Craig Knight On Using A SPAC To Build A $1.5 Billion Business In Just One Year

Craig Knight has been leading the charge in fuelling the future with sustainable energy. It turns out that the world has been embracing his startup’s solutions in a big way. Resulting in creating a rocketship of a venture that went from launch to publicly-traded company in just a year. The company, Hyzon Motors has raised funding from top-tier investors like Wellington Management, Riverstone Energy, Federated Kauffmann Fund, and BlackRock.

In this episode you will learn:

• Hyzon’s vision for the future of fuel and transportation
• Navigating SPAC opportunities
• Thinking opportunistically versus long term
• Craig Knight’s top advice when starting and funding a business

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About Craig Knight:

Born in Australia, Craig has a diverse industrial background, with over 25 years of experience in International Sales and Marketing and Business Management.

After studying Chemistry and Pure Mathematics at the University of Sydney, Craig went into commercial roles, and later completed an MBA at the University of Sydney.

He held positions based in Australia, the USA, Singapore, and China in the chemical sector, before moving into hydrogen fuel cell technology.

Craig believes we all have a personal obligation to make a positive impact, and he has made it his mission to be a facilitator of decarbonization for the well-being of future generations.

Connect with Craig Knight:

• Crunchbase
• LinkedIn
• Twitter

Read the Full Transcription of the Interview:

Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. I’m very excited about the founder that we have today. His journey is incredible, and also what he’s doing with his company and the team. It is remarkable. We’re going to be talking quite a bit about SPACs, as well, and there’s a lot going on in that segment, a lot of noise, a lot of people talking about it, but today, we’re going to be filtering through that noise from someone who has done it. So without further ado, let’s welcome our guest today. Craig Knight, welcome to the show.

Craig Knight: Thank you very much for having me. It’s great to be here, Alejandro.

Alejandro: Originally born and raised there in Sydney? So how was life growing up in Sydney?

Craig Knight: Australia is a great place. I think especially as a young male in Australia, enjoying the outdoors, sports, nature, and all those sorts of things, Australia is a great place. But like a lot of other people that grew up in Australia, it’s a small country, and we crave contact with the outside world or the rest of the world, so a lot of us end up traveling the world and looking for job opportunities and opportunities to explore different parts of the world when you’re from a small country like Australia.

Alejandro: In your case, Craig, what fueled that interest around chemistry and mathematics because that’s what you went to university to study?

Craig Knight: Yeah. It’s hard to say what fuels those interests, but I think scientifically-minded people just end up in certain modes of learning, acquiring knowledge, and pursuing answers to the questions of why things are the way they are and how things work. As a scientifically-minded person, I ended up studying chemistry and math and looking for opportunities that took me into the chemical sector. Then in the chemical sector, I came across some new energy technologies, and that’s how I ended up with exposure to the material side of the fuel cell technology.

Alejandro: We’ll talk about that, but one of the things that was pivotal was to do the MBA and then to go to Singapore.

Craig Knight: That’s right.

Alejandro: First and foremost, after being on the scientific side, why did the business side come about, and also, how did you land in Singapore?

Craig Knight: I decided to do an MBA because I realized after a little bit of time exposed to labs in the kind of industrial chemistry setting. I realized that I wasn’t destined to be a lab rat, as they call them, for too many years, but I still really liked science, so I went and studied an MBA and used some of those skills to get into commercial roles in the industrial chemistry sector. I ended up in a group that was doing technology validation and corporate venture capital and that sort of thing based in Singapore, and that’s where I got exposed to fuel cell technology for the first time.

Alejandro: Tell us about, as well, really getting excited there about clean energy in the late ‘90s and then how that evolved into landing on Horizon Fuel Cell Technologies.

Craig Knight: We looked at a number of different technologies that related to clean energies and to water technologies. Fuel cell technologies was one of the areas that looked interesting, but the chemical company we were working in a small group that was evaluating this called Eastman Chemical was a spin-out from the old Eastman Kodak. They chose not to invest in the space specifically, but a couple or my colleagues were so interested in the technology that they wanted to quit their day jobs and take a punt on being entrepreneurs in the space. I tried to convince them they were mad for a little while, but in the end, they won me over, and I ended up following them a couple of years later. I helped with some of the thinking process and business setup in the beginning and some investment. After a few years, I also joined the business. So here we are some 18-odd years later, many battle scars along the way. But here we are with plenty of experience in the core field of technology. In the last three years, experience in taking that technology downstream into mobility applications.

Alejandro: In this case, with Horizon Fuel Cell Technologies, what was it like to be, for so many years, in survival mode into a segment that is not that popular, I would say?

Craig Knight: You’re right about being in survival mode. I sometimes call it growing up on the mean streets because we were trying to sell a technology that nobody was asking for, so we had to learn how to package fuel cell technology in a way that it became a viable solution to somebody’s power problems. We were competing with diesel generators, factories, different factory technologies embedded in UPS systems, and these sorts of things. We found enough use cases that were interesting and also sold a lot into R&D, for example, around the world. We managed to manufacture more than a million Eckel bill cells over the years with Horizon. That built a certain base of experience and also material know-how. Then we’ve used that to acquire more and more complex fuel cell systems and hire powered fuel cell systems to the extent that five or six years ago, a parent company started focusing on Horizon, started focusing on automotive applications. When we looked at the global opportunity for those high-powered fuel cells, we saw the need to create a new business around the applications.

Alejandro: Especially for the people that are listening that maybe are not so technical or don’t have the scientific background, tell us why this approach is so important and so unique.

Craig Knight: Take a step back from that core technology and think about the challenges that the world is currently faced with, and think about how hydrogen can contribute to address some of these challenges. At the moment, the global population are all facing this very inevitable reality that if we don’t change our habits, the environment suffers irreversibly, and then humankind is suffering in turn. So we really need to decarbonize. We need to change our behaviors around energy systems and around mobility and the burning of fossil fuels. Fundamentally, we need to find solutions to our habits, our fossil fuel habits. If we think about how to address one of the big chunks of fossil fuel consumption, transport, you end up with a range, a spectrum of viable alternatives. On the passenger vehicle, light vehicles, scooters, and all this sort of thing, the end of the spectrum, factory electrification is the most practical means of eliminating fossil fuels. But if you think about the other end of that spectrum, which is very heavy equipment, very high daily uptime, for example, payload imperative-type stuff, this sort of equipment, these types of daily usages are much more suitable to hydrogen because you could refuel these vehicles with hydrogen in a very similar fashion to the way you refuel them with diesel. Really, what you’re looking at is the different use cases for fossil fuels and looking for the most logical way to replace those fossil fuels or displace those fossil fuels. What HYZON does is target these heavy-duty high daily use case types of scenarios like concrete trucks and garbage collection trucks and urban transit busses and refrigerated food delivery trucks, and trucks that run so many hours a day, you don’t have the opportunity to charge if they were battery-based. And, in fact, you don’t want to charge something with such a big daily operating cycle requirement because it’s a huge amount of electrical energy. So you create a massive burden on the grid when you put those applications onto the grid as well. What we pursue is grid-independent electrification. So we go after hydrogen-produced from renewable sources, waste products, and the like that don’t have dependence on the grid infrastructure to charge the vehicles, recharge the vehicles, etc. So we go after grid-independent decarbonized heavy vehicle power and fueling solutions.

Alejandro: In your guys’ case, you were pushing Horizon Fuel Cell Technologies, and then this becomes a possibility, as you were alluding to on the application how you were also able to apply it to the automobile sector. Tell us about the incubation process of the idea, and then, all of a sudden, it becomes a reality, and HYZON is born.

Craig Knight: Great question around how that happens because frankly, the parent company, Horizon, was a technology developed by a technology incubator and not a mass commercialization capable company. The way that Horizon got into automotive applications was by being a power-train supplier, by being a fuel cell or a fully integrated fuel cell system supplier, and working with Eagle companies, especially in China, where China initiated a support mechanism around pollution abatement solutions. This is hydrogen-powered trucks and busses in high daily usage type scenarios where the switch from diesel to batteries has been challenging because of the really high daily up-times. So the Chinese government, a number of years ago now, brought in some subsidy systems, some policies around converting some of these challenging heavy vehicle usage scenarios. Horizon was a beneficiary of that because Horizon was able to sell to companies making the busses and the trucks, so selling to companies like Yukon, Bell Farm, and other companies that make a lot of these types of vehicles. Horizon was a beneficiary of that and was able to demonstrate its core technology that had been developed since 2003. They were able to demonstrate these in-the-vehicle applications and then being pretty successful in those applications as the management team at Horizon, at the time, where I was. We started looking at the opportunity to globalize that experience. But in looking at the global market, the global opportunity set, we realized that the rest of the world was not nearly as ready to go towards hydrogen electrification as China had been. Partly, that was a legacy issue because China has been electrifying ecosystems for decades. Over that time, they already electrified scooters, small cars, light council vehicles, and light commercial vehicles. These things were already running on batteries. They already have 400,000 to 450,000 full-size city busses on batteries at the time, for example, in China. But there were limitations to what you can do on batteries, and that’s why the subsidy system and the support mechanisms came along for hydrogen. Then with the experience in the Horizon gain there, we looked for the opportunity to globalize that but realized the rest of the world was behind on electrifying mobility, generally, and therefore, we had to be more creative about the models we used to be able to apply fuel cell technology to, for example, the traffic decarbonization in Europe or the truck decarbonization in the United States. We had to be a lot more creative, and we found that the incumbent players were a lot more comfortable in those markets were not in a real hurry to introduce hydrogen as a substitute to diesel and as an alternative to diesel. That’s why we became obsessed with this idea of going downstream into the vehicle applications and becoming a master vehicle integrator if you want to follow that, whereby we can source the rolling stock, the cabin chasse, and we can then fit that out with the whole electric propulsion system and the fuel cell system to make those trucks zero-emission trucks, although they weren’t originally designed to be zero-emission trucks.

Alejandro: Also, that’s the moment when HYZON is born, but the journey of HYZON has been incredible. It’s been like lightning speed, literally. You guys founded or built or gave birth to the idea of HYZON around 2020 or earlier perhaps?

Craig Knight: Early 2020.

Alejandro: Then, even now, you’re already a publicly-traded company, which is unbelievable so quickly. What were the early days like, and how did you guys think about the business model of the business in a way that would make sense that would be, obviously, making it all the way to the public eye now as a publicly listed company which is remarkable? For the people that are listening to really get it, what is the business model of Hyzon? How do you guys make money?

Craig Knight: Firstly, let’s talk a little bit about the mission because it then plays into the business model. Our whole mission is around decarbonizing commercial transport, so the execution paths are about accelerating the right at which a fleet operator can choose to go zero-emission. So we have to make it easy for a fleet operator, whether it’s a public sector, utility, or a transit authority, or an operator [15:50] trucks, so whatever it might be. For these fleet operators, you have to make it easy for them to make this choice. Fundamentally, what we need to do is provide an alternative to what’s familiar now, which is diesel trucks. We need to provide an alternative that’s attractive in terms of operations and in terms of cost. What we’re focused on is leveraging our core technology, which is the fuel cell systems, and how that works within the vehicle, so the electric propulsion along with the fuel cell. We optimize the way that these things work, but within the basis of a donor chasse, you feel like or a third party [16:35]. So we work with the established vehicle OEMs to source those cab chasses, and then we fit them out with the fuel cell and electric propulsion. By doing this it means that we’re relatively asset-light. We specialize in the hydrogen system, the fuel cell, our generation system, and the electric propulsion to make the vehicle operate. The rest of the vehicle someone else can build. That keeps us a relatively asset-light manufacturer because making fuel cells is not a big heavy investment like making cabs, chasses, and all those heavy steel components. The model is to be a master integrator leveraging the core technology in the fuel cell and electric power train to make it easy for these guys to choose to go to zero-emission. There are two major elements to the cost structures in commercial vehicles. One is, obviously, the CAPEX and the second is the OPEX. The major OPEX component is fuel. Fuel is a very big chunk of the total cost of ownership for commercial vehicles, so we have to play an active part in helping our customers access affordable hydrogen. There are two big jobs we have to do. 1) Design and make a supply a reliable, high-performance vehicle that can operate more like a diesel vehicle so that routes can be the same, driver hours can be the same, refill time can be the same or similar to diesel. 2) We have to provide access to affordable hydrogen if they don’t already have it. Our focus is around enabling those easy choices for fleet operators.

Alejandro: In this case, how did you guys think about, as well, capitalizing the business?

Craig Knight: We had three choices, the usual choices: 1) looking for private placement capital and enough to scale this business. What we had was the core technology, but it was embedded within this private company, Horizon, which just doesn’t have a massive amount of capital to go and pursue new initiatives. If you’re a Honeywell, General Electric, or something, you just throw capital at a concept, and instead of technologies, you can go and create a new global business. We couldn’t do that, so we had to either choose to go private raise or an RPA, RPO or a SPAC route. When we looked at the three options, we said, “Okay, we definitely have enough friends and people who like the look of what we’re doing to raise some money with a private placement,” which is what we did in the beginning. We started that process early in 2020. That was a good way to raise a little bit of money and validate our concept and refine the concept with the input that some of these people came with the A Round. Then we fairly quickly went into a more substantial type of a raise process because we realized that the timing was really ripe for what we were doing, and we also should execute quickly to make sure we didn’t lose the momentum in the market, in the business concept, and in what we started to elevate commercially. Some customers have already decided to come on board with serious expressions of interest around vehicles. We had started to negotiate some agreements here and there. So we chose to go after a source of capital quickly, and we went out to start that process of marketing ourselves, essentially, to potential investors in the form of SPACs.

Alejandro: The SPACs, there are so many people talking about SPACs. It’s like the new kid on the block. They’ve become so popular in the last 12 to 24 months, so there are probably a lot of people that are tuning in now and listening and are like, “Oh, my gosh! SPACs. I’ve heard it left and right.” What does it look like? What is the experience of going through a SPAC, and all of a sudden, you’re a publicly listed company?

Craig Knight: Really going through an RPO or going through a SPAC process, as the same in gold, obviously, and the same outcome of becoming a publicly listed company with hopefully enough capital on your balance sheet so you can go and execute your plan, and hopefully, with the amount of dilution that you planned on when you started the process. But for us, the environment last year was such that there were so many SPACs out there, so many sponsors of SPACs looking for attractive investments that we thought we had a decent shot at finding someone that could be an interesting partner. Because we had been so long in this basic technology of fuel cells, we thought we had something to offer that was a little different to a lot of people. There were a lot of new concepts coming out of garages and universities and spare bedrooms as business models here in the last couple of years. But how many really seasoned entrepreneurs that have built a technology-based business were out there looking for merger partners. There aren’t that many, and there weren’t that many last year. We thought we would have a decent shot at finding a suitable partner. The second thing is that we knew that we were at the very early stage of increasing focus on ESG oriented investment. We felt because of our whole mission in life, which is to make fuel cell technology relevant and to use it for good, for a positive purpose, namely decarbonizing commercial transport in the case of HYZON. We felt like we could appeal to an investor set that would give us a decent chance of striking a deal, getting a decent valuation, and all the rest of it. We went through this process of interviewing, and our advising bank was Goldman Sachs. We went through the process of interviewing—it’s kind of like a mutual interview with a bunch of SPAC sponsors, and we spoke to more than 30 of them, and you feel each other out a bit and get a sense of their purposes and mandates versus our direction, base, and vision on the business. You just look for that fit. You end up with a shortlist of parties that they feel like they can work together. You go through a usual term sheet there and negotiation, and you come out with a deal at the end.

Alejandro: Nice.

Craig Knight: Our process to close was a little lengthy because the SEC changed some rules around board reporting and all that sort of stuff with SPACs, but that was an industry effect, so we ended up finalizing our transaction in the latter part of July, just a few months ago.

Alejandro: Now, all is public. All the information is public, so what is the market cap today of Hyzon?

Craig Knight: We’ve been a little bit beaten down by some short-sellers, so we’re around about $1.5 billion the last time I looked. I think we’ve replied to the reasonably fully-informed report that was issued a little while ago. We responded with a formal statement. It was another attempt to discredit us shortly after that, but it was not really worthy of any response. What we’re doing is we’re responding simply by continuing to execute to plan. HYZON has been busy in different corners of the world with validating customer interest and going through this process of validating our offering compared to what customers want and signing up customers. In Australia and New Zealand, we’ve announced customers. We’ve announced an MAU leading toward firms in China. We’ve announced orders in Europe. At the moment, we’re working on opportunities in North America, and we’re continuing to try and execute the plan. Obviously, everyone is facing various supply chain challenges and whatever, but that is what it is. You deal with that in the context of making your choices and taking actions in your daily business operations. At the moment, we’re sitting on a $1.5 billion market cap. But most importantly for us is that we have around about $500 million in the bank accounts, and we will use this very cautiously. We’ve always been very careful stewards of our own money and shareholders’ money, and eyes on management have DNA to very carefully allocate capital and to invest in ways that bring a return to our shareholders. This is a habit that was formed a long time ago in lean times and making our way through those mean streets we talked about earlier. These habits have habits, but you don’t let go. We’re very cautious stewards of capital, and we will carefully allocate funds to the right areas where we develop technology and build that capacity and build and develop the teams so that we can execute the global HYZON model.

Alejandro: In that regard, as we’re looking ahead and into the future, imagine you were going to sleep tonight, and you wake up in a world five years later, where the vision of HYZON is fully realized. What does that world look like?

Craig Knight: Five years from now, to me the success would look shipments somewhere around 15,000 to 20,000 commercial vehicles over the years, successful facilitation and support and sponsorship of the buildout of hydrogen infrastructure in a very locally-oriented fashion because we’re all about sustainability, so we love local hydrogen production bases close to demand centers for the hydrogen, which are built on the back of fleet operations. For us, going after backed-based trucking hubs like the concrete trucks, refuge trucks, and whatever, we like local hydrogen production basis close by to those demand centers because this is all about sustainability, and there’s nothing more sustainable and secure than local suppliers of energy. So hydrogen has a great opportunity to improve energy resilience and energy independence right down to a very local level in every corner of the world. We’re very much proponents of that. So success to us would look like local hydrogen hubs and hydrogen ecosystems popping up in different parts of the world that are fundamentally sustainable through economics and sustainable in real terms in terms of consumption. We’re also very proud to say that fuel cell technologies are inherently sustainable because it’s a cradle-to-cradle technology. If a fuel cell is wearing out and starting to lose efficiency, we simply take it, tear it down, and rebuild it with fresh membranes, and then we recover the catalyst and put that into another fuel cell later. So fuel cells are inherently sustainable. They’re cradle-to-cradle. They really don’t consume a lot of resources. We just keep reusing the precious [28:43] that’s in those fuel cells. Every fuel cell is like a storage bank for platinum that can be used again and again.

Alejandro: Imagine now that I put you into a time machine, and let’s say I’m able to bring you back in time to that moment where you and the team were thinking about the idea of bringing HYZON to life, especially based on everything that you’ve learned and everything that has happened, and now you’re a publicly listed company. If you were able to go back and give yourself one piece of advice based on what you know now, to that younger Craig when HYZON was about to see the light of the day and be born. What would you tell your younger Craig, and what would be that piece of advice based on what you’ve learned now that you make sure that younger Craig listens?

Craig Knight: At different points along this journey, I would have pointed back and said, “We should have been more opportunistic and been a little less obsessed with big-picture, long-term thinking, but it’s just our nature to be a bit more big-picture, long-term thinking. Now, I don’t know that the opportunistic approach would have been so very successful or very different from where we are. We ended up merging with a SPAC that we feel is such a great fit for us, and the people involved are such great people that we’re very happy where we are. We merged with a SPAC that had been sponsored by Riverstone, and it was called Decarbonization Plus Acquisition Corp., DCRB. This was an energy sector play, but with a mandate around it, decarbonization, obviously, and new transition. These were people with a lot of background in the energy sector that was looking at the long-term trends around the energy transition and were forming all kinds of theses around some of the scarce materials, forming all kinds of theses around electrification, hydrogen, and we found a great fit in exploring the potential for our business in the context of what they had raised as their investment capital. Fundamentally, a SPAC is a bag of cash to an entrepreneur. However, as in everything, as in life, as in business dealings, who you’re dealing with is very important, so when you look at HYZON and how it transforms pre- and pro-SPAC, it’s working capital. It’s a bag of cash on the balance sheet. But there’s a lot more to it than that, I think, and we’ve been super excited to work with the Riverstone guys because they’ve been so constructive. For us, I don’t know that I would change a whole lot. I think one thing we would do is that we would have had a greater sense of urgency around that process of identifying filtering shortlisting and negotiating with SPACS because it was all new to us like it is to most people that embark on this kind of journey, and we were learning as we were going, and we were willing to feel our way along. I think we could have probably been a bit more aggressive there and shortened the timeline by six months overall. But frankly, I can’t see that there’s a whole lot of difference sitting where we are now and where we might have been if we did things slightly differently. Definitely, we’ve learned a lot. I’m not suggesting we haven’t learned, but even with those learnings in mind, I’d be able to execute much faster now if I did the same thing again. But you can’t do that. You can’t take the learnings that we’ve gone through and wind yourself back in time the way you suggested with the time machine. We have to accept the fact that that was the first time we had ever done it, and we were learning as we went, so a little bit more orientation around urgency may have changed things slightly, but I really don’t know if the more opportunistic approach would have been that much better.

Alejandro: Craig, for the people that are listening, what is the best way for them to reach out and say hi?

Craig Knight: You can come to our website. I think you can reach me pretty much by emailing me. I think it will go through to somebody that will handle it, but we’re always interested in making contact with people with an interest in decarbonizing transport and in the hydrogen sector, in general. Hopefully, we’ve shared a little of our journey, and it’s been useful to people, but certainly, an interesting activity to go and try and raise hundreds of millions of dollars for a business concept and lots of lessons along the way.

Alejandro: Amazing. Craig, thank you so much for being on the DealMakers show today.

Craig Knight: My pleasure, Alejandro. Thanks for having me.

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