A Way Better Mousetrap, with Quilt founder Paul Lambert

Ep 21

Dec 27, 2023 • 52 min
Paul Lambert, CEO and founder of Quilt and former Director at Google’s Area 120, joins Allen to talk society-scale problems, why searching for product-market fit is overrated, the power of building a better mousetrap, why the “internal incubator” model usually fails, how modern hardware startups iterate rapidly, and why different cities lend themselves to different startups.

Allen: Welcome to It Shipped That Way, where we talk to product leaders about the lessons they’ve learned, helping build great products and teams. I’m Allen Pike and today’s interview is with Paul Lambert. Paul is CEO and co-founder of smart heat pump startup Quilt, and previously worked in leadership at Google’s Area 120, in product management at Google and Twitter and was the founder and CEO of Learndot. Welcome Paul.

Paul: Thank you. It’s really fun to be here.

Allen: It’s been a lot of fun watching your path and in some ways are parallel, but different paths from developers, fresh out of school, ambitious and curious about the world to repeat founders tackling interesting, bigger problems. Obviously the audience doesn’t know this yet, but the problems that you’re tackling are at the very large sort of in some ways society scale, which is really fun and exciting. So I’m glad to have you on the show and looking forward to digging into that. Yeah,

Paul: Likewise. And that’s really kind of you to say. We met a long time ago sort of in the Vancouver tech community, both I think founding our first companies together just on different paths. So yeah, I don’t know how much of that you want to share, but I think that is cool to sort of come up together and see where we’re today.

Allen: It’s not a secret. I think on this show that a lot of the folks that we have on the show are folks that I’ve met many years ago. And you meet interesting people and obviously it pays a lot of dividends in a career to just have conversations and get to know people and listen to people and then stay in touch and keep an eye on people who are doing good work. And so that’s paying dividends and 10 years later I can be like, “Oh, Paul’s working on some cool stuff. Let’s get him on the show.”

Paul: Cool.

Allen: So before we get into some of the specific stuff at Quilt, some of the interesting challenges of being a hardware startup, as someone with a software background. How do you like to summarize your story so far in a way to give people a bit of context about who you are and what you’re up to?

Paul: Yeah, so my story is, so I grew up in Canada I think like you. I grew up in Calgary and that’s relevant because the industry in Alberta is largely the energy industry and specifically the fossil fuel industry. And that kind of comes into the story later. But I grew up in a world where everyone worked for the oil companies. And it’s very kind of conservative place. I was a very much more kind of creative and artsy and didn’t really fit in super well and I was looking for a way to make stuff. I originally was much more like an arty, like I was into music and creative writing and things like that. I actually moved to Vancouver to do an undergraduate in creative writing and anthropology because my favorite author in high school was Kurt Vonnegut and he had majored in anthropology, so I was like, I’ll just do that. But I’d spent, my whole life I’d been into computers and the way I actually made money as a teenager and in high school was making websites. So I originally made websites for bands I was in, and then businesses started asking me to do it and I was like, “Well, this is better than being a dishwasher.” And for some reason it never occurred to me that could be a career when I was coming out of high school. I think I didn’t have engineer role models in my life, and so for some reason it felt more viable for me to go be a novelist than being a software engineer. That was where my head was when I was 18. So anyways I graduated from that degree, I discovered there aren’t a ton of jobs for aspiring 21-year-old poets.

Allen: Unfortunately.

Paul: Unfortunately, yeah. And I’ll speed up a little bit, but it’s an interesting segue. I ended up moving to China. So I had a friend who was teaching English in China and in Beijing specifically, and this is right before the 2008 Olympics, I moved there. The big focus at the time was getting ready for the Olympics and one of the issues was the quality of the language translation. And it was really interesting that they were struggling so much with this, the Olympic Committee, the hotels, and they were very aware that all these foreigners are going to come to Beijing and potentially get lost or have bad experiences. And one of the big issues was that most of the internet was blocked. So the people doing the translation on the ground couldn’t watch YouTube, they couldn’t interact with native speakers. But I had just graduated from a writing program with a bunch of people who were looking for work. And so I made a web app and hired my friends back home to essentially man it and started selling it as a package service to some of the businesses in Beijing. And this became my first startup and it was the most incredible feeling. And all of a sudden everything I’d been looking for in my life around this creative, I was able to scratch with the technology side of my life. And it occurred to me that these two things can come together and that eventually creating a new technology product and business was everything I’d wanted. And it was the most incredible feeling. That is how I got on this career path. We became super clear to me that what I wanted do with my life was be a technology entrepreneur. The Olympics came and went. I also realized my computer science background wasn’t as strong as I thought it was. So I went back to school and I did a full computer science degree, with a business on the side, totally different experience. I was there for one reason and one reason only, and that was I was going to be a Silicon Valley style entrepreneur.

Allen: You’re on a mission now.

Paul: Yeah, which turns out that panned out. And in my final semester of that, I was making an app to access the learning management system at UBC and it started getting popular. The next thing I know, some people reached out to see if I wanted to take investment and I was like, “Holy crap, investors are talking to me. This is the greatest thing ever.”

Allen: I’ve made it.

Paul: Yeah, exactly. And this became my first venture back startup, which was Learndot. And we pivoted a few times out of the university space, was the CEO of that for about six years, ended up being a SaaS platform for largely other SaaS businesses that wanted to build a training around something to do with their brand, like a skill set for their brand. Hootsuite would want to have Hootsuite universities so that people could learn how to be great social media marketers and they needed a platform to run that. I was CEO of that for six years as I mentioned. We were eventually acquired by a company in Palo Alto. So that got me down here to where I’m now in California. I turned 30 the year that happened and I felt like I’d never had a real job. I was like, I should probably do that. And even though I definitely identify as an entrepreneur, I want to kind of go learn from my heroes. Like here I’m surrounded by Apple and Google and all these companies and I was like, “I should go see how it’s done in the major leagues before I go found another company.” And so that was the plan. That’s what I did. I actually went to Twitter first for two years as a product manager, kind of fortuitously got exposed to some early AI work around recommendation systems for ranking the timeline and things like that at Twitter. Then joined Google to work on AI around Gmail primarily actually helped build the first LLM at Google. So that was a smart compose in Gmail. And one of my engineering peers on that is actually now working on BARD and it’s really cool to see how that’s evolved. And I’d like to five years had passed and I’d been here, two at Twitter three on Gmail and I was ready to found my next thing. And I kept experimenting with ideas on the side and I would try to play out what would happen, say I was going to make some SaaS tool to do language completion for, I don’t know, other tools other than Gmail. I could probably sell that as a service or something. And I would play it out and I would realize I’d end up in exactly where I was before, which was six years into a company trying to climb some monthly recurring revenue metric or annual recurring revenue metric. And my big lesson from Learndot was that I was so excited about being an entrepreneur that I just ran with the first thing that had traction without really doing the inner work of that’s really what I wanted to spend my life doing. Because it turns out I didn’t care that much about corporate education. And I can say that now, but that’s a really hard thing to admit when you’re the CEO of a company that does corporate education. People think entrepreneurs have all this freedom, but they actually don’t because in most cases unless you’ve really got a level of success, you can’t quit. If you quit, basically the company fails. And so I knew I wanted start another company, but I also knew I needed to have a serious level of conviction to do it. And I actually made the rule that I would only start a company if I would commit 10 years of my life minimum to it. And I think that’s absolutely the right mindset, but it’s really hard to get to that level of conviction, especially when you’re, you have a pretty great job at Google and I was making a good amount of money and I had a mortgage and I also had a kid, in very different situation from when I was 22 in Vancouver. So I really struggled with that quite a bit. I figured that if I couldn’t get to that level of conviction, I could back other people who did. And I was like, “Maybe I should be an investor. I could go be a VC. How was I going to do that?” And out of nowhere, area 120, which is effectively a seed stage fund within Google, reaches out to me and says, “We’re looking for an investment partner, we’re looking for someone who understands how Google works, but also understands the startup ecosystem investment.” And I was like, “Great, this is awesome.” So I applied for the role, got the job, spent my last years of Google essentially being a VC within Google. And it was great because I learned quickly that, no offense to any investors on the podcast, but that wasn’t the right path for me. Because I discovered that I was spending a lot of my time evaluating business ideas and then doing a lot of frankly, internal politics, but not actually making things in the way that I… That’s why I got into tech. I like building stuff and I felt like I was very distanced from it. I’d be like, “Yes, go make this amazing thing.” And then I would see them in three months or six months. My wife had our second kid and I was on paternity leave, and I realized I really did want to start another company and wanted to make something from scratch. But how was I going to solve this ten-year commitment problem? And it seems almost cliche to say, but it was completely real for me that we just had this kid and I was thinking about their life and what I was going to do with the rest of my career. And I realized that I just had to work on what problem I genuinely believed was the biggest problem facing our kids’ generation, the next generation of humans. Because that’s a complete unlock, because worst-case scenario is you spend 10 years of your life trying to make life better for your kid’s generation and you fail.

Allen: It’s inherently meaningful.

Paul: Yeah. Well and also, so what? Put that in my obituary, that’s what I tried. I’m going to be proud to have tried. And the best-case scenario is you make really significant traction against the most important problem facing humanity, and it’s like what more could you want? So that was completely the unlock. And then it’s like, “Well, what is that problem?” And you can look at a lot of valid problems. World War III would be a big problem. But climate change really bubbles to the top when you’re looking at level of number of human lives impacted, it’s basically everyone. And the confidence bars we have around it happening and what those outcomes look like. We don’t know exactly what is going to happen with climate change, but we know it’s various levels of bad and it impacts everybody. And in some cases it’s very, very bad. And then as I was going through this in a very rational way, I get an email from my dad about how climate science is kind of made up and I was like, “Oh really? That’s interesting.” And of course because of where he is coming from.

Allen: He’s coming from Alberta oil capital, Canada, and he’s probably spending time on Facebook.

Paul: Yeah. He was the CEO of an energy company. That’s just the world he lives in. And I was just kind of overcome with this multi-generational responsibility, to be frank that I just had to work on this, for this is the legacy I wanted to have. So then the question was, “Okay, where can a guy like me make difference in climate change?” I wasn’t going to start a nuclear fusion company, even though that would be incredible if we could crack that for climate change.

Allen: You just have to go back to school a third time I think for that one.

Paul: Yeah, exactly right. At this point, this one I’m halfway through my career. I felt like I wanted to leverage the skills I’d built. And I want to say I think it’s in some ways even bigger than climate change. It’s like the energy transition is about a new way of powering society. And if we do it well, it unlocks much more abundance and much better ways of living. And I think if we get things like fusion right, it’s going to be the next era of humanity. It’s just incredibly massive. I’m a consumer tech person. That’s what I’ve done most of my life. That’s also the network that I have. I’ve been thinking about building a company. It’s not just one person, it’s who can I hire? Who are the world-class people I know? And here I am sitting in the middle of Silicon Valley and I know I can build a world-class consumer technology company. So if you work for the consumer backwards and you say, “Well, where did they buy fossil fuels?” Because those are both going to change in a major way if we’re going to complete the energy transition. And it turns out they only do it in two parts of their life, which is kind of incredible. So you go out and actually change your hard-earned money for fossil fuels. In your car, when you put it in your tank and in your house when you put it in your furnace, and your hot water tank. But it’s in your house and your car, and that is it. So that means to complete the energy transition on the consumer side, we only need to solve those two things.

Allen: Now you’ve simplified your search space. It’s obviously big, huge problems, but you’ve simplified your search space now.

Paul: But they’re both massive multi-trillion dollar markets, but there’s only two of them, and that’s really nice. And also it was really clear the car side was going well, the vehicle side was… When I was first thinking about Quilt, I think Tesla had just passed a trillion dollar market cap and everyone was so excited about EVs. But you start digging into the impact and it turns out the house side is a bigger problem. It’s more emissions. Residential homes are about 20% of all emissions. The energy used in homes, personal vehicles is 14 to 15%. Both big, homes are bigger. And there wasn’t nearly the amount of energy or investment around innovating in that space, even though it seemed like in some ways a bigger opportunity. Also, maybe this is obvious to say, but homes are also worth more than cars. People invest more into them, they spend more time in them. Just this incredible mismatch of what was required in level of investment happening. And then it was like, “Okay, so what’s happening in the home? What’s the biggest fossil fuel consumer in the home?” By far it’s CHX system. It’s over 50% of all energy and 70% of all fuel use. “Okay, so what’s the game plan?” Well, the game plan is heat pumps. And anyone who started to look into the space, you just hear this word over and over again, it’s a horrible word because it cools and-

Allen: Heat pumps, heat pumps, heat pumps.

Paul: … And that’s because as a technological basis, they sound like magic. They’re more than a hundred percent efficient. And here what that means is you get more than a hundred percent, if you converted all the electricity into heat, you get multiple times of that because you’re not actually converting electricity into heat, you’re taking heat that already exists outdoors and just moving it inside. So it’s more like a conveyor belt. But the net effect is incredible so that when people adopt heat pumps, they actually lower their energy bills even though they’re switching from gas to electricity.

Allen: Even you switch, even if you have electric baseboards where a lot of new construction in Vancouver for example has, you can still switch to a heat pump and you’re using way less energy because it’s that model that you’re describing.

Paul: Oh, it was like four times more less energy. It’s not minor, it’s like a quarter. And so if you’re a policymaker and you’re trying to figure out how am I going to get my society, my country, province, state, whatever, you’re going to push for heat pumps. That is just, it’s kind of the only game in town. There’s multiple different ways that they exist. You can get geothermal, you can get air source. I could get into that if you want me to, but it’s obvious on paper it’s a solution. So it’s like great. And then I went to go get a heat pump in my house and it’s like the record scratched. Everything about actually buying and adopting this product is just not good. It feels like the way things were done decades ago, it’s like the internet never hit this industry. You can’t really research stuff online. You can’t buy anything online. There’s all this misinformation that you talk, multiple contractors will tell you different things. It takes weeks to even find out what the price is because someone needs to come to your house and look at it. And then the products themselves, by the way. You can get a central system that looks on the surface what you’re used to. You get a Nest thermostat and everything that can control it. But generally, unless you’re redoing all the ducting in your house, which is open heart surgery on a house, you have a worse experience. That’s because the ducts needs to be widened for free, heat pumps to work for heating because basically the air is not as hot because furnaces superheat the air and there’s sort of this assumed cooling. And so the problem is if you don’t compensate for that and by moving more air, you don’t get enough heat into the house. And then the other option, a lot of people are going to these things called ductless or ductless mini splits.

Allen: Yeah, that’s the one I’m more familiar with.

Paul: And people are familiar with them often as ACs, and they’ll see them in Europe or Asia, they’re very common. They don’t feel premium and they don’t feel like an upgrade to your home the way that a Central air does today. They’re kind of ugly white plastic boxes. You have to put this large ugly white plastic box in every room in your house. You don’t have a thermostat anymore. You now have a remote that looks like it was from 1985 and has 50 buttons on it, and you have to find the remote for every room to just set the temperature. It’s a total headache.

Allen: And then the remote gets lost. I was in an Airbnb where the previous people’s kid had accidentally pocketed the remote for the thing.

Paul: No, exactly right. This just starts all the alarm bells start ringing. It’s like this is exactly the type of problem where I can build a world-class team to solve it. I know how to build internet enabled research and purchase experiences and we can build a really great product experience around the heat pump itself because the core is great. The core guts, the R&D is done, but no one has really thought about the user experience and how do you use the frankly, digital and internet technologies the last few decades to make these things feel like a modern product experience. So it just felt like elevating heat pumps into something like a coveted category, something that people really excited to bring into their life the way that the Model S did for EVs, right? It was the first EV though. It became a coveted car just for its own sake, not it was good for the planet. It was more because it accelerated like a Ferrari. And it’s like how do we do that? But for the home space and the biggest possible lever is starting with HVAC. So that’s how Quilt was founded and how it ended up here today.

Allen: I love it. You weren’t as brief as I’d encouraged you, and I’m glad that you weren’t because every part of that story was interesting, and it is gotten us to a really great place to actually talk about what you’re building. It also helps that you’ve hit on some of the things I’m personally interested in, which is this intersection of how does one go from having skills in building stuff for consumers and building great experiences and then have a big impact so that’s a thing that’s on my mind often. I want to dig into the hardware stuff on Quilt, but there’s first, before we do that, I have a couple of questions about the beginning or earlier parts of your story, and then we’ll dig into Quilt a little bit more. So going back to Learndot, which you kind of described that story of building this product that ended up pivoting a few times and having some form of success, but maybe not at world changing amounts of success, what were the big lessons that you learned from that process and how did that inform, we see the direction that you’ve ended up going in and how did that inform that direction?

Paul: So some of them I think I already touched on, which is just firsthand experience of being an entrepreneur, trying to get a company like this built is that it takes a long time and it’s really hard. And so I am not going to get a bunch of swings at this. So let’s make sure that whatever you’re working on is something you’re going to be interested in for at least a decade, and is the type of thing you’d want to be essentially your legacy. This is what you spent a lot of your work time on. I really don’t believe in the try things and see what sticks. Maybe a bit of a hot take is I actually think product market fit. The search for that is kind of a big distraction.

Allen: Oh, hot take. I love it. Tell me more.

Paul: I think it, maybe it’s in the interest of entrepreneurs to encourage a bunch of really ambitious young people to search in the dark for something and just iterate based on some, oh, I have a product. I’ll just listen to user feedback and iterate with this product until I find a market. The vast majority of markets that are worth innovating in already have large transacting businesses built around them. And a lot of the innovation that really changes the world actually looks more like a better mousetrap, but a way better mousetrap. And so what I mean is you want to solve a problem that has existed for humans for basically as long as you can think. And if I could explain your startup with a really simple analogy to my grandparents’, grandparents, so somebody who lived in the 19th century, then I think you’re probably onto something. If I can’t, and this is true for I’d say 90% of startups, you have a problem. And what I mean by that is like, okay, what’s the analogy for Uber? It’s taxis, it’s horse on carriages, it’s getting around, right? What’s the analogy for Google? It’s librarian, right? It’s where you go to find information. What’s the analogy for Quilt? I hope it’s the fire that people have had in their house for literally a million years to keep warm. And so really important problems have existed for kind of ever. And the solutions we have to them evolve, but the problems are fairly fixed. So when I say a better mousetrap is that there is some solution for this problem, but by leveraging technology, you can create a generational increase where it’s this 10X better solution. So it’s not incremental, it has to be 10X better. But I think you want to start with saying, “Here’s my competitor. Here are the millions or billions or trillions of dollars already spent every year to solve this problem.” And by the way, HVAC is exactly this. How much money spent every year in HVAC, it’s insanely large. And I’m just going to take this quality of solution and elevate it dramatically.

Allen: So this is the playbook, not necessarily that or what I’m assuming you’re saying or what it seems like you’re saying is that this is the mental model that you advocate for going into a consumer space. Because maybe, or at least it seems to me that if you’re trying to build a B2B SaaS company, you’re going to build Datadog. It would be maybe challenging to describe that to your grandparents, grandparents. But if you’re building something for consumers, the needs of people, human beings are pretty similar to what they were generations ago. Or even like you say, a thousand years ago.

Paul: That’s a really good refinement actually. And you’re probably right, not to give myself a plug for a ten-year-old blog post, but after finishing Learndot, I wrote a blog post mostly for myself. And I had sort of four lessons for myself coming out of Learndot, which is really the question you asked. And one of them was exactly this, solve ancient problems. And it’s interesting in that Learndot was a B2B company. But I think my disposition and my real mindset has always been consumer. And maybe I didn’t realize that until this conversation right now but I think you’re right. I mean you could push it. I think you could say, I don’t know, Salesforce, sure, yeah. If you need to make sales as a business, you’re going to need to track your customers. But you’re kind of stretching the analogy. I think you’re right that it’s mostly on the consumer side that sort of solve ancient problems bit. And then the other three that were in that post, and we’re completely still true today for me were, solve your own problems also so you can have real empathy with your customers. I also think that’s easier in consumer.

Allen: Of course.

Paul: Because often, and right. And then the other one is making no little plans. So this is this ten-year commitment thing. It’s like if you’re going to do something, make it really big and not just for yourself and your own accomplishments, but that people are attracted to that. Everyone wants to be part of something really great in their life and something to be really proud of. So if you set a really high bar, it’s going to attract a lot of other people. And then the other one is find some trend that is going to make the tide lift the boats. And sometimes this is a technology-driven trend. Obviously right now AI is a big one, but for me it’s climate tech and it’s like all the energy around that. And COP, the big annual international conference just finished, and there’s always commitments that come after that. So I’ve certainly benefited from the tide lifting boats around the investment in the climate space. So those are the four. Find a trend you can attach yourself to, solve ancient problems, solve for yourself and make ambitious plans.

Allen: I find that making ambitious plans one quite interesting out of that because I think there’s very reasonable people who will both push really hard on that idea. That will sort of make, talk about some of the topics you’ve talked about today, which is if you’re going to dedicate a huge chunk of your life to something, then swing big and go hard and do something that matters and really have a big vision and that’s how you attract great people. And that’s obviously helps you track investments that you can afford to rate people. But then there’s also, I think a bit of backlash isn’t exactly the word, although there’s also backlash. But there’s people who take a different perspective and they’ll say, there’s a tendency in Silicon Valley to go too far with, “Oh, okay, well we’ve created this thing, it’s going to replace all currency in five years or something like that.” And just the scale of the plan is not necessarily a, maybe it’s necessary but not sufficient, I guess is the thing to maybe keep in mind with that one, in my view.

Paul: Yeah, I mean completely anyone can sort of put out grandiose ideas. The art isn’t actually making that feel achievable, intractable. So yeah, maybe it’s not the entire story, but I certainly think it helps.

Allen: Yeah, I appreciate that, and especially when you’re doing something that has a societal impact, it feels a lot better when it’s a big bold ambition rather than like, “Well, we’re going to make 10 heat pumps and see how it goes.”

Paul: Yeah, exactly.

Allen: We’ll link up that blog post in the show notes for this episode. Another big piece of the backstory as you’re telling it is this time you spent some time at Google’s in-house incubator Area 120. And I’m curious a bit about that model because I often hear about, obviously Google is an exceptional company in various ways and so their experience there might not fully generalize to other companies, but it’s common for a large company to get to a certain size and then they start to worry or maybe just very plainly see that they’re not innovating at the way that they used to and it gets harder to do things, get things done, and there’s more bureaucracy and things slow down. And so you end up, “Oh, okay, well we’re going to have this org here and they’re going to innovate and they’re going to be our venture thing and we’re going to have entrepreneurs and stuff like that.” And occasionally hear successes from that model. But I hear a lot more, I guess, frustration with it from people that have gone through that pattern. So I am curious if you have any kind of thoughts now having gone through that of, is that a model that is valuable but it really is just maybe tricky to do well? Or is it kind of inherently challenging to have the cake and eat it too of being a large organization, but then also having these sort of free explorations within?

Paul: It’s funny everything you said in terms of your perception of that, that usually doesn’t work. And you talk to people who’ve been through it and more often than not, it wasn’t a success. Sometimes there are a few, I mean, everyone who started Area 120 knew that too. And we actually saw that as one of the opportunities in the challenge. It’s like, we want to be the exception here. We want to actually change the script and actually try to solve this and see how this is done. And also I’ll say, business leaders all over the place know this and yet they still continue to create internal incubators. So why is that? Either the problem is so great or the potential upside is so great they’re willing to roll the dice on it. Or people are somewhat delusional, which or both all those things might be true. So I will start off with talking about on the high level, without talking about Area 120 specifically, I think the problem is very real. Innovators dilemma is a very real thing. What I mean is the sort of specific definition around you have a large business that would have to get undermined in order to do the new thing, and it’s really, really hard to pull money away from the cash cow that has built your business. And very few companies have done it successfully. I mean, Apple did it with the iPhone and the iPod, but there’s very few companies that can do that. And one way you can try to achieve that is you cordon off an area that sort of has the mandate to fly the pirate flag or whatever it is that could potentially undermine the core business. I also think that culture stagnation does happen as well. Where you get to the size where people see their jobs are to march forward as opposed to create new things. And so by creating a cordon-off area where people, you can attract those more entrepreneurial spirits, I think there’s merit to that. Yes, there is a different culture in sort of the people who like to create new things. But yet these programs still mostly fail. And having gone through Area 120, which I actually think did have some real successes… Even though a lot of them are not known to the outside world because what they do is we would go and get rolled into an existing Google product, we would have pretty good metrics around how much business value we created versus say how much it costs to run the program. And it was a very good investment in terms from a financial management perspective within Google, dollars put into Area 120 always turned into many more dollars for the business. But the way that often worked was we would create a small product or business that looked like it was independent and then really commercialize it via an existing product. And sometimes you’d be in cloud products. There’s one in cloud that does quite well called Call Center AI, CCAI is what we call internally. That started as an Area 120 project and now it’s a major revenue driver for cloud. I think the reason these often fail is for the same reasons they’re created, that those problems are real and we hit those at Area 120 too we’re like we would try to do things that would pull things away from the core business. And you get some very powerful executives sending really angry emails to your executive or Sundar or whoever it is. And even where that was explicitly the mandate, rocking the boat too much had real consequences. And also I think on the talent side, it is a little bit harder to have this 10 year vision and this sort of swing for the fences kind of thing when you’re inside that confines because you know if you get to sort of your first second base of success, you’re going to get rolled back into the mothership. So it’s kind of like a cap or a ceiling on how much business value you can create that you feel like you have a lot of autonomy over. Sort of interior, like a startup CEO within the company. And actually we stopped using the words startup CEOs because it started setting the wrong expectations. Because these people were going to rejoin the mothership and have a whole bunch of levels above them. And Area 120 is mostly actually wound down now. They kind of restructured it after the firing or the layoffs, I should say, of January this year. And I’m not in the company anymore, so I don’t know everything going on there. But I will say that I’m really proud of the work we did. I do think that we were one of the most successful incubators. We had some incredible talent there. And that’s actually, personally, this was the way I benefited the most is that it was a moth to the flame for really ambitious, entrepreneurial talented Googlers. And Google attracts all this incredible talent of course, and it has for decades. But sometimes people get there and they feel like they’re a little bit confined. And Area 120 was a place where people could come and work on their own ideas. If they did well, they could actually sort of shortcut the comp system for a while. They could shortcut the promo system. So it was like this fast track in the company and there are very few of those. And so it was really hard to get in. It was, I think we had a 5% acceptance rate or something. So within Googlers, we’re talking about the top 5% of the company and both of my co-founders at Quilt, I met through Area 120. And so I just got connected with the best of the best at Google. And so it also was personally really good for me in that way. So I’m really glad I spent that time there.

Allen: That makes a lot of sense and mostly matches with all the things that I’ve heard of other programs like this and other companies. Obviously they vary in the way that other companies vary, but it is interesting, there’s a bit of this sense and you’ve kind of reinforced that it is often good for the people who work within those programs because for the reasons that you say, they often have a high talent concentration, they have more ambitious and creative teams sometimes than they let off often normally than the larger orgs that they’re within. And you often have a more reliable economic return than if you’re going off and starting your own thing. So it can be a good kind of training ground, breeding ground for folks that then go off and do big ambitious things as well, which is interesting.

Paul: But whether or not that actually brings back to the mothership of the parent company in a meaningful way, the way that people hope it’s going to, I don’t know. How many internal corporate incubators can you point to where the source of the next big business line for some major company, you know what I mean? Did the ex-product come out of this? Very few.

Allen: I’m sure there’s examples that we don’t think of off the top of our heads because we sort of forget, “Oh yeah, that originally came from this thing.” But this almost kind of proves the rule that I’m like, “Well, there must be at least one example.”

Paul: Well, and at Google there’s a few things that started at 20% time, and that’s why it was called Area 120. It was the idea of 20% time, a hundred percent of the time. And it was sort of carrying that flag. But in reality, all those major products that started at 20% time were well over a decade ago. People talk about Gmail and-

Allen: But a totally different, Google different culture, get different incentives at that time.

Paul: Yeah, exactly. Yeah.

Allen: Okay, so that’s all awesome. We have to at least talk about the heat pump opportunity and the challenges. Because you have a software background and now you’re the CEO of a hardware company that has very real physical… These things need to get manufactured, they need to get installed. People just can’t click on a website. Obviously there’s a website forthcoming where people will click on it and they will be able to learn things, but you have to actually manufacture things. So what have you been learning so far in that journey? What has been surprising to you about going from software to hardware?

Paul: A lot of the skills are actually really transferable, at least in my role. So call it the product manager role. I mean, even if I zoom in from being the CEO, but if just trying to design the right product. The fundamentals of you start with who your customers are, what the problems are, and you kind of prioritize against that. You tell the story of success. There’s this approach Amazon made popular if you write the press release before it’s… All that stuff.

Allen: Do you like that? The press release first approach?

Paul: Yeah. Or some version of that. We wrote a wire cutter review for Quilts.

Allen: I love that.

Paul: And early on, and it all totally applies. And so a lot of the skills are really transferable. I’ve also found it incredibly satisfying to literally watch something I can touch with my hands get built. And from where we’re sitting right now, I can see prototypes right there. I think sometimes people work in software for a long time, have this itch to do something tangible. That’s why you see a lot of software developers take on carpentries hobbies and things like that because I think-

Allen: Absolutely.

Paul: … we have this desire to do something with our hands, and it certainly is hard. You’ll hear that hardware is hard in the sense that it feels like I almost said exponential. I don’t know if it’s quite exponential, but quite a bit more complexity. So you just look at the sort of skill sets we needed to bring onto the team that we needed to hire to even get something out of the gate. It’s like 10X more than a software company. You can basically launch a SaaS company with a couple of people. A handful of people are less that can write software, maybe someone doing product, business outreach, but you can have a team of four or five people build a SaaS app. For us, we need electrical engineering, mechanical engineering at multiple levels, different kinds of it. We need of course firmware, then we need your traditional software, we need manufacturing, we need quality engineering. Quality coming off the line. There’s just all these skill sets that I never had any exposure to before, and they’re completely deep rich domains of knowledge with just as much level of expertise and complexity as software, and there’s 10 of them. And so in a way, I really love it because I feel like I’m tapping into so much more human knowledge and capabilities and skill sets and the diversity of domains of expertise that we’re able to incorporate into this product, is so much larger than if I was just doing a traditional SaaS company in my mind, that it is really satisfying. I’m a, I think a very curious person. I really like learning things. And so I’ve been having to get crash course on all this stuff and it’s been fantastic. But also I’ve surrounded my self with really good people. My co-founder of our CTO is Matt. He was also one of my neighbors. He led the largest investment we made at Area 120, which was a robotics company. He’s been doing hardware and robotics his whole life. He’s an expert. And so I get to learn from him and draft from him and other people that we’ve hired who are really good at this.

Allen: And that’s a core piece of the puzzle that I certainly, if I was going to make it into hardware, I would be very intensely making either notion or Google Sheet lists of people that I would want to talk to both get on the team as well as learn from. Because obviously one of, if not the most important thing that drives the success of any business is the people. And it’s difficult to hire the world’s best person that does a certain thing if you know nothing about that thing.

Paul: Yeah, totally.

Allen: “This person is really confident. I guess they’re good.” And then you find out after you’re getting a failed units delivered from the factory, you’re like, “Oh, they weren’t good. Oh, no.”

Paul: Yeah, I mean I think some of that risk is just inherent too, because also I think you want to really complementary strengths. I think with Matt and I that is true. I bring things to the table that are not his strengths, and he clearly brings a lot of things to the table that are not my strengths. And to be totally candid, it’s not like I knew for sure how good he was when we decided to go into this. I had seen some evidence and I was able to piggyback on some of the things that, for example, Area 120 was able to help me evaluate by having him be in the program. But there’s certainly a certain amount of risk and leap of faith there.

Allen: Yeah, and that makes a lot of sense. You mentioned the difficulty of hardware and some aspects of things that the expertise and the breadth and the complexity. One of the things that scares me about the idea of being in hardware company is that I think of, and maybe this goes back to a little bit of your product market fit search thinking and maybe why not thinking that way is appealing to you. It’d be an hardware company now, but I think of building products as a very iterative, fundamentally iterative process. And I think of the levers of how to build product better, faster, and more successfully as a lot of it being about reducing cycle time, getting things in front of customers faster, getting things in my own hands faster, playing with things soon rapidly, and then iterating a lot of times. And fundamentally not knowing exactly the logistics of getting these prototypes built and manufactured and installed in a home. But that’s not a thing that you can have multiple iterations per day, or at least I don’t think of them as having multiple iterations per day. So how has that changed how you think about product development in that? Or is it you just find ways to make iteration fast even though it’s not at the macro scale, literally getting installed in your home multiple times a day with what other product changes we’ve made?

Paul: Yeah, I think it’s more like that and where it actually is very iterative. And this goes back to me maybe being surprised at how not different it felt. And in my experience, even with software products, you’re not really trying new substantial product ideas every day. Yeah, there’s people who run continuous integration and constantly push. But in reality, you probably have some product that are product hypotheses that are a little bit deeper. They’re a new feature or they’re like some new flow that’s got to be built out. You might run an experiment around it, but the iteration, even a really fast company is usually a few weeks to test real significant product ideas and often a lot more than weeks. And that’s about the pace of our iteration here. So we started with really lightweight prototypes that we could build. Well, you prototype different things. So we prototype the industrial design that has basically a dummy box, but can let us know how the product looks and feels in your hand and on the wall we’d go install those in houses. It was my house and Matt’s house. And literally essentially Styrofoam boxes, but we just put them in rooms and live with them and see how they felt. And in parallel, we would prototype the more internal, call it the guts of the system. It didn’t look very pretty, but we wanted to make sure that it all worked. And so we did a bunch of prototypes at that level. It doesn’t feel that different. If I look on the wall over there, I see eight different industrial design concepts that we all prototyped. And one of those is the one that has passed the evolutionary process and is now has offspring or the current version. It’s not the same thing because it has iterated. And right now we’re doing an install about once every two weeks, and that’s going to pick up the pace. There is one thing that is very different that is worth talking about. Are you familiar with the idea of tooling, what that means in hardware businesses?

Allen: Yeah. In that the factory has tools that can produce the product and that if you change the product, they have to change the tooling and that can be very expensive depending on the process.

Paul: Yeah, exactly. And they generally look like molds, that are injected plastic molds that are specifically for the shapes of the components of your product. So the important part is that they’re not reusable by the factory for other customers, so you have to invest in them because really just your IP. They’re the shape of your specific product, and they’re very expensive to make, very, very expensive to make. Multi-million dollars often, are hard to change because that’s expensive to make and they’re hard to change. So we can prototype pretty quickly right now where we’re 3D printing a lot of parts, and we haven’t invested in tooling yet. But once you sort of invest in tooling, you’ve kind of locked in a lot of stuff. And so then things get harder to change. But I’d also say that even with software, there are things that once you’ve shipped it and it’s in production and people are using it and people are… You’ve invested in the data structure, it’s hard. It’s hard to migrate databases, it’s hard to take features away from people that they’re invested in. And so there are still analogies there where in reality there are lots of things that are still hard to change on the software side once it gets to a certain level of maturity.

Allen: But God bless 3D printing.

Paul: God bless 3D printing for sure. And we also use CNC machines.

Allen: For sure. Yeah, I mean, I was initially surprised as I got to a little more familiar with hardware startups in the modern age, how much CNC and 3D printing is happening and how much money and time and effort sometimes teams will spend doing that as opposed to going to, well, let’s just… Because I’m in software, I’m like, “Well, let’s just put it in production,” but put it in production means spend a million dollars on tooling to be able to extra produce these. It’s like, “Ah, maybe let’s just spend a hundred thousand dollars on CNC and then you can move a lot faster.” One topic I’d like to touch on before we run out of time is geography. So you’d mentioned that we both started our careers in Vancouver and you moved to the Bay Area, but kept a foot in Vancouver. I stayed in Vancouver, I have a foot in the Bay Area. I’m curious, having built startups in both cities, obviously in very different conditions like the student out of school versus coming from Area 120 where you know all these talented founders and have all these connections in the Bay Area. But what have you learned about the opportunities in practicalities of starting scaling businesses inside and outside of the Bay Area? Because I know we have a healthy share of folks who listen to the show that are both in the Bay Area as well as elsewhere.

Paul: My honest answer is going to be like, is going to really annoy most people who are not in the Bay Area.

Allen: Oh, no.

Paul: But that’s my honest answer is that it’s just a cheat code being down here. It is like Matt, who’s our CTO, who was probably the reason that if we’re going to have any level of success, you’re building hardware. If I did not have him as my co-founder, I would not be able to do this successfully. He’s literally my neighbor like three blocks from me. And part of the way I was able to recruit him was I was like, “Let’s go grab a coffee. Let’s go for a walk over lunch.” And I could physically walk to his house. There’s many, many, many examples like this. One of the founding electrical engineers on the iPhone, this guy’s in the computer history museum, literally top 0.001% in the world kind of thing, lives a few blocks from here. And he also did the first prototype of the Nest thermostat with Tony Feudal and stuff. And just wanted to come hang out with us because you heard we were doing something cool. So we’re just like, “Come and advise us.” It really feels like a code, and I’m sorry to say that, and the answer should not be like everyone has to move to the Bay Area. And for certainly, I had a bunch of advantages because I’m much more mature in my career than I was when I started Learndot. And you obviously can build great companies anywhere in the world, but there’s a reason so many of them are here and that network effects are real. And part of the network effect is the community of the density of talent at all levels of the ecosystem. So of course there’s investors, there’s probably more investors within, I don’t know, two miles where I’m sitting then there is in all of Canada. I mean that seriously. I’m actually maybe only two miles from Sandhill Road, so it’s kind of cheating. But that is real. And in terms of great hardware engineers who’ve built products like the iPhone or the Nest thermostat or the Google Watch I’m wearing, they’re probably all sitting within 10 miles of me, or a lot of them are, right? I’m maybe 15 miles from Cupertino right now. So it just feels like a cheat code. That said, that is, like I said, really not productive for people who aren’t here. So I think if I could say something, I think there are their own versions of strengths. So maybe isn’t the most insightful thing ever to say, but certain sort of verticals get a certain density of talent around it. So I’m trying to build a hardware product for a really great consumer facing component. It’s good that I’m near Apple. There’s a lot of people who kind of fall off of that aura. If I wanted to build a Canadian company and I wanted to do something around e-commerce, it’s probably good to move to Ottawa or be near Shopify because that’s now a world-class company in that domain. And so there are other things that might be able to spin off of that. And I think that applies for all around the world where people have their levels of expertise and they can sort of build on that versus try to go after the whole kind of tech ecosystem at once.

Allen: And that really resonates. Obviously, I have an inclination to think from a Vancouver perspective, and I think it was possible here. But something that I’ve seen a pattern that reinforces what you’re saying is that people benefit a lot from thinking about where they’re building, what they’re building, the team that is available and the people that are available and leveraging, I don’t super love the word leveraging in this context but leveraging the people that they know and can to know that are maybe that are neighbors or that you can go on a walk with, a walk and talk once a month with somebody who really knows something. And like you say, if you’re in Ottawa, maybe that means e-commerce. And if you’re in Vancouver, there’s certain startups and areas that we have a lot of expertise and some really talented people who have built businesses of certain kinds. And then there’s some areas where it’s kind of chip manufacturing, probably maybe don’t start that in Vancouver. And so you can take that in two ways. I think you can take that in a, “Oh, okay. Well, I guess that means I need to move to the place that is best suited to the thing I want to found,” which if you’re very mission-driven, like I absolutely am going to be making the next competitor to Intel or whatever, then it’s like, yeah, maybe you want to be in Taiwan or maybe you want to be in, at least not in Vancouver. In the other direction you can say, “Okay, well, what are the things that are well suited to where I am?” And then obviously the other piece of that is that there’s the Bay Area, which is, it’s very unique, but then there’s also this second tier of, there’s a lot of places like Vancouver, but also New York. Actually, it seems like, I don’t know if this is just sampling bias, but I’ve been running into and meeting people working in really well-run interesting startups out of New York, more so in the last couple of years than five or 10 years ago obviously New York has long had a good start ecosystem. And if you live somewhere that is not the Bay Area, but is within easy flight of the Bay Area, that can also be… You can get some subset of that advantage. You’re not necessarily going to go on weekly walks with the person who created the iPod or whatever. But as you ramp up in terms of your understanding and your connections and you build it network and you build a reputation for doing good work, you get opportunities to be able do that stuff as long as obviously if you’re in somewhere where you can’t, or maybe for Visa situation you can’t visit the Bay Area, then that’s challenging.

Paul: Yeah, for sure. And I actually think there’s a whole other angle here that I think there’s been a bigger rift around, I mean this is obvious to say, but around remote versus in-person since COVID. And that there is now a large part of the tech economy that is fully remote and kind of plans to be always. And then that actually obviously creates a lot of opportunities for other regions to access the exact same talent, especially if you’re in the same time zone or close to the same time zone. So I think for places like Vancouver, it’s an incredible opportunity and maybe they just want to… What are those equivalent online networks that are being formed for people who are primarily remote. We’re by the way, taking the exact opposite because we’re a hardware company company. We have a lot of people in the office. We’ve actually taken the kind of hardline other position where we’re currently, we don’t have any roles open to remote, even software roles. But I think it’s fine to be either one, as long as you lean into it. The middle ground, especially as a small company, can be difficult. So I’m just show that out there too, that there’s sort of this internet as its own geography disjoint from physical space. Maybe it’s more of a time zone constraint. That is an interesting opportunity that it’s been there for a while, but it’s really coming to its own today.

Allen: And obviously as we’ve talked about on the show before, there’s the tendency for teams who are working on something like a brand new hardware product to benefit a lot from being physically cool located. And I think there’s a bit of a tendency for teams that are, although in some ways you describe what you’re doing as this approach, I think there is something fundamentally difficult about what you’re doing. But that are building better mousetrap, that it’s a well understood problem where we’re definitely executing on a mission rather than doing something that is really fundamentally uncertain. Seem to have an easier time building a really successful remote distributed culture where everything is asynchronous and they’re across time zones or even just in maybe North America, but they’re fully remote. So it is very interesting to continue to watch that I’m in the same position as you as someone who comes from a perspective of kind of leans towards the in-person thing, but then also also very aware that people are being very successful with the remote setup. So I don’t cast aspersions on that approach as well. If it’s delivering results, it’s delivering results, right?

Paul: Totally, totally agree.

Allen: So your head’s down, your work on Quilt, you can see prototypes from where you are. I know that you have the product is now installed in your home, but we can’t yet see it. If we were to chat in a year, well, you and I will chat in less than a year, we’ll be in touch. But if we were to chat in a year, what would you want us to hear? Where would we want to be? What should we be kind of looking forward to for the next short, medium term for you without having to make any promises that you can’t reveal as of yet?

Paul: Yeah. So I certainly think a year from now our product will be launched, the pricing will be out there, the photos will be out there, videos will be out there. It’ll be very clear what we’re building. And whether or not that resonates with people is one of the big open questions of the next year. I’m very optimistic that it will, I am incredibly happy with it already in my home and I have essentially a prototype, an early build. But yeah, so I’m hoping there’s a lot of demand, of course, a lot of excitement for the product. I hope that we are getting into as many homes as possible. To bring this back to the big climate mission is like we have to sunset a lot of furnaces. And it’s actually really cool building this company where business impact and climate impact are basically in perfect alignment. The way that we create the climate impact is by building a big company that can, because we need that in order to be able to support getting into millions and tens of millions of homes. You can’t do that as a thirty-person company. Just the operations of it and everything else. So a year from now, we’re not going to be global, we’re not even going to be national in the US yet and unfortunately we probably won’t be in Canada a year from now. But I certainly hope there will be a few geographies in the US where we are actively installing in homes. We have really happy customers that are benefiting from our system. They’re more comfortable in their home, they have lower energy bills and they have a lower CO₂ footprint. So that’s where I hope we’re a year from now. And if we’re talking again a year, then we can talk about future products to come.

Allen: Nice. Well I’m looking forward to that. Thank you so much, Paul, for being on the show. Where can people go to learn more about you and your work?

Paul: Well, you can learn more about Quilt at Q-U-I-L-T, Quilt. Just like the thing you put on your bed to keep you warm,.com. Quilt.com. You can learn more about me. I mean, honestly, kind of LinkedIn is a good place. I do post on there. I have a personal website, but I don’t update it very often and I have a complicated relationship with Twitter, so I’m not very active on that anymore. Instagram, we have a Quilt Instagram as well. I’m going to start build up my own presence there as well. So Quilt, it’s currently Quilt Heat Pump is the handle. I’m going to try to get a better one. And I’m Paul R. Lambert on Instagram.

Allen: Awesome. Well, I’ll link those up in the show notes. And again, appreciate you being on the show. It’s always fun chatting.

Paul: Yeah, likewise. Thank you. Thanks Allen. This was fun.

Allen: It’s Shipped That Way it’s brought to you by SteamClock Software. If you’re a growing business and your customers need a really nice mobile app, get in touch with SteamClock. That’s it for today. You can give us feedback, follow us on social media, rate the show, let us know who you’d like to be on the show by going to itshipped.fm/contact. And until next time, keep shipping.

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