Do you want more funding?
Steve Fambro has started several companies, including relaunching his car startup for a second time. His company Aptera has successfully raised funding from top-tier investors like Sandy Munro, Bay Wharf Capital, Meyer Equity, and NRG Energy.
In this episode, you will learn:
- Aptera’s new vehicle designs
- Aptera’s new crowdfunding campaign
- The one book Steve says you must read
- The role of emotional intelligence in business and negotiating
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About Steve Fambro:
Venture partner and COO of Ocean Holding, an investment and development company dedicated to advancing the use of clean, renewable energy. Founder of Famgro; raised $8m to launch a superefficient pesticide/ herbicide-free indoor food-production system.
Connect with Steve Fambro:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today’s guest has an amazing journey – an amazing journey to tell from building, scaling, from turning things around, from traveling around the world and many, many lessons learned, and he’s going to be sharing them with us. So, without further ado, Steve Fambro, welcome to the DealMakers show today.
Steve Fambro: Thank you for having me on, Alejandro.
Alejandro: So, born in College Park in Georgia. How was life growing up there?
Steve Fambro: You know, I had a fantastic childhood. It was before cellphones, of course, and even before cordless phones, I’m ashamed to admit. Growing up as kids, we played outside; we rode our bikes everywhere. We had to come in when the street lights came on, and that was our cue. I think it was more of a carefree world then. I really wish I was able to give my children that kind of life growing up, but it’s difficult in today’s age.
Alejandro: When you had your first job, you were flipping burgers at McDonald’s. Is that right?
Steve Fambro: That’s right. I worked odd jobs before that. I worked in a tire warehouse, and I cut grass and stuff like that. But the first sort of proper job was cooking hamburgers in McDonald’s. I was 16. You don’t know how to make anything until you’ve made thousands or tens of thousands of something. Even today, I still draw back on that job where I think, at the time, it really teaches you to think ahead of things. When you’re making thousands of burgers, it’s not as straightforward as you think. You have to plan ahead; you have to make sure materials are there, that the material can flow, etc. It was a great learning experience.
Alejandro: Here you are, already making some money, and basically, instead of following the traditional path, you decide to join the Army, and off you go.
Steve Fambro: Yeah. A lot of my friends went to university. I wanted to go, but to be honest, I was an average student in high school. I didn’t really put the effort into my school work, and I would pay for that later in university by having to start from scratch with basic math in my university program to get my Bachelor’s of Science in Electrical Engineering. I realize that at the time, my parents probably would have paid for me to go to the university, but I felt that I would have been wasting their money, and I couldn’t have done it in good conscience. Also, staying locally, I thought at the time that I wanted to work as an auto mechanic because I love working on cars. I’ve been working on cars as young as I can remember. I thought the Army would at least give me the opportunity to see the world, and with the GI bill, I could maybe go to college later when I was a little bit more mature. And that’s what I did.
Alejandro: So when you were doing your journey in the Army, and you visited places like Germany and things like that, you started to develop this incredible passion, and you ended up getting your degree. But it was in electronics and everything that is electrical. So how did you start to develop the love for that?
Steve Fambro: I went to an electronics school in the Army, calibrations and test equipment repair – Calibration School. At the time, it was a very advanced school. It was a nine-month school, which is long for the Army. Most of the schools are weeks or months. We learned how to repair electronic equipment down to the component level. And I loved it, by the way. I loved that job. In the short time that I was there, I saw the equipment being replaced by small circuit cards, and there was no repair. You would simply plug them into a fixture, and a red light or green light would turn on. It would tell you to throw the card away. I saw the whole infrastructure of my industry and my schooling basically going away, being made obsolete right before my very eyes. I said that I should be on the design side of this stuff rather than the user/operator side of this stuff if I want to have any hope of future growth and future opportunity. That steered me into electronics as an industry. Then, once I got settled back in the U.S., that’s when I pulled the trigger, so to speak, to go to university. I went to the University of Utah. I spent five years there, full-time, even during the summers to finish my program in Bachelor’s of Science Electrical Engineering, 2001.
Alejandro: Then, you started working as an electrical engineer, which was the segue into what would be your first business, the original Aptera. Tell us about that incubation, that bringing-to-life type of process. How is that for you?
Steve Fambro: I think I was maybe the first or second electrical engineer hired at this biotech company, Illumina, here in San Diego. I was hired out of university before I even graduated. I had a job lined up, everything, of course, when I graduated. I worked for a very talented boss with a very talented team who let us try great things and imagine things that were maybe impossible. And the electrical engineering degree, I found, gave me a great toolbox to solve abstract problems, complicated problems, where I could immerse myself in math for hours, days, weeks to understand a problem and solve it. We built robots that made DNA, which then would go to be used for genetic discovery, and things like 23andMe, and stuff like that. It was very rewarding, but after five years, I wanted a new challenge. At the same time, I’d been building this idea of a car of a high-range electric vehicle in my garage, and I decided that I wanted to do it full-time. So, I wrote a business plan and got it funded. Actually, I did that after I quit my job. My wife was pregnant at the time, and I came home, and I told her, “Honey, I want to start a car company.” I couldn’t believe it. She was in a really good mood, and she said, “Okay, Honey. Whatever you want to do.” So I sold my stock to fund the company. I gave myself, I think, six months to get funding and to get some traction before I would go back to the workforce. Within a couple of weeks, we got our first term sheet. Within a month, we had money in the bank, and we were a new company. It was my first startup ever.
Alejandro: How was that for you? What were the early days like?
Steve Fambro: The early days were before kids. My daughter was born several months after we got our first funding, and it was 18-hour days, and loving every minute of it. That’s what it was like through subsequent rounds of fundraising. As we got bigger and made more progress, we decided that to have a chance at getting this big government loan, the ATVM loan; the same one that Tesla got. The board felt that we needed a “professional” automotive team, some management team from Detroit with high-volume experience. So we went along with that and brought those team members in. I helped interview the CEO and some of them. I think everybody gave it their best, but after a year, it just didn’t work out, so Chris and I left. Chris started a battery company, Flux Power. I think they just uplisted on the Nasdaq last year. I started Famgro, and that took me to the Middle East.
Alejandro: It’s interesting because there is this book from Jim Collins that is a Good to Great, and he enlightens companies and how they perform over time. The main difference of companies that still have the founders involved versus those that don’t, and also the ones that put together a very good succession plan, but it seems that the companies that end up putting aside the founder and bringing new, fresh management or whatever you want to call it, they tend to not perform so well. What did you learn from this experience of you guys, the founders, being put aside and having fresh air coming in?
Steve Fambro: One of the things I learned – there’s a book that was written in the 1500s by Niccolo Machiavelli, The Prince. My synopsis now, having done deals all over the world, is that’s how the world works in that book, as Machiavelli describes it. It’s not how I want it to work; it’s not how I want to raise my children to behave, but I think, in truth, that is how the world works. And I had a very naïve understanding at that time of how the world works and how people who have climbed their way up the corporate ladder have gotten there. I was in a very naïve position to, I think, play an integral part with the management team simply because of me being the founder in my first startup versus people who had much more political and corporate skills than I did. I would say it really wasn’t a good fit. Sometimes, it can be a good fit, and that’s how it was sold to us. But it wasn’t a good fit, so I guess my lesson learned there is I would have done everything I could to have at least postponed the professional management team until more of the important DNA could have been transcribed into the company, and we got further along in the business so that there was less risk of it being disturbed as what happened.
Alejandro: You guys leave. The company ends up getting liquidated, and then you go and start Famgro, but eventually, Famgro takes a different turn that takes you to the Middle East. So what happened there?
Steve Fambro: Yeah. I started Famgro, again, in my garage. I’m a foodie. I love to cook, eat, bake food, talk about food. In fact, during my travel in the Middle East, Armenia, Hong Kong, wherever, even with Google Translate, I would always strike up a conversation with the taxi driver, with maybe the guard at the palace, or anything about food. “Hey, what was your favorite food growing up? What food does your mom make that you miss?” Stuff like that because food unifies everybody. It doesn’t matter what your political leaning, economic class. You can always make a conversation about food. It was no surprise to me that I wanted to grow it, and I wanted to grow kale, in particular, and I couldn’t in my garden because aphids would get to it. I couldn’t use pesticides because my daughter loved to play around in it. That turned me onto hydroponics, and so I started growing it in my garage. Then I started thinking about how would you scale it? Then, how do you automate it? Then, what would some IP be around that, some technology to make that happen? I wrote a business plan and got it funded. We raised about $9 million, and we demonstrated an indoor farm in Michigan and also here in San Diego on Ocean Side. We had retail clients like Whole Foods. We had wholesale clients. We had a fantastic product that people love. But I think the economics of scaling in this country just didn’t work out. The competition that you face from really high-quality produce that’s growing in greenhouses in Mexico and other places is really hard to compete against. It is an idea that has merit in certain places. I’ve almost gone back full-circle to trying to find ways to grow things in the soil and outdoors and using as much of nature as possible as opposed to excluding it. When that wound down, someone from one of the family offices reached out to me and started a conversation. I flew out there to talk a couple of times, back and forth, and they made me an offer. We negotiated a deal, and I moved my family out there. We lived there, and I worked for them for two years, and it was great. I was able to take my family on vacation, maybe seven different countries, at the time we were there. We’d never be able to do that here because of the cost, and the distance was so long. We were able to do that there, and I was able to run some really big projects there from scratch – from desert sand to a complete project, and I demonstrate this kind of stuff at scale and develop export revenue channels to Singapore and Hong Kong for local-growing produce. So it was a rewarding experience.
Alejandro: While you were turning the page on your entrepreneurial path for a bit, here you were on the other side, more on the investment side. You really got an insight into how you deal with what you can control and what you cannot control. Can you share that with us?
Steve Fambro: As I mentioned earlier, after the dissolution of Aptera, I began soul-searching and tried to understand what I could have done better. Why is the universe this way? Maybe even for a moment, even playing the victim. That’s when I discovered stoicism and stoic philosophy, which I’ve been a passionate follower of since. But, really, what that then helped me discover was the idea of emotional intelligence, and the study of emotional intelligence and how much work is being done on that. A lot of the basic tenants of emotional intelligence are grounded in stoicism. It turns out that today, one of the single most determining factors of a person’s success in the workplace is their level of emotional intelligence. I think that’s fascinating because, on one hand, it’s so critical, and on the other hand, it’s not taught in schools; it’s not taught in the home; it’s not taught in the churches; it’s not taught anywhere. I think some people have studied it and developed it, and there are even tests where you can screen potential employees or help train them, etc. But we don’t have this global/national understanding of how important emotional intelligence is. So I’ve made it one of the things that I’ll stand on my soapbox about, and that we’ll integrate into Aptera, just so we can create an environment where people love to be there, where they like to get along with each other, where they understand boundaries and respect limits without the tyranny of enforcement but by simply recognizing that this is the best way to interact with your fellow human beings. I recognize it also in developing parts of the world, as I mentioned that I think a lot of people because they’re not so connected, are shackled to technology like we are. They actually have a better read on human beings in negotiating. You’re sitting across the table from someone, and you’re looking at their face; you’re watching their emotions and actions. I think people in the highly-developed Western countries like the United States, Western Europe, we’re the worst at it. We’re terrible negotiators. We are so uncomfortable. We are so addicted to speaking and technology that we can’t even stand a 15 second or 30-second pause in a negotiation. When the other party stops talking and just remains silent for 30 seconds, it drives Westerners crazy. They lose their mind. They’re almost ready to sign any deal at that point, but it’s a common tactic throughout the rest of the world. So these are some of the things that I learned while doing deals overseas.
Alejandro: So you come back. You decide it’s time to pack the bags there, and you return back to California. Definitely, something sparked the interest to pick up the phone, call Chris, your original co-founder in Aptera, and explore what’s possible. What triggered that?
Steve Fambro: Chris and I are like brothers. Brothers from another mother. We’re both from the South. We have the same sensibilities. He’s as opposite of me in many ways. He’s a finance guy. He’s more gregarious and outgoing. I’m an engineer. I’m more reserved. As a management team, we have this synergy between us that makes us greater than just two people. So, we work really well together and make sure that we don’t drop things. We never lost touch. We always stayed in touch through the years, and he knew I was coming back. I got settled, and we had a barbecue or something. We were talking about this, and he mentioned that he was available, and he was thinking that maybe we should look into securing it. So we said, “Why would we do this? Why would we even restart an idea of another car company with Tesla being so popular.” I did some MATLAB calculations and began reviving the old models with some of the newer energy densities because I hadn’t thought about it since we left the company because I thought it was a part of my life that was over. But once we started thinking about it again and looking at the numbers, it was really compelling. It was more compelling than it was ten years ago because now, people have accepted electric vehicles, and they want them, but we recognize that the cost is primarily determined by the amount of batteries, and also the range is determined by that too. And those are the two main factors that drive the sale. So if we could control those, and increase the range, and reduce the cost of the batteries by needing fewer of them, then I thought we would have a very compelling business plan. We decided to do it and haven’t looked back.
Alejandro: Then, you got back, again, with Aptera. What was the process like? Did you guys have to purchase back the assets? What was the process of getting Aptera back up?
Steve Fambro: We reacquired some of the IT, but it was a start-from-scratch with the tribal knowledge that we could remember and develop new knowledge along the way. So, we made lots of improvements at a very technical level with things like the body and the assembly, and that kind of stuff. We made a lot of improvements to what we had when we left the company. But a lot of the engineers that were involved had moved on, but they still wanted to be a part of the new Aptera. Even to this day, we have people – one guy left SpaceX to come work for us. We have former employees that are employed at other EV companies that are leaving to come back to us just because they are so passionate about this and believe that this is the right way to do it. And also, they believe that it’s a story that’s unfinished, and they want to help write the story. They want to help make sure it’s a success.
Alejandro: For the people that are listening, how would you describe the new Aptera? What kind of vehicles are you guys putting together?
Steve Fambro: The primary difference between the old Aptera and the new Aptera is that we’re a solar electric vehicle. The solar power and solar integration of the cells in the body and the electronics and how that is stored into the battery pack is part of our new DNA; it’s part of our new IP. It’s part of our IP such that every vehicle that we make will have this. Every vehicle that we make, there’s a product pipeline beyond the vehicle that you see now. Every vehicle we make will have the benefit of lightweight, low-drag aerodynamics, which means the solar cells can actually help move the needle. They can actually help add an appreciable amount of range to the vehicle. The primary difference is the old Aptera, we were arguing. Our board said, “We have to have a hybrid; we have to have a gas power.” Chris and I were both, “No, it has to be all electric because that’s the future. We were already splitting our resources at that time, and they were setting us up for failure. So, now, there’s laser-focus. We are only an electric vehicle company. That’s all we’ll ever be because that’s the future. On top of it, we’re a solar electric vehicle company because we’re so efficient that we can actually save 20, 30, maybe up to 40 miles a day in the battery just by being parked in the sun. Most people will probably never have to charge it or charge it that often. It’s a huge improvement for the quality of life. It’s a reduction of batteries. It’s more efficient, more affordable per mile, and it’s just better in so many ways.
Alejandro: For the company, how much have you guys raised to date, and maybe we can count on what the old Aptera also had raised.
Steve Fambro: The old Aptera, I forget how many trounces we had in the old Aptera, but when Chris and I left, and we handed over the keys, I think we had raised almost $50 million at the time. And I think there was about $20 million in the bank or so when we left. To date, for new Aptera, we’ve raised just about $6 million, and we’re starting our next round in March, which is a Reg A+. It’s a different kind of financing. It allows for private investment, and also crowdfunding or crowd financing – crowd investment, I should say. We intend to raise about $50 million in that round. We’re going from $6 million to $50 million with this next round. We’re looking at some other alternatives. Of course, everybody is fact-crazy today, and we’ve been approached, and we’ve got a team of people that are helping us evaluate our options with that. At a basic level, we have the Reg A+ that launches in March, and that provides the financing to actually get us in production.
Alejandro: Nice. Imagine if you were going to sleep tonight, and you wake up in a world where the vision of Aptera is fully realized. What does that look like?
Steve Fambro: I tell you, it doesn’t look like our trip yesterday. Chris and I drove up to Los Angeles to have a business meeting in the world’s most popular electric vehicle. But we had to stop and charge twice. That’s not a bad thing. You can stop and maybe take a meeting or eat or something like that. But in an Aptera, we’d be able to go up and back on one charge. Actually, I think we might even be able to go up to San Francisco and back in one charge. I think what it’s going to be for most people, we wake up, and Aptera is everywhere, and you’re not going to have to plug in your car all the time. Your car is going to be topped off by the sun. It’s going to be extremely fast. It’s going to be efficient. It’s going to cost you less, which means you’re paying less per month on the payment for your car, and it’s just going to look like the future. It’s not going to look like a bunch of regular vehicles that have been converted to electric. It’s going to look like what people think electric vehicles should look like – shapes that are driven by efficiency, and that efficiency saves you money and makes you go further.
Alejandro: Do you think that we are entering into a new era where every single vehicle is going to be electric?
Steve Fambro: I think so. Oil has lots of positive attributes. It is energy-dense. It’s used for plastics. You might say it’s a better use for oil for plastics and things maybe that could be reused and recycled rather than just burned, like in oil. I think, environmentally, people are coming around to the fact, even very traditional people that burning this stuff to move around is just not a good idea. There are going to be some places where it’s still allowed, but that shouldn’t be used as an excuse for inaction. In fact, I think it should make us double-down and help bring about the change much quicker because I think the whole world benefits when we move to electric power trains and all the vehicles. There are so many emerging economies where they’re blessed with bountiful sun, and yet they’re importing diesel fuel and gasoline to run Tuk Tuks and other two-stroke vehicles up and down the roads and polluting the air and polluting the ground. There’s just no excuse for it. We can do better than that. I think the integrated solar technology with lightweight vehicles and aerodynamics is the way to do that, and a little electrification is the key.
Alejandro: Imagine now, Steve, I’m able to take you into this time machine, and we have the possibility of going back in time. We go back in time to that moment where you got together with Chris, and you guys were thinking about launching your first business. Imagine where the younger self actually listens because when we’re younger, we don’t really tend to listen that much. But imagine that younger Steve actually listens, and you have the opportunity to give that younger Steve one piece of business advice. What would that be and why before launching the business based on what you know now?
Steve Fambro: I would say read The Prince, by Niccolo Machiavelli. Understand it, and find some senior sage people, executives, who also understand that, and that can help guide you that are on your side. They’re not board members appointed by investors or independent advisors, and they’re in your camp. They’re there to guide you and help you. And also, recognize that you have to unsheathe your sword and fight your way out of situations in ways that a naïve person may not think they need to. I would be far more assertive and dangerous in that regard.
Alejandro: I love it. Steve, for the people that are listening, what is the best way for them to reach out and say hi?
Steve Fambro: We have Instagram. We have Twitter and Facebook. They can always leave messages there. If they want to send us an email, it’s in**@ap****.us, and it will go through all the filters and get to who it needs to get to. That’s the easiest way. Check us out. We’ve got a great ER team who is taking images and videos of things we’re doing all the time, and posting it, and creating lots of excitement, lots of momentum about what we’re doing. It’s good for them to go and check out the visuals, audio, and video and see what we’re doing because it’s changing all the time.
Alejandro: Amazing. Steve, thank you so much for being on the DealMakers show today.
Steve Fambro: It’s been my pleasure. Thank you for having me.
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If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*******@pa**************.com.
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