Chris Hayes is a true serial entrepreneur with several startups under his belt. His latest venture, Alturus has already raised hundreds of millions of dollars in capital, and is reinventing how companies manage their energy needs. The company has raised $600M from top-tier investors such as Generate Capital.
In this episode you will learn:
- The truth about VCs, and why ‘the house’ always wins
- Hayes’ one piece of business advice before launching a company
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Chris Hayes
Chris is a founder and Managing Partner of Alturus. He has a twenty-year career building innovative companies within clean energy and financial technology. Prior, Chris was a founder of Altenex where they originated, analyzed and closed over $4 billion of clean energy projects. Altenex pioneered the contract structure making offsite renewable energy purchases possible for the Fortune 1000. He has a passion for building companies and transforming emerging markets. Chris lives in Sun Valley, ID with his family and enjoys time with them in the mountains and on the ocean.
Connect with Chris Hayes
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a very exciting founder, a founder that has done it multiple times. I think that we’re going to be hearing from his own journey, the good, the bad, and the ugly because we all know that building and scaling companies is not a straight line. So without further ado, let’s welcome our guest today. Chris Hayes, welcome to the show.
Chris Hayes: Thank you. Great to be here. I appreciate it.
Alejandro: How was life growing up in Rhode Island?
Chris Hayes: It was great. I grew up on the water; I spent a lot of time surfing outside just being a kid. It was fantastic.
Alejandro: Tell me. How did you become so obsessed with the financial markets?
Chris Hayes: You know. It’s a good question. As I look back on my childhood, if you had talked to me in fifth grade, I probably would have told you I was going to be a stockbroker. I remember the stock crash of 1987. I was 13 years old, and I somehow figured a way with my paper route money to go out and buy shares of GE, IBM, and AT&T. Of course, I didn’t keep them, which would have been a good decision. But I think I was just fascinated with the whole thing – the stock market, publicly-traded, the ups and downs of the companies. It was a passion when I was a kid.
Alejandro: And combining that with the entrepreneurial spirit because you were selling skateboard parts back in seventh grade. Is that right?
Chris Hayes: I had a number of very strange businesses when I was a kid, which is not to overstate their success. I think the success was limited, but the intent was certainly there. There were skateboard parts; I was trying to convince my mom in the ‘80s to open a video store. I researched all the suppliers and did all that. But it turns out that a school psychologist is not best oriented to opening a video store then. But Blockbuster did buy them all, so I think I was on-trend.
Alejandro: Yeah. In this case, how did you get this entrepreneurial bug? Was there anyone in your family, or all of a sudden, it just happened to you?
Chris Hayes: You know, it’s funny. I don’t know the answer. If I were forced to guess, I would tell you it was innate. My grandfather started a law firm, probably in the mid-‘50s and has since become a third-generation law firm, a small country firm in Cape Cod that my family runs. As I look back, I always had a new idea. I was an investment banker, and I had this import/export business from Bali and Indonesia. I didn’t sell much, but I enjoyed the trip. So I sort of always had the bug as long as I can look back in my track record.
Alejandro: In your case, skiing got you to Denver, where you got your degree in finance. But, literally, after getting your degree and getting out there and thinking that you were going to be tackling what you were always thinking, that it would be your future, which was Wall Street. It ended up taking a different turn, so tell us about this.
Chris Hayes: I got through college. I interned at Merrill Lynch and Raymond James, and I always expected I would go in that path. The more I learned being in the trenches as a stockbroker, the more I saw it as just selling, and it did not occur to me that a 21-year-old would be the best person to advise grandma on her life’s finances. So I ended up taking a turn into investment banking that was a really good place for me at Boston Capital.
Alejandro: But investment banking always gives you that nice visibility and approach on transactions and deal-making. Funny enough, some of the best founders that I interview have backgrounds either in investment banking or consulting. So why do you think investment banking makes or creates such great entrepreneurs?
Chris Hayes: I think taking an M&A path, which I did not – Boston Capital is a real estate firm, the second or third largest owner of multi-family properties, so we were in that segment. But broadly, I think that the M&A world is a great place to grow a career because it teaches you how to think critically about a business in different sectors, competitive landscape, durable competitive advantage, growth models, and they also teach you a work ethic because they break these kids in terms of the hours they work and always on. I think it gives them an edge no matter what direction they end up taking.
Alejandro: For you, it definitely gave you that push to get into building your own business, Worldstreet Corporation. What happened there?
Chris Hayes: I was at Boston Capital for a few years. This was in the go-go late ‘90s of Internet Companies, and I had a bunch of high school friends who were taking companies public and selling companies and all this stuff. Ultimately, there was a company call Worldstreet that I discovered through a career office, and they were a bunch of technologists at the intersection of financial technology and the financial markets, which I thought was super interesting and would be a high-growth market. So when they got out of build mode, simply doing software engineering, I got a call from someone in HR, and they said, “We’re looking to round out the founding team here,” which they used very loosely in terms of bringing more folks in. I met with the CEO. I’d like to say I wasn’t underprepared for it; I was not prepared for it, but I think this guy, Bruce, just saw something in me and said, “This guy came from banking, and I bet he can figure this thing out. We’re going to put him in a seat and give him a phone and teach him what we’re all about, and he’s going to sink or swim on his own.” It ended up being just a phenomenal experience.
Alejandro: What I was going to ask you here is that, obviously, not life-altering from an outcome perspective, but at least life-changing from a lessons-learning perspective because the company was acquired by Thomson Reuters. Before, you were doing it on the transactional side as an advisor, but here, you were more on the operator’s side and being able to see that full cycle. So what would you say opened up for you, from a visibility perspective, from this experience?
Chris Hayes: What I saw there – there were three founders. I worked very closely with them. What I saw there firsthand is someone can have an idea and have enough passion and tenacity around it and raise the money, understand the market, deliver into the market, sell, grow a business, grow a team, and make the dream happen. It took it from a theoretical, let’s say a case study where someone has an idea, starts a business, and has a wonderful exit. It actually made it real world, and working with a lot of the people that I did was super, super formative in terms of letting me understand internally that I could do this one day on my own, being the guy starting the company.
Alejandro: Talking about life-changing experiences, after this, you went to the Macgregor Group, and that was an amazing outcome. What were you doing there exactly? Tell us about this.
Chris Hayes: That was a great, great stop along the way. They were pioneers in the so-called electronic trading of stocks and bonds. That’s a business that used to happen exclusively on paper. Now everyone knows it’s the world of high-frequency trading and stuff like that. So I had an opportunity with the CEO. They hadn’t sold a deal, I think, in two or three years. Some of my friends said I was nuts to take the position there, and they brought me in. I ran global sales and marketing. We restructured the team. We built a team. We had offices throughout the world. We ended up closing 50 or 60 deals with big insurers, institutional asset managers, and hedge funds. We ultimately sold the company to Investment Technology Group. It was super fun. My best friend in childhood worked there. It was a wonderful experience across the board culturally, educationally, and at the time, with the financial outcome, I thought it was all the money in the world at that stage of my life.
Alejandro: Obviously, at a $350 million deal, it’s enough zeros to get anyone dizzy, Chris. Good stuff.
Chris Hayes: It was certainly a good exit. We had great investors. It was 5x top line, 11x bottom. It was a wonderful business. I spent a year at Investment Technology Group who acquired the company and learned a little more, and then ultimately decided – in general, history repeats itself. So what I was trying to figure out is, how can you take the technology and the advances that we have seen on Wall Street and apply it to less sophisticated asset classes? That’s where the idea for Fluid Trade happened, which was the company I started after Macgregor.
Alejandro: Let’s talk about Fluid Trade. Tell us about how you brought this idea to life.
Chris Hayes: Fluid Trade was cool. After we sold Macgregor, I started a little consulting group. For a minute, I was doing that. I had this idea. I was renting space from my co-founder, and I called him one night, and I said, “You’re not going to believe this. They trade like $9 billion a year in delinquent credit card debt using Excel spreadsheets, and you have all these sophisticated buyers buying off of spreadsheets.” I said, “We should create a marketplace that uses technology as the underpinning for people to bid, buy, have it secure.” And that was the seed that started that company.
Alejandro: Tell us what the early days were like.
Chris Hayes: They were super exciting, super hard, and I was a first-time CEO, and I think with it comes problems that you don’t make again as the CEO. We built a pretty good team. We raised some institutional money. We had a big customer. We were sort of exchange in a box, which could be used for many different asset classes. Delinquent debt was our first, but we were involved in wireless spectrum and scrap metal, all sorts of big asset spaces that were much less sophisticated than Wall Street. This was in ’08, ’09, which you may remember had this small little great recession. We had a term sheet from Royal Bank of Canada and probably five months of diligence and legal negotiations, and they decided the night before funding that they were not going to move forward with the deal.
Alejandro: So tell us about that moment. Make us be insiders there. That moment where you received a call, who calls you?
Chris Hayes: I get a call from Robin Tanitus, a wonderful guy. I was at a hotel in New York City. I lived in Boston at the time. I assumed we were set to close the deal the next day. I thought he was calling just to dot an i or cross a t or say something. He led in with the preamble, which I initially knew was a big punch. He said, “Chris, we’ve never done this before. I’ve never seen Royal Bank of Canada do this. These are unprecedented financial times that we’re having. Capital markets are worried, and we have made the very difficult decision that we’re not going to be funding your deal tomorrow.
Alejandro: Wow. So, what happened next?
Chris Hayes: Oh, man. That hurt. At the time, I would have probably told you it was the biggest knockdown that I had had professionally, which is probably true. What we did then, and it was a sign of the times, we had a certain amount of money in the bank, probably three or four months of burn. We decided that we would furlough employees, stop the burn, give them more equity, and try and reassess our situation in the market, and try and get funding. Obviously, if you’re on your last dollar, you are certainly not going to get the best terms that you could from venture players. And we had a fairly involved venture experience in terms of the process, so we had a number of firms that we could have gone to at that point to try and reconstitute a deal.
Alejandro: Did you have to shut down the business, or what ended up being the outcome?
Chris Hayes: The outcome was that we had to shut down the business. We weren’t able to get funding. Sadly, we had a CTO that decided that it might be a good idea to try and work for our biggest customers as opposed to sticking it out with us. That created its own issues, as you can well imagine. Ultimately, the company just wasn’t able to survive financially, which was super painful.
Alejandro: I can imagine. From those experiences is where you really get to learn and where you get to transform yourself as a human being, not just a professional or even an entrepreneur. So, what would you say was the lesson there to be learned by you from this experience?
Chris Hayes: There were a lot of them. I deal with a lot of startup folks and entrepreneurs now. I think the single, most critical skill that they can have that can make virtually any business idea work is tenacity and sticking with something and not giving up. That’s quite literally what we did with Altenex, which is the company that came from the ashes of that Fluid Trade experience. We just continued fighting, swinging, building, raising money, looking for customers – just never stopping. Apparently, fate was on our side, and it turned into a very interesting outcome.
Alejandro: Let’s talk about Altenex, your next baby. Tell us about this marketplace for renewable energy.
Chris Hayes: When we sold the company to Edison International, we had a 96% market share. But what I think was most interesting is when we started the company, there was only one Fortune 500 company on planet earth who had done a large offsite renewable energy transaction, and that was Google. Now, Google did that by registering with FERC, in essence, becoming a utility. We knew that was not going to work for the average Fortune 500 company, so the first thing we did is, we hired the guy who started Google Energy who became a wonderful friend – a super smart guy. We tried to figure out: how can we get the Fortune 500 to be able to do large offsite renewable energy? At the time, all they were doing was onsite little solar car parks and things like that. Ultimately, we were able to invent a contract called a virtual power purchase agreement, which has become the industry standard to allow large-scale corporate purchases of offsite renewables. Probably, the single most exciting thing with that company is, we did $4 million or $5 million in deals, but when you look at the carbon abatement, and what it has actually done for the planet earth, and taking coal and natural gas offline, it feels really good to build something that had that impact.
Alejandro: Absolutely. In this case, you had learned the whole stuff with the term sheets and with getting outside investors. But in Altenex, it was a little bit different this time around. You definitely avoided the VC model. It’s funny how, in many instances, everyone thinks that the venture model is like the Holy Grail, being another company on TechCrunch, announcing that you’ve raised so much money from a Tier 1 VC, but finding most of the founders that actually receive venture money walk away with nothing, with all the craziness around the liquidation preferences and things like that. So how do you guys go about financing Altenex?
Chris Hayes: Right. The saying I use there is: the house always wins. Venture is a wonderful tool for people that have no other financial outlet, but the reality is that after getting left at the altar in a six or eight-month process the night before funding, we just decided we were not going to pursue venture. What we did is we funded the company out of pocket. We were flying around. Dell Chemical became our first so-called charter advisory board member while we were simultaneously raising money, and we ended up getting very lucky through our network. We sold 17% of the company. We raised exclusively through ultra-high net worth, but they were strategic. These were people that were on the boards of Walmart, Chubb, Microsoft, Liberty Mutual. They invested. The terms were great. There were minority rights only. We had a tremendous amount of control. They invested in common, right alongside us. They’re wonderful guys, and they ended up being real partners with us, and as you can imagine, they put some money into Alterex, the next company that we started.
Alejandro: Absolutely. I believe that here what they made was a 74% IRR on the investment, so not bad at all for them. One event that was really interesting was, when a key sponsor at Microsoft was walking around with Steve Ballmer, a really interesting conversation sparked, so what was that conversation?
Chris Hayes: Let me set the scene very quickly. Startup company – no revenue – a couple of good customers with Microsoft being a great one. We had tremendous support from their head of energy management. We had an offsite renewable energy deal, papered, ready to go, fully negotiated. It was a company-maker of a deal. We were set to close on a Monday. I get a call on Monday morning, and this gentleman, Brian, says to me, “It turns out, Steve Ballmer doesn’t believe in insurance. I positioned this deal as a way to insure against our rising energy costs and the deal’s dead. I’m sorry, but we’re not going to be able to do it.
Alejandro: Wow. How do you recover from that?
Chris Hayes: I guess it has to go back to tenacity because as I look back, we were with the team in our boardroom when the call came in. I’ll never forget it. It started out, “As it turns out, Steve Ballmer…” What we did there is, we took the hit. We rebuilt, and ultimately what we did is reposition with our sponsor there, who turned into a wonderful friend, and I think we did about a billion dollars in deals just with Microsoft. We positioned it the way we think all companies should look at renewable energy as a cheaper way to buy power on a long-term basis. These are typically 15 or 20-year deals. While power might be cheap today through traditional sources, having a small portion of someone’s power portfolio management spend, being fixed and controlled, at the cost that renewables are at now makes a tremendous amount of sense. So, ultimately, it had a happy ending, and we closed several deals with them.
Alejandro: In this case, after the rodeo with Altenex, it was the turn for the next rodeo, and the next rodeo was Alturus. Tell us about Alturus.
Chris Hayes: Ultimately, with Altenex, we sold NRG 33% and then sold the whole company to Edison International, the utility that owns Southern California Edison – a great group of people. We left there. We had to figure out what was next. We were in a super enviable position in that we did not have to rush to do anything. My partner and I looked at the landscape, and we said, “Look. What do we want to do when we grow up? What’s going to give us purpose? What do we think can be successful and enjoyable at the same time?” We said, “You know what? Working with the Fortune 1000 was a great experience,” and while we were only doing large offsite renewable energy, all these energy managers would come to us and say, “Do you do anything onsite? Is there any way you can lower our energy costs through better lighting or HVAC or management systems?” My partner and I decided, “You know what? Let’s start this thing up. It’s a new space called Energy as a Service, and we’re going to have it as our second act, continuing to make the earth a better place, a little carbon abatement.” But, ultimately, what we’re doing is helping the balance sheets of these Fortune 500 companies. You go to these firms and say, “I can give you guaranteed cost savings and no upfront costs.” If you’re a publicly-traded company, that’s going to get your attention. That’s what we’ve been doing, and it’s been super-super fun. We just closed on $600 million in equity, so we’re fully funded and fired up. We’ve got a bunch of great customers who have been saying good things about us in the press, so we’re excited.
Alejandro: How does that work. What’s the business model? You said that you just got the $600 million, so how do you put that $600 million to work? That’s a lot of millions.
Chris Hayes: It is, particularly when you consider that 90% to 95% of a deal is debt?
Chris Hayes: That makes it in the billions. We provide infrastructure, advisory, and financing services to large energy users. In English, what that means is, we help them with energy efficiency, storage, water conservation. We buy all the equipment. We own and operate it, and they pay us a monthly service fee. What that does is, we handle all the project costs, performance risk, maintenance services, but the beauty for them is they get off-balance sheet accounting treatment, and it’s treated as a service expense, and they can focus on their core business and leave all the building management system stuff to us. It’s pretty compelling. We think where this is going is much like Cloud computing. Fifteen years ago, if you were any Fortune 500 company, you managed your server farm, and you considered that your most critical data. Now, all of a sudden, the idea of doing that with Microsoft, Azure, and Iron Mountains of the world, it would be ridiculous to manage that yourself. We think that’s where the puck is headed in terms of energy assets for these big Fortune 500s. Let companies focus on making consumer products or cars or steel, and let someone else manage your energy assets, and do it better, cheaper, faster and just pay a service fee that’s an operating expense rather than a capital expense.
Alejandro: Let’s say, Chris, that you go to sleep tonight, and you wake up five years later. So you haven’t slept like that obviously in your whole life. But you wake up in a world where your vision for Alturus is fully realized. What does that world look like?
Chris Hayes: Cloud computing for energy infrastructure assets. You get all of these Fortune 500 companies, and they have outsourced all of the ownership, operations, management, and services associated with all of that equipment. They let some geek, like us, deal with all of it, and they write a check every month, and they have huge carbon abatement. Most of these companies are operating on 10, 15, 20-year-old equipment that is totally outdated in terms of its energy usage, but why is the company going to want to use their cost of capital to upgrade infrastructure when they can do share-buyback and research and development and all of that. I think that whether it’s through Alturus, and I think we’re going to have a great market share in that space, I do think it is a better way for the Fortune 500s to manage their energy assets, and there’s no question that it’s better for the environment in terms of carbon abatement and using less power.
Alejandro: In terms of the typical customer that you guys would have, this is all Fortune 1000 companies. Is that right?
Chris Hayes: It is. Berry Plastics is a customer. They have been very vocal about us in the press. We are taking a strategic view of their whole energy-efficiency programs, so we design solutions that are deployed at scale. So they require no upfront capital, and we do it all under an energy services agreement, but the point is, we upgrade all of their infrastructure, HVAC, lighting, building management systems, assembly lines, and things like that.
Alejandro: Very cool. Now, let’s say that we were able to get you, Chris, into this time machine, and you’re able to go back in time. We’re literally going back to that moment where you created your very first company – even before that, even before Worldstreet Corporation. You’re at Boston Capital, your first gig. You’re thinking maybe like doing something on your own. If you had the opportunity to go to that moment and speak with that Chris, knowing what you know now – now you’ve been through the wringer. You’ve seen the good, the bad, and the ugly of entrepreneurship. If you were able to go back in time and have a chat with your younger self and give yourself one piece of business advice before launching a company, what would that be and why, knowing what you know now?
Chris Hayes: Turn back! Don’t do it!
Alejandro: I hear you.
Chris Hayes: I’m kidding. It’s been an unbelievable ride. I’ll tell you exactly what it is: trust your gut. I have had a couple of incidences where I wanted to make a certain decision, but I analyzed it; I looked at it on a sheet of paper; I overthought it, and I made the decision based on my brain instead of my gut feel. That usually, in my experience, is the best-informed way to make a tough call.
Alejandro: Is that maybe like an inner voice or something that we all have, like when we’re thinking about the gut, maybe there’s something that is off that doesn’t sound so clear that you have some questions that are unresolved. How would you make that be more tangible for the folks that are listening, many, many entrepreneurs that are listening to this episode? What does trusting and listening to that gut feeling look like when we put it into a pragmatic approach?
Chris Hayes: I’ll give you a real-world example, and we can drill it from there rather than being theoretical.
Chris Hayes: With Fluid Trade, in the early days, we acquired a technology company. With that, we brought in the CTO. The CTO, at that point, maybe two or three weeks after acquisition, left me a sticky note and said he was resigning. I looked at that, and I talked with my partner, and our gut feel was to let him go. This is what should happen. But our brain analyzed it and said, “But we’ve got investors. The optics aren’t going to be right. Who’s going to build this?” All of these other things that we had to unpack as to what made sense on paper. And without going into too much detail, it was the wrong choice by a landslide.
Alejandro: Wow. Thank you for sharing that, Chris. For the folks that are listening, what is the best way for them to reach out and say hi?
Chris Hayes: That is a great question. I would say – I will give you a fun little email address that folks that feel free to reach out to me on, and that is firstname.lastname@example.org.
Alejandro: Fantastic. Do you have any type of social game going on Twitter or LinkedIn or anything like that?
Chris Hayes: I’m certainly on LinkedIn. I have not been a member of the Twitter-sphere at this point, but perhaps given the president-elect, I may switch and get a little bit more into that world.
Alejandro: I love it. Well, Chris, thank you so much for being on the DealMakers show today.
Chris Hayes: Thank you so much for chatting with me. I really enjoyed it.
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