it. You said that they're both tension clearing functions. I'm curious what you meant by that.