Duncan McIntyre is the founder and CEO of Highland Electric Transportation which is a comprehensive turnkey solutions provider that delivers electric school buses. The company has raised $250 million from investors like Massachusetts Clean Energy Center, Fontinalis Partners, and Vision Ridge Capital Partners to name a few.
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- Raising from private equity versus venture capital firms
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- Where to get full A-Z help with fundraising and selling your own startup
- How to get a 30% discount on the best podcasting software
- Why Duncan says entrepreneurs should be cold calling every day
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About Duncan McIntyre:
Duncan McIntyre is the founder and CEO of Highland Electric Fleets. Highland Electric Transportation is a comprehensive turnkey solutions provider that delivers electric school buses (EVSB) to school districts and third-party managed fleet providers (3PMs).
Prior to Highland, Duncan is was the President of Altenex, responsible for leading the day-to-day operations and developing the growth strategy for the business across its renewable energy and wholesale market products and services. He joined Altenex in May 2011.
Prior to being named President, Duncan was Senior Managing Director, responsible for Altenex’sclient services and energy supply functions. Duncan led the architecture and build-out of the company’s network of project developers and projects.
Prior to joining Altenex, Duncan was at Polaris Ventures, a $3.5 Billion venture capital firm where he was responsible for sourcing and managing the fund’s investments in biofuels, solar, wind, fuel cells and smart grid technologies. Duncan also has significant expertise in the energy supply chain and power markets through his work at PowerAdvocate, an energy intelligence company.
Duncan holds a Bachelor’s Degree in finance from Babson College.
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Read the Full Transcription of the Interview:
Alejandro: Alrighty hello everyone and welcome to the dealmakerr show. So today. We’re gonna be talking to a founder that has done it a few times building scaling financing exiting. We’re gonna be talking about running out of money landing your first customer I mean the the whole thing so without further ado. Let’s welcome. Our guest today. Dumcan Mcintyre welcome to the show. You.
Duncan McIntyre: Thanks so much Alejandro. Love what you’re doing love your platform and appreciate you having me on.
Alejandro: So originally from Massachusetts 1 of 4 kids so tell us about life growing up.
Duncan McIntyre: Look very, we were very fortunate. Great. Great family. Super close family. Definitely father’s a cancer doctor got a lot of encouragement to yeah pursue What I enjoyed and what came naturally and ah you know, generally that. Had a wonderful childhood.
Alejandro: And how how did you get? you know that law for perhaps finance and and the combination with energy.
Duncan McIntyre: I think by default I was never very good at foreign languages or chemistry but math came easy to me and I loved ah the idea of investing and picking companies and businesses that I thought would be successful. And did the tiny bit of it with my father when I was in high school and definitely had the bug for sort of ah career in finance in the early days
Alejandro: Now you went to babson so bobssonny is known for being very entrepreneurial as a school. Do you think that that was the time where you planted the seed that one day you were gonna start your own thing.
Duncan McIntyre: I think I went back and forth I loved the entrepreneur entrepreneurship track at Babson being able to learn about you know marketing and and finance and accounting and things that are the building blocks for running a business but by the time I Left Babson um a professor basically warned me don’t go start a business unless you figured out a problem in a market and you really have a good way to fix it and um I ended up joining an investment bank getting a ton of training learning a lot about the energy industry and. I think um, the the timing was good because renewable energy was starting to emerge as ah, ah, sort of new technology. There was ah a vision and a promise for a sort of cleaner ah cleaner system and to me that seemed exciting and something. You know, worthy of being part of so I think I came back to entrepreneurship maybe five or six years into my career when I thought I had a good enough idea.
Alejandro: Now it is true I mean one one of the things I come across a lot is that some of the best entrepreneurs they have a background either in consulting or the investment Side. You know as private equity or venture capital or investment banking so investment banking What kind of um how how do you think is shape. You up and also the way that you’re thinking towards being a solid operator and.
Duncan McIntyre: Well I think it gave me some grounding in what successful businesses look like and what investors look for and are able to attribute value to it gave me a sense for. Looking at a bunch of companies. We sold mining businesses and energy services companies and getting a flavor for you know what recurring revenue means what it costs to acquire a customer.. How a product is positioned in a Market. You know the the. Research and the diligence around how a market is expected to grow or not grow and then looking at the companies and how they’re positioned to capture that growth. So I think from a macro standpoint banking was great training and then I did spend a number of years in venture capital investing in startups And. Ah, got different training about how to look at entrepreneurs and assess their backgrounds and whether whether they were well suited to you know to be successful in what they were explaining their you know their ah their business plans to be.
Alejandro: And what was that point where Alton X really came knocking. You know the idea of your first business and how did you go about really executing and bringing it to life.
Duncan McIntyre: Sure you know my background was was in energy and energy markets and I I was one of 3 founders in altnex my two partners had different backgrounds. 1 of them came from sort of corporate strategy and marketing and the other one came from. Financial technologies and building software and it was I think the the you know cumulative nature of our our backgrounds they thought about building an exchange that was automated and I thought about energy services and the needing the need to sort of hold the hands of these big corporations and. Really navigate the inner workings of how they buy power and how that meshed up with the wholesale markets and so it was those conversations that led to the you know the belief that ah procter and gamble and Microsoft and Home Depot all wanted to buy renewable energy but the market didn’t have good mechanisms. To sell it to them and and that was the the birth of sort of a new product which was the virtual power purchase agreement.
Alejandro: Now Let’s talk about then about altanex what ended up being the business model.
Duncan McIntyre: Yeah, so it was a marketplace so we were paid based on transactions and you know a traditional marketplace is more about facilitating buyers and sellers in matching up. And we did do that That is how we were paid but we represented the buy side and the buyers in this market needed a lot of handholding and a lot of sort of consultative engagement as well as data and Analytics. So It was about building a data business with a service layer. And using that as sort of the the leading tool to enable transactions.
Alejandro: Now in that regard I mean you guys raised a little bit of money. So how much did you raise for this company.
Duncan McIntyre: We raised a little less than $3000000 Not a ton of money. But as a services business we were able to Generate. You know some real revenue to offset costs fairly early on and in the business’s evolution and. But that helped us get to profitability.
Alejandro: And what does it look like because now obviously racing from investors. You know they like the platform based type of stuff I mean was it challenging to raise money for a company like this.
Duncan McIntyre: Um, it was I think Altinx was not a traditional sort of institutional investor play. You know it’s hard to it was hard to point at core our core ip there wasn’t a technology. We were ah a services business. Um, and so I think we had better luck with angels. Who believed in the vision and were comfortable taking a flyer on on a team and a market thesis that they thought was they thought was exciting.
Alejandro: Now the company ended up being acquired and it was a really good acquisition I mean first company you know that you create first company that exits I mean that’s not really the norm. So how did the acquisition come about tell us about it. So.
Duncan McIntyre: Yeah, it. Um so about a year before the acquisition we were approached by n energy and at the time they were building the utility of the future. Um, the vision was to be the the renewable energy sort of utility. Um. Under David Crane and it’s a vision that we were very aligned with so we were really approached and our g ended up making a big investment. Ah primary capital for the balance sheet and secondary so there was a partial liquidity event that was sort of. They came knocking and we entertained it and we thought the marriage made sense about six months later the the allergies board had really shifted their thesis and gone in a little bit of a different direction and we ah determined they. Wouldn’t be the right partner to you know grow the business to the next level and so we we got an investment bank involved explored options and we spoke with you know, a number of ah you know, ah traditional. Um, yeah public companies that were looking to be in this space. And we had a good amount of interest. But ultimately Edison International had a plate had a position in renewables already. They were eager to build a deregulated service business that had sort of multiple strategies and renewables was one of those strategies and so. Ah, they had the right team the right strategy the right timing and it was a good fit.
Alejandro: Now while so the terms of the acquisition. They were eventually announced and there was 100000000 of an acquisition you know and obviously probablyly other stuff you know involved as well. But 100000000 was announced and and I’m wondering like what was that what was that day like were you guys you know, signed. The papers the agreements.
Duncan McIntyre: Yeah I mean look it was definitely um, it was ah it was it was exciting to become part of a big business that valued the platform that we had built and they had ah a vision for how we could continue building it and you know. Expand into some new markets create some new products. Yeah, but certainly you know, coming from a bootstrap startup and the tough early days that every entrepreneur has experienced to an exit was was definitely. Um, fulfilling the vision we had had for the company.
Alejandro: And I think that when you go through an acquisition. It also gives you more visibility into the journey of being an entrepreneur I mean being able to see the full Cycle. So How how is that for you now like giving you that visibility on on what does it look like from going to idea to launch to building. Racing to scaling to exit I mean how is that for you. So.
Duncan McIntyre: Yeah I mean the first time you’re you’re making it up as you go? Um, we certainly made plenty of mistakes. But I think we tried to work smart listen to the queues from the market really listen to our customers and make sure the the product. Fit was was there and the product was priced and structured in a way that um was receptive to the vast majority of the market and then you know building the team and the systems and processes and the technology backbone to actually execute is a whole nother. You know is a whole nother piece and so. Um, as you grow you know I think I learned the hard way that I had to fire myself from jobs and take on different roles as the team grew the business grew our customer account grew and um, it’s definitely helped me I think. Do things a little differently the second time around.
Alejandro: Now, let’s talk about the second time around hi hi let’s talk about Highland Electric fleeets so at what point does the idea come to mind and I mean at this point you were already in edison I mean you lasted in edison for for about a year close to a year doing what they call the vesting and resting. But in this case for you I mean how did the idea you know come to mind and and why did you think it made sense to to really leave everything behind and go for it. So.
Duncan McIntyre: Um, yeah.
Duncan McIntyre: Yeah I spent maybe a little closer to 2 years with Edison running the the business but um, Edison you know Southern California utility company and I think the ev movement was more meaningfully kicked off in California at least in in the us. Than any other state and so um, there were I was brought into conversations with you know, electric vehicle companies with um, you know the the the challenge of electrifying big depots. You know, new service the utilities used a new service being Half a megawatt or you know one hundred kilowatts you know the idea of ten Megawatts into ah a big depot is daunting and so there’s a lot of strategy and a lot of work that’s got to be done to do that in the right way. Um, and. Ah, that was really the start was call it late 2016 early 2017 and for me, it looked like the renewable energy market did a decade before you know, big wind farms big solar farms had the promise of delivering power clean power. Into the markets but utilities weren’t well suited at the time anyways to take on development risk take on technology risk. You know they didn’t always have the tax appetite to monetize tax credits and ultimately you know they they. Developers renewable developers drove the market and utilities were created signing power purchase agreements and to me fleet electrification felt like it had a lot of similarities. It’s hard for ah you know a city transportation director to know how to navigate electrifying a depot. Picking the right products taking technology risk and and then they have to come up with the capital which is 2 or 3 times more than what it costs to buy a diesel bus or a diesel truck and so for for me, it felt really ripe for managed solutions that. Bundled and packaged to the capital and the services to make it affordable and simple and less risky for for municipal leaders to go electric.
Alejandro: Now Then let’s talk about the the way that you guys make money I mean what does that model look like.
Duncan McIntyre: Sure so we ah, we put all the equipment on the ground. That’s the vehicles and all the charging infrastructure the charging stations themselves so very capital intensive. Our projects are capital intensive upfront highland foots the bill for all of that and then we effectively deliver fully fueled vehicles every morning every afternoon based on the duty cycles of the fleet we’re serving so we we sign effectively performance-based contracts. That look a little like an energy services agreement where we use our equipment and the services we provide managing the charging um quarterbacking spare parts. Doing some training of the you know existing staff the municipal staff on how to operate the vehicles and then we charge by the mile. So the full package the equipment and the services including the electricity. We might charge $3 a mile or $4 a mile and so then if ah, you know the customers driving the. Vehicle Ten Thousand miles in a year at $3 a mile will earn $30000 for that year and our contracts tend to be twelve years fifteen years in length so a little bit like a renewable energy contract high upfront cost lower and predictable operating costs. Um. But some execution risk mixed in and that that’s how we make money.
Alejandro: Okay, and now in in in this case, How do you guys? go ah about capitalizing the business.
Duncan McIntyre: Yeah, so um, we um, we raised a little over a quarter of $1000000000 from 2 institutional investors and the flavor of the capital is infrastructure capital um, but the the. The bottom line is we have equity investors and we have access to debt that we can put at the project level and that capital is you know, backed by the equipment and the contracts with our municipal customers and it’s the. The intersection of that equipment and the contracts that um you know effectively you know creates the underwriting comfort for the way we raised money.
Alejandro: Now in this case, you know like why did you go after private equity firms versus going after um, you know, maybe venture Capital firms or height networks I mean why private equity. Yes.
Duncan McIntyre: Yeah, so ah, you know our our the bulk of our capital is from a private equity firm that really focuses on sustainable infrastructure. So I think traditional private equity cost to capital is probably a little higher than the cost of capital we were seeking. Um, infrastructure investors like long-term contracts they like assets that effectively backstop the position and so you know we we definitely looked around at all the different investors and sources of capital. We had a lot of interest The fleet electrification is ah. Category that I think in the last year and a half has has basically had more interest from the investment community but we found partners that ah both know the automotive manufacturing space really well and they could help us navigate. Ah, the relationships as well as understand technologies and then also a sustainable infrastructure investor called Vision Ridge who has just a really smart team and a tremendous amount of experience investing in ev charging and transportation and sort of. Sustainable side of transportation so they were able to dig deep and really quickly understand the flavor of ah of product and service. We were bringing to the market and do the underwriting to get comfortable with. How we were making money and how we were investing in projects so that was sort of how we landed on our our investors.
Alejandro: Now when you’re going after money and and you’re raising capital I mean if you’re going after venture capital people they they typically invest in people I mean it’s very early private equity. They invest more in numbers. So what does um. And the people that are listening are probably very familiar with the venture route. You know of raising that type of capital but maybe not so much with a private equity route and how you raise capital from private equity firms. What does that profit. What does that process process look like and and how is that different so but like different from the Vc route itself.
Duncan McIntyre: Sure? Um I think our investors definitely invested in both the people right? The team me and the other folks on the Highland team that were part of the business at the time but they also looked at um. Pipeline and the contracts that we that we had at the time you know there’s 1 contract in particular that was meaningful and we had been awarded via public procurement a contract with Montgomery County public schools in Maryland and that was a contract to convert. Basically a quarter of the school bus fleet to. All electric under a sixteen year contract and so the you know the total revenue associated with that contract was a little over one hundred and seventy million dollars and so we had um, substantial sort of contracted revenue. Or awarded revenue that was going under contract when we were closing our round and I think that traction in the market was definitely one component around getting investors like infrastructure investors as opposed to. Sort of just straight venture investors that invest more in a team and an idea but but having said that the market I think was still early. So the the team side of it was not um, an insignificant piece is is my belief.
Alejandro: And in this case I mean it’s it’s pretty amazing. The way that you guys say and went about raising the money because literally it took like almost no time I mean I mean like two or three years to raise. How much have you guys raised today I mean it’s it’s quite a big amount 250 3000000 is that right.
Duncan McIntyre: That’s correct. Yes, and we we raised a couple million dollars in the first two years which which is capital that came from a couple angel investors as well as from me but you know I think. Um, the the first year was all about proving the business model getting our first customer the second year was about scaling building a pipeline acquiring a second customer a third customer building a presence in more markets and and after those 2 sort of. You know inflection points were realized we had the ability to go raise a lot more money. Um, and I think I think found you know the right partners and at the right time to you know, build a big business in a market that. Ah, we all believe is is yeah guys growing quickly and will continue to grow quickly.
Alejandro: And nice now. Imagine if you go if you were to go to sleep tonight and you wake up in a world where the vision and mission of Highland is fully realized what does that world look like.
Duncan McIntyre: Yeah I think you know our vision is to be the largest most profitable provider of fleet electrification services to municipalities and governments. You know it’s the it’s the public sector that we seek to serve as a company and we’re creating. You know the skills and the discipline to really address that market need in a meaningful way. Um I think that it’s going to take time. There’s a lot of mass market education that has to happen people have to get comfortable that these vehicles work that you know they ah. They will work after the warranties are completed on the equipment they have to get comfortable with a different type of of transaction and you know those things will take some time but you know we think over the next four or five years there’s going to be a meaningful shift. You know. Driven by both grassroots efforts as well as local interest and politicians that you know increasingly have sustainability and clean air as a cornerstone of their platform and so you know ah the the vision is yeah a. Bulk of the market is really seeking electrification solutions and we’re not going to We’re not going to win every time we try to you know, deliver for a customer. We’ll we’ll lose to competitors and to you know cities that want to do it on their own. But um I think our value propositions really strong and we’ll will win a lion’s share of the work that we go after and so that’s definitely my vision is that the market identifies around this transition and we’re you know we’re the biggest and the most competitive. Player in that space.
Alejandro: So nice now for the people that are listening. You know just to get an idea of the scope and size of Highland today I mean anything that you can share in terms of a numbers. Maybe a number of employees or anything else to give them an idea.
Duncan McIntyre: Sure. Yeah, so we’re private companies so we haven’t you know we don’t publish financials but we’ve got close to 60 people and growing pretty quickly. We know we’re adding a couple people a week right now. And those folks are some of them are really part of our fleet operations team that actually delivers on the services for our customers and then there’s a lot of people that are sort of in sales origination underwriting and market development roles that really seek to. Unlock and open new markets. Do direct selling as well as a ton of sort of indirect selling through local stakeholders and other channels that are you know relevant engaged channels and you know transportation at a state level. Yeah there’s a lot of work at the state level and so one could sort of look at the business and say we’ve got you know we’re in a little over 20 states and 2 provinces in Canada today. So we’re we’ve got you know, really specific people and plans for how to participate in each of these markets. And they’re all a little different.
Alejandro: Nice now imagine I was to put you into a time machine and I bring you back in time and I have the opportunity of bringing you back in time to have a chat with that younger duncan that younger duncan that is thinking about starting a business you know before altan x maybe. Maybe right when the maybe the idea of Alten x was coming into mind your your first business and let’s say you were able to sit that younger self down and give him 1 piece of business advice for launching a business. What would that be and why given what you know now.
Duncan McIntyre: That’s a good question. Um I think I would say don’t be afraid to cold call anyone and everyone that you think can be helpful in figuring out what your strategy is and then going after it I try to make a like cold call once a day. Even today because I think it is a is a discipline that’s hard to learn and it’s incredibly powerful. There’s people who never answer the phone and won’t take a cold call but there’s plenty of people who do and when you get those people who do on the phone. Um. You know? Yeah I’ve been surprised at how willing people are to sort of have conversations share their experience. Um, and those turn into business relationships. They turn into people you want to recruit and hire and the more. Ah. More and more that I’ve forced myself to get out there and be bold at getting in front of the right? The right individuals across all you know all aspects of our market. Ah, you know the more that it’s been really fruitful and I think I would tell you know myself. Twelve years ago get out there and just pick up the phone.
Alejandro: I love it. So for the people that are listening Ducan what is the best way for them to reach out and say hi.
Duncan McIntyre: Um, send me an email drop us a note on our website I’m Duncan at http://highlandfleets.com and yeah we’d we’d love to hear from folks if they’d like to reach out.
Alejandro: Amazing. Well doncan thank you so much for being on the dealmakerr show today.
Duncan McIntyre: Thanks so much. Really appreciate it.
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