Pivot and Fail Fast: Most Valuable Lessons During Our 12-Year Journey to IPO | SES AI, Qichao Hu

00:00so I think the one thing that I wish I had done differently is I wish I had made these pivots faster sometimes you have to change your DNA faster but then because you are who you are and you don't want to change something that's quite core to you that takes a long time at least realize that the things that you're doing are influenced by who you are and and by the human aspect for example we used should focus on drones and then we had people that were quite close to drones companies that we work with and then also they spent a long time developing the drones cells and the

00:34drones design and when we say now we pivot to EVS we to let go all that all the relationships we build with those people all the work that we did all the momentum that we build we had to let that go and that's not that easy it goes back to Pivot when you make a pivot there is a risk and the biggest risk is you are letting go of something it's quite natural for you to be emotionally attacked attach to the thing that you're trying to let go but you have to let go the sake of growth so I think I wish I had let go of momentum the pass the DNA faster so that we could actually pivot

01:12faster my name is CH hul I'm the founder and CEO of SCS aai we develop Next Generation lithium metal batteries for electric transportation both on land and in the air we also use AI to accelerate the pace of material Discovery and improve EV safety we've been around for more than 10 years we've raised more than half a billion dollars now we're listed on the lyc and we were the world's first to develop Automotive a sample and Automotive B sample lithium metal sales and we partner with global card companies including GM Hyundai and Honda so when I was a child I was

01:54fascinated by the universe and then in terms of anime Transformers just like any other kid that grew up in the late ' 80s and the '90s everything that we have today Once Upon a Time was an imagination a lot of things in Transformers for example cars flying cars space travel nowadays we are quite close to be living in a society where you have these things everywhere I was fascinated by physics show a lot of my time and MIT in undergrad SCI physics and then at that time when I started my PhD in 2007 2008 it was a very special time in the US it's the largest lithium ion automotive

02:35battery manufacturing plant in the country and today the company A123 Systems will officially open their new plant A123 was at the peak I would go to these seminars MIT and then just hear Founders top Executives at A123 give talks about their experience A123 was the American hero in American Battery industry but then in 2012 they could not compete I think A123 was too early too advance for its time they had this lfp technology but back in 2009 2010 2012 the popular Chemistry by the Japanese and the Korean companies was not LP it was NCM at that time the OEM like GM

03:20Ford they would make A123 and the Korean and Japanese salemers compete and obviously A123 could not compete and they lost and then they went bankrupt so founder cosos and professional cosos are really different founder CEOs are very technology focused and they really care because as like your baby but when you are a professional CEO you don't know a lot of the the Deep challenges and the Deep issues and then you get funding from the government and then you quickly forget who you are then their Professional Management forgot that because they got a lot of funding and

03:53they thought they could expand really fast they hired 5,000 people in 3 months build this giant Factory in Michigan and then it was like from the moment they announced this build out and the hire 3 months later they had 5,000 people they had just barebone facility and then 3 months later they had to lay everyone off growth was too inorganic was too fast and if you make one mistake and also they lost focus on quality they were focusing on management focusing on just public marketing they had an issue with one of their I think was like a tab welding those defects cells ended up

04:30getting shipped to GM obviously that was not good so they lost the contract to LG so the A123 Professional Management care a lot about revenue is a listed company and revenue is important for your market cap but they lost focus on the cost it was huge Revenue with huge negative margin just it was not sustainable and the whole thing blew up I watched the whole thing and I interface with everyone both the founders Professional Management back then I remember just saying to myself don't let it happen to CSI end of 2012 after A123 went bankrupt because A123 is here in wam at that time

05:09we were just just trying to raise our series a we had no money so we went to A123 because we had known those people quite well and then their R&D facility in Wan was was available it used to have at the Peak 200 people at that time you had like eight people and then all the dry rooms all the equipment there were new sale VR but then everyone's gone so we went there and we just asked one of those Engineers hey can you use the line 1865 line and help us build build a couple of prototypes for free so they did that so that was uh end of 2012 like we would go to A123 and then just

05:48leverage whatever they had and then just build prototypes all for free looking back that really saved us a lot of time and then a lot of money was a a very good experience no other battery company in the US went through that we were the only company in Massachusetts at that time that leveraged that A123 and I think both that experience leveraging the A123 incubator learning from A1 123's mistake A123 had a good technology but they expanded too fast they got a lot of funding and they almost forgot who they were I think one thing is when the market is is really good we try to

06:26get as much cash as possible but then we don't don't invest many others for example in 2022 in 2023 and also I will say first half of this year when the market was was actually quite quite hot a lot of our peers invested a lot if you go visit our peers in California in other places I think you'll probably like their facility more than our facility we tend to be pretty pretty cheap but then a lot of those companies that invested in these things they are now shutting it down the market is good we trying to get as much cash as possible which is what we did with the

07:04spa in 2021 and 2022 but we don't invest aggressively as many of our here especially in CeX because I've seen companies that spend $100 on cack fire cell situation will have to sell that for less than one cent yes so when you run a company especially want to become listed there is a lot of work that you have to do but you also don't have to do you have to do a lot of work for the sake of of a shareholders Market investors but those actually don't really add value to the PO Mission I mean I think there are lots of challenges we F raise seven times sometimes Market is good sometimes

07:51Market is tough and you have to raise from private investors from Financial investors from strategic investors it's challenging technology is challenging deal STS challenging these are okay these are challenges that we have to deal with I think the biggest challenge that I hate the most is um is a bad board so when you're the CEO of a company there's a board right when you're private the board is consist of investors when you have like a bad investor that doesn't know anything but wants to get involved could be this investor has like a timeline and they need to exit or they have say this new

08:27fund and they have pressure from P the most challenging and then it's the worst kind of challenge it's not like a worthy challenge it's not like technology or business deals they're challenging but they're interesting and they are worthy of your time investment I think one you need to be as an entrepreneur when you raise money from investors you should be very selective in the type of investors some investors maybe it's a big name investor uh but then if they are too controlling you want to avoid that a dollar from a bigname investor is the same as a dollar from a less known

09:03investor it's it's really the value of the dollar and you really want to select a good board and a good investor investors that have good chemistry with you when you have these agreements shareholder agreements and the Border agreements be really clear with what kind of power you have and I think um as entrepreneur now is not a time to be nice you have to be really clear in terms of what power the CEO has and then what power the board has and it's it's really not the time to be polite if you don't give me the power don't make me the CEO make someone else the COO if

09:38you're going to make me the CEO give me the power I think that's really important if you get too complicated there it's hard to focus especially when situations get bad when you have to make pivots if there is not clear and concentrated power it's actually hard to make things happen yes so the current EV Market is challenging we are in the industry where the validation process takes a long time it should be because for someone to buy a car and then drive that car with their family that car should be safe it takes a long time to qualify a new battery chemistry in cars when you change a new

10:18material when you change a new manufacturing process when you change a new design it takes a long time to qualify this is also one of the reasons why we develop the three AI Solutions so that we can accelerate that timeline actually taking 10 years of seeing how it behaves under different real world situations let's take one year and then take all the data from one year play an AI model and then have that AI model tell us how it will behave in the next 9 years so I think the the use of AI can accelerate the time that it takes customers and the market to get comfortable with new Innovations the

10:58three AI solutions that we are developing AI for science AI for manufacturing and AI for safety really start to form a new ecosystem that did not exist before and this new ecosystem is now forming because you have more data from all the gigafactories that are becoming available and also you have all these new models that are being developed large language models New Foundation models and all these new models that we are developing when these two converge the data from these gigafactories and these new models you can form this really exciting ecosystems that never existed before and then we

11:32are working with in addition to the car companies that we worked with before Hyundai Honda and and GM we're now working with computer companies for example like U Nvidia and and a few others to really establish very capable computer centers and also to develop these new softwares new models that are tailored to the type of computation that we're doing so that we can really efficiently and then quickly compute a large amount of data from Material data to manufacturing data to vehicle data I think we are taking this this Challenge and then turning this into a very

12:09exciting opportunity where we're forming a new AI ecosystem in the EV battery industry that never existed before I am personally very interested in transportation related applications Transportation a that's why EV Transmission in the air so flying cars I really believe flying cars will be everywhere in 10 years worldwide it's something I'm very passionate about and I truly believe in when I was a child I really like the Greek mythologist of Hermes it was one that brought dreams and then one application I'm particularly excited about for the use of lithium metal is high altitude Pudo

12:48satellites so these are these drones that fly in the stratosphere so 30,000 m above the ground and then it's basically a flying cell tower so you can imagine these high altitude stud satellites will fly in remote places and then provide Wi-Fi provide signals to kids that have no access to Wi-Fi in terms of the spread of knowledge the spread of information to uh people in remote places I think it's a very exciting application and also on the material side we are building bigger and bigger GPU clusters in the Arctic and this Arctic Computing Center can power more

13:31and more applications from batteries to uh for flying cars but also I think is going to expand Beyond transportation for example there are many challenges in climate change you can use this Arctic Computing Center to address a ocean plastic waste or to come up with new antibiotics or to come up with new uh models the Earth climate SCSI will uh evolve from a battery company to power company for transportation and then also brain for to address climate change I think as a human it's it's quite natural to assign an emotion to success and emotion to failure but

14:26actually there are just different labels of different States right I don't really think too much about about these failures obviously when these things happen there is a cost emotionally financially and whatever really in the grand scheme of things it's just a state temporary state I'm not that bothered by those I'm a robot