The clean technology sector is infamous for taking a big toll on startups--requiring large investments, risky technology propositions, steep international competition, and fickle government policies. How do you create a business around the still-emerging market of electric vehicles and avoid those issues? One way is developing testing tools and infrastructure around that market, to help those manufacturers in their research and development, which is just what Calabasas-based GridTest Systems (www.gridtest.com) is doing. We spoke with founder Neal Roche about his startup, which provides testing tools for the electric vehicle (EV) market.
What are GridTest's products used for?
Neal Roche: We make test equipment for the electric vehicle market. What is happening in the electric vehicle market, is there are lots of new models coming out, and lots of companies building charging stations for both residential, commercial, and public charging stations. Both the cars and charging stations have to connect, not just for power, but also for communications back and forth. We build test equipment, which can check that those charging stations and cars can work together safely and reliably.
How did the company start?
Neal Roche: I spent twenty years in the Internet networking business, working on internal hardware for test and measurement. I've always understood that wherever you have lots of new technology on the market from different companies, there are always issues between companies. I had joined a company, Aerovironment, which makes the charging stations for Nissan, and learned about the electric vehicle market. I left there in 2010, and starting looking at the electric vehicle market, what Southern California Edison was planning, saw these charging networks, and how all of this was planned to be an intelligence network. Those charging stations were like network devices in terms of communications, and because of that, there are lots of problems around safety and interoperability where test tools will be needed. That was the genesis for the idea for the company, which was to build tools for that new market. It's essentially a combination of connecting cars with an energy network, and an intelligent utility network.
Who would use your equipment?
Neal Roche: What we do is sell our equipment to companies making charging stations. In the industry, we don't call them EV charging stations, we call them EVSE. So we supply that equipment to manufacturers, and to independent testing labs who are testing those cars and charging station, and to customers like the Department of Energy, Argonne National Labs, and others. We manufacturer our equipment here in the San Fernando Valley, but we're also shipping our equipment to Asia and Europe. Our product has gone to China, Taiwan, Australia, and Europe. They all have slightly different connectors and standards.
Are car and charger companies even anywhere close to figuring out standards at this point?
Neal Roche: We're actually playing a key role in that, and are on the SAE technical community drafting standards. There is a standard for a standard connector for AC charging, and two competing standards for DC fast charging, one out of the SAE, the other from Japan. What we're doing in the standards group is helping to contribute to industry standards for testing charging stations, and figuring out interoperability, to make sure that cars can charge at any charging station. The biggest problem in the market today, is that an auto company would test their car with a couple of charging stations in the factory and with their approved partner, and then say "hey, our car works with chargers". But, they'd go out into the marketplace, and find that consumers would plug their cars into twenty different brands, and they wouldn't work. People are getting a bad fist impression that they can't charge their car in public. We're there to help with that.
We understand you have some funding?
Neal Roche: I worked the trail of angel investors around Southern California. However, if you get up in a room of fifty to a hundred guys, they get switched off if you talk about hardware. They're all chasing the next mobile app or Facebook app. Instead, I found some early, lead investors from the Pasadena Angels, who connected me with the Tech Coast Angels and Maverick Angels. We essentially found angel investors who like hardware, understand that we're not building commodity appliances, and have systems with embedded software which is not easily replicated next month in China. If you look at companies like Ixia, they've been very successful in the network testing business. They've been exporting tens of millions of dollars of equipment to China, because no one in China can replicate that kind of technology, which is all embedded technology and microcode, which is all protected.
You spent some time at both Ixia and Spirent, correct?
Neal Roche: I was Senior Director of Product at Spirent, and at Ixia as VP of Product Management.
What has been the biggest challenge you've encountered so far with your startup?
Neal Roche: I think some of the biggest challenges are that when you fund a startup, the assumption is that you are focusing markets close to home. Because you're in an emerging market, your funding initially for sales and marketing is very small. So, we run into some challenges when there are trade shows in Europe. Another challenge with fundraising, is with a hardware company it takes much more seed and Series A funding that a software company, and when you go to an angel group they write pretty small checks. You have to get a lot of angel investors together to get a seed round, and the next round of a couple of million is quite hard as well. Big venture capital firms are only interesting in big plays. I think that our next challenge will be raising a Series A round, where we're looking for investors for a Series A round now.
What's been the most interesting thing you've learned about the EV industry from your involvement there?
Neal Roche: I'm an EV driver, and I think the thing most people need to understand is they have got to get into a car to experience it. They're fun to drive. From our business perspective, though, we've found that there are still safety issues with charging stations that people need to test, to make them safe and reliable. We've found some products that don't work very well, and we've tested over 40 different brands of chargers. You might have seen the issues that some of the startups have run into, such as Fisker and GM's Volt had last year, and you don't want any accidents happening. Even small issues can blow up when safety is a concern. The other key thing in our business, which we try to help investors understand, is that's we're at the early stage of product development, so we don't need a million electric cars in our business to flourish. We're essentially helping people at the R&D stages. Every global auto company has an electric vehicle roadmap, and vehicle plans, and we're helping them address that R&D investment. That's how we're able to make a profitable business at this early stage of the industry, even though there are not lots of electric cars out there yet.