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37 minute read
In this episode, Ed Smith and Eric Fitz, Co-Founders of Amply Energy, speak with Paul Lambert, founder and CEO of Quilt. Paul shares how Quilt saw a massive opportunity to innovate in HVAC by reimagining heat pumps from top to bottom and building with an integrated “full stack” approach.
Paul discusses the inspiration behind Quilt, how his background in Silicon Valley shaped the company’s approach, and why vertical integration is key to optimizing comfort and efficiency for homeowners. He also explains why the shift from a direct-to-consumer model to working with contractors is the next crucial step in scaling Quilt’s impact.
Whether you're an HVAC professional, a heat pump enthusiast, an entrepreneur or someone interested in the energy transition, this episode is packed with insights on product innovation, business strategy, and the future of HVAC hardware, software, and the overall heat pump experience.
Expect to Learn:
- How Quilt designed the most efficient two zone ductless heat pump on the market.
- The role of aesthetics in HVAC and why design matters to consumers.
- Why Quilt chose a vertical integration approach similar to Apple.
- The lessons learned from launching a startup in the HVAC industry.
- Why heat pumps are like the electric vehicles of HVAC – they just work better.
- How Quilt is partnering with contractors to expand across the U.S.
- The unique software-driven optimizations that improve efficiency and comfort.
- Why Paul believes the energy transition is the defining opportunity of our time.
- How interested contractors can become Quilt dealers..
In Today’s Episode:
[00:00] - Introduction
[01:12] - The Origins of Quilt & Paul Lambert’s Background
[03:21] - Why Quilt Chose to Develop a Ductless Heat Pump
[06:02] - Why Paul founded Quilt
[14:18] - The Role of Aesthetics in Consumer Adoption
[21:04] - Scaling Quilt’s Distribution and Training New Partners
[29:33] - Shift from direct consumer to Business-to-Business.
[35:12] - Expanding Quilt geographically with the help of partners
[40:31] - Closing Thoughts & Final Advice
Connect with Paul Lambert:
Transcript:
[00:00:00.02] Paul Lambert: If you start researching it, you realize heat pumps are the only game in town because of the physics of it, right? You're not going to replace furnaces with electric resistive heating. That's just not obviously going to work. And as I got into it, I realized that this ductless idea was really cool. And there's no ductless furnaces. Really. Right. it's kind of you wouldn't really want to put a fire in every room of your house for safety reasons, right? But you can put a heat pump in every room in your house. And what that does is that the technology shift has enabled a fundamentally new architecture, a new way to heat and cool homes.
[00:00:34.37] Ed Smith: Before we begin, we've been getting a ton of feedback on the pod, and a common request has been to share our top learnings. So we did that with our first book, where we packaged up the top ten Sales Lessons to Grow Your Business. Hear from our guests experienced heat pump entrepreneurs on how they built world class sales teams that consistently win in the market. Click the link in the show notes and you'll have it in your inbox in seconds. Enjoy the show! Hi and welcome to the Heat Pump podcast. I'm Ed Smith.
[00:01:03.84] Eric Fitz: And I'm Eric Fitz. We are co-founders of Amply Energy.
[00:01:06.81] Ed Smith: Okay, so today we have Paul Lambert, founder and CEO of Quilt. And Paul, we know you have some news that's coming up about how Quilt is evolving, which is very cool. So we're excited to get into that. But welcome to the podcast.
[00:01:21.30] Paul Lambert: Thank you. Honored to be here.
[00:01:22.68] Ed Smith: So we want to talk about your guys evolution. We want to talk about Quilt a bunch. We want to talk about you. But before we even get into any of that stuff, for any of our listeners who don't know about Quilt, because you're not our typical guest, what a quick summary of what Quilt is what you guys are doing.
[00:01:39.33] Paul Lambert: So Quilt is a new HVAC manufacturing company. So we are our first product is a ductless heat pump, and we've made it with a big emphasis on the end customer experience around both the design and how it looks in the home and how you interact with it through phone and other control surfaces. So we make a smart thermostat as well that's integrated with the product. And we've done this because we've been able to make a really, really efficient system. We actually broke the records for the most efficient heat pump in our category, which is a two zone ductless system, and we were able to do that by building on the shoulders of giants, which of course are incredibly efficient to start with. And if you can improve on that, there's some pretty great improvements you're able to make. Yeah. So that's that's a Quilt in a nutshell I would say, more big picture. We are a company that's very, very excited about being a big part of the energy transition and believe that the type of skill sets we can bring to bear on this industry around consumer design, technology, brand building, customer experience, user experience can be a big part of that. So consumers and people, you and me in our daily lives, only buy fossil fuels in two parts of our life, right? Their vehicles and their homes. And we think that there deserves to be at least as much Innovation and excitement and design going into decarbonizing and advancing really the whole experience around the home, which is such an important place for every person as there is around that we're all very aware is happening on the vehicle side. So Quilt is trying to help be that flag bearer company, to really advance the energy transition at the home and bring about a better lived environment for all of us.
[00:03:15.59] Ed Smith: Awesome. So I'm hearing sometimes people hate this, but the Tesla of HVAC, but you don't hear brand new startup Ductless manufacturer very often, so that's pretty unique.
[00:03:25.88] Paul Lambert: Yeah, I think we looked at the major OEMs and if I'm not wrong, the youngest one is over 60 years old in terms of the major OEMs selling equipment in the United States. Yeah.
[00:03:35.81] Ed Smith: Very cool.
[00:03:36.53] Eric Fitz: Right? Yeah. Fascinating. Parallel to the electric vehicle industry where, there wasn't a new car manufacturer for decades and decades and decades until very, very recently. So that's an interesting parallel. And can you just provide a little more context. So you're a startup company. You're manufacturing ductless heat pumps, kind of where are you in that evolution of your business? can you give some sense of maybe what territories, states that you're serving now? What kind of scale are you at?
[00:04:03.69] Paul Lambert: So we have developed the first product and we're very, very happy with it. It performs very well. It's very reliable. This is not a first generation product that we think we're going to replace right away. We're expecting to sell this product for a long time, and we're very proud of and have tested thoroughly sort of how long it's going to last. And we have started in the Bay area. So that's kind of our home territory. But we are rapidly, rapidly expanding. So we have an installer partner in Boston, they're named forge and they are doing installations on our behalf. We've been working with them kind of under the radar for a while, but it's now official and they're out installing Quilts and we are rapidly signing up partners. really across America. California is our home base. We're expanding to other parts of California. The West Coast is quite attractive in terms of, again, being relatively close logistically, and there's a lot of demand there. We have money down deposits in 51 metros across the United States, basically the whole country. And so the name of the game now is that we are not doing it all ourselves anymore. So we'll get maybe we'll get into this later, but it is. How quickly can we find really great partners who want to be some of our first partners in each area? And we're going to be fairly selective early on, because we want to work closely with the best of the best, and people who are want to do things a little bit differently and want to be part of this story and find partners that sort of fit that bill in each metro that we have demand, which, as I mentioned, is most of the country.
[00:05:24.00] Ed Smith: That's actually it's great to get out there early on in case someone doesn't listen to the whole episode. So if you're a heat pump entrepreneur and you want to be one of those early installers with Quilts, actually put a plug in, now how do people reach out?
[00:05:34.50] Paul Lambert: Email us hello@Quilt.com or Advisors at Quilt.Com. There's also a partners page on our website that might be the easiest way. So you go to the website and fill out a partner's interest form. We'd love to hear from you. We are actively looking for people who want to work with us to get these products installed. And I mentioned there's a lot of consumer demand, but we need help getting the local knowledge and expertise on how to install in every,all the housing stock around America is very different depending on where you are. And then there's local experts who really understand their market. And we want to work with them. And one of the things I really, really about this model is that we have every, every incentive to truly make their business succeed. It is truly a win win scenario, right? We want our partners to be as successful as possible because frankly, if they're successful, they're going to sell more Quilts. So it's been really cool because we get to genuinely just try to find great folks and help them succeed.
[00:06:22.81] Ed Smith: Awesome. All right. I want to come back to that and talk a lot more about what it's to work with contractors and what you're looking for, but I'd love to double back for one second. Tell us about you. Why you founded Quilt, why you thought this was a problem. To solve that, you need to start a company for.
[00:06:39.40] Paul Lambert: I've been an entrepreneur in one form or another for most of my life, and I'm from Canada originally. I grew up in Alberta, which is a very, very strong energy industry. It's where most of the fossil fuel industry in Canada is based there. So grew up surrounded by the traditional energy industry. Didn't really see myself going there, but certainly by osmosis, experienced a lot of, both the ups and downs of what happens when the gas price changed and, and just the volatility of that, and also just seeing people, going out to work, work in the fields without giving my whole life story, I'll say that I did some tech company entrepreneurship and then ended up in Silicon Valley after selling my last company in 2013. And my lesson after the last one was that when you start a company, you're going to spend at least a decade of your life on that, generally speaking, and a lot of entrepreneurs, especially younger entrepreneurs, including myself when I was younger, don't really think that way. They think about, hey, what's the cool tech today that I can wrap a business around and, and maybe find some success? So that's why if you go to YC Demo Day, the Y Combinator startup accelerator in Silicon Valley. It's all generative AI, which is cool. It's hot. Three years ago, it was all cryptocurrency. Three years before that, it was all drones. And the thing is, the shelf life of these trends tend to be about three years, and when you've seen a few of them, you realize that you're not going to actually truly have that ten year commitment if these things have these three year shelf lives.
[00:07:55.96] Paul Lambert: So I just couldn't find a way to get to an idea that I felt I was going to truly make that level of commitment to and to cut to Quilt. The thing that really drove it home for me was I was on paternity leave with our second child at home, and I realized if I worked on the problem that I thought was genuinely the defining problem of the next generation. And the flip side of that is really the opportunity of our time. Whatever you believe that to be, that you can't fail because the worst case scenario is you build a business that doesn't succeed. But you spent ten years of your life trying to make life better for your kids, so you're not going to have any regrets. The best case scenario is help solve the most important problem on the planet, because by definition, that's what you're working on, right? So asymmetric upside right. So much upside very little downside. And for me that the answer to that question was the energy transition. And climate change was the motivating problem. But really, the energy transition is this incredible opportunity to reinvent almost every piece of the economy. And you can do it in a way that isn't just, sustainable. It's actually just plain better. Right. I mean, the car analogy is great here, too. , the fact is EVs are more fun to drive.
[00:08:59.93] Paul Lambert: They're just they're way more fun to hit the pedal because you move a lot faster and they handle better. And there's other things like that. Right. And, a Quilt system in your home is just fundamentally better than a furnace. You have control over your room. It's healthier. You don't have to worry about having gas in the home. I don't have to pitch you on why? Heat pumps are awesome, but it's just better, right? Even if you forget about the sustainability side. So. But because the energy transition is motivating all this rethinking and rebuilding of core pieces of the economy, you get the opportunity to rethink the core building blocks of our society. So anyways, I really wanted to be a part of that. I spent most of my life making consumer technology, so I was , how do I take those skill sets and that network really? Because as an entrepreneur, it's not what you do individually, it's really who you can recruit to work with you. And I'm sitting in Silicon Valley, surrounded by world class technology companies. And it came back to the thing that I think I already mentioned, that if you're working from sort of the end user backwards, and the energy transition is about getting off fossil fuels and onto electricity, that can be renewably produced. You have to displace fossil fuels, and consumers only buy fossil fuels in two parts of their life. And the vehicle side was going really well. Three years ago when I was starting this, Tesla had just passed $1 trillion market cap.
[00:10:04.41] Paul Lambert: Everyone was excited about it. Great. Glad that's happening. But there was this big blind spot because the building side is as much, if not more emissions, certainly more valuable as an asset class. And it just was kind of under the radar. And so the opportunity then was , how do we accelerate the energy transition with buildings and at homes? And if you start researching it, you realize heat pumps are the only game in town because of the physics of it, right? You're not going to replace furnaces with electric resistive heating. that's just not obviously going to work. And as also as I got into it, I realized that this ductless idea was really cool. And,there's no ductless furnaces. Really, right? , it's kind of. You wouldn't really want to put a fire in every room of your house for safety reasons, right? But you can put a heat pump in every room in your house. And what that does is that the technology shift has enabled a fundamentally new architecture, a new way to heat and cool homes. Of course, we could cool this way for a while in many parts of the world did. But most Americans still have a central system as course, and what this new architecture unlocks is more granular architecture is that you can solve the pain points people care the most about in ways you could never otherwise do it. So the things people care the most about are, in our experience, comfort and efficiency.
[00:11:15.30] Paul Lambert: Right? They want to be comfortable in their homes, and they and they want to spend less on their energy bills. And it kind of occurred to me that the Ductless architecture would allow you to do that in just fundamentally better ways than trying to have an averaging across a whole home. And, and, heating living rooms while you're sleeping, which is what most people do. And it was , great, so let's get a ductless heat pump. And , candidly, I was just very, very disappointed with the whole experience, and particularly the product experience and the kind of alarm bells went off in my head where I was , hey, this is something that I think I could I know the people who could build a way, way better version of this. And we could actually advance the state of the art by a decade or more. And that's what opportunity feels , right? So kind of wrote this idea, this doctrine of , hey, let's take all these ideas from the technology industry and apply it to the to ductless heat pumps and see if we could build a system that just truly feels an upgrade to someone's life. You know, forget about the sustainability thing. we don't go to market talking about climate change. We go to market talking about comfort and efficiency and way that we're going to make lives better. And those are all true things. And so that was kind of the vision that led to Quilt.
[00:12:22.03] Eric Fitz: What a cool story. And certainly many parts of it, I would say resonate with both me and Ed and man, it's. So remind us, when did you really get things going with Quilt? How many years are you into this journey now.
[00:12:36.20] Paul Lambert: Two and a half years. So it was spring 2022 that we really started going. I left Google and kind of spring summer 2022 with my co-founders and paint.
[00:12:45.89] Ed Smith: So anyone who goes to your website will see the unit and sort of get kind of what you're going for. But , your solution is multifaceted because you've got the unit, you've got the thermostat, you've got software just for someone who's listening, who has, who doesn't know about , what makes your solution a decade jump on the Ductless heat pump experience?
[00:13:07.76] Paul Lambert: So what you're pointing out, I think, is the technological vertical integration, meaning we build the whole thing. And the interesting thing is the ductless systems today, they're almost they almost don't really have the top of the user interface stack that central systems do. So the central systems usually have, your your central furnace or your blower. And, but they usually have a nest or an ecobee or some kind of smart thermostat on the top. And when a ductless system generally you get a remote, right. And you can buy over the top systems. There's a couple of names of a lot of startups out there who do this, but they kind of tack together and they're fundamentally limited because they're communicating over these air blasters, which is how the remotes work. Right? And by taking responsibility for the full thing, you can integrate stuff and make decisions that you would just never be able to do otherwise. So, for example, a nest and Ecobee doesn't know what speed the compressor is, it doesn't know the temperature of the coils in the outdoor unit and just fundamentally can't. Right. Because it needs to be a compatible interface with any AC or furnace made in the last 70 years or whatever it is. And because we've integrated it, we can build algorithms that work across all those data points and optimize specifically for the hardware we've created. I mean, this is an idea that Apple made famous, right? Forever. They would always talk about how their products were kind of more deeply vertically integrated because they knew exactly the hardware at the software level versus, at the time the competition was Microsoft and things that. And it totally applies here. So what we've done is we've taken all these different components that are usually made by different OEMs and kind of stuck together and made a bunch of assumptions about how they're going to work together. And that's how we were able to kind of get the efficiency and the user experience that we're able to deliver.
[00:14:46.11] Ed Smith: It also just looks a heck of a lot better. you didn't touch on the esthetics. I mean, people will go to the website, but , it just I mean, it's.
[00:14:52.80] Paul Lambert: One of those things that's seeing and believing, hearing someone say on a podcast, it's pretty is not the same as seeing it. But I do encourage people to go look at it. Yeah, I mean, that's that's a huge part of it too. And that's not an accident. When we were doing early user research about what are the points of friction about people putting ductless heat pumps in their home 100% of the time? Esthetics is in the top three. And maybe it's not always number one, but it's pretty darn close to number one most of the time. So we had to solve it. And also our higher level strategy as a company is we're trying to elevate heat pumps as a category. We're trying to make it this coveted thing. people want to get a heat pump because it's that's their status. There's pride. There's , people want this in their home because it's not just going to make them more comfortable and efficient, it's also going to look pretty cool when their neighbors come over and their house is going to sell for more money, because they have this really desirable system, and a lot of that elevating a category gets into the squishy world of brand that can feel a little bit black magic to some more technical folks, but it's very real. It's because humans are not robots. We're very multifaceted creatures, and we care about things status and our social how we show up socially, of course, and this is why we do stuff swag drops and , things this that might seem just, kind of random. They're not they're all part of this strategy to elevate the category and really add brand appeal.
[00:16:07.87] Eric Fitz: It's fascinating to kind of flip a, I'll say, a traditional design principle on its head where, for the last call it 100 years or since 200 years since we've had any form of central heating systems, the design principle has been we have this gray box, let's put it in the the back corner of the basement. So nobody has to look at it that's what we want to do. We don't want anybody to look at it and think about it, but to kind of switch that and say, hey, no, actually we want people to see this, this product, this equipment that's actually a feature, not a bug of the product itself. And so it's very interesting to kind of look at it from that perspective. And yeah, make it known that I've got these particular products in my house and it's making me comfortable and helping reduce my utility bills and making it more clear to other folks that that are sharing your home with you. That's awesome.
[00:16:53.85] Paul Lambert: That's right. Thank you for pointing that out. I actually have never framed it exactly that way, but that is a basic observation that there's many objects that people add to their walls and homes because it adds value. something we noticed early on was you can look at these multi-million dollar homes being sold all across the country, but certainly in the Bay area where you go to the Zillow ad or whatever system you use to shop for real estate. And the third photo will be a zoomed in photo of a nest thermostat. It's what? That's a $300 device you can get at Home Depot. , why am I selling a $3 million house with that? Because it says something about the house, but also it shows that having that nest thermostat on the wall has added more value to the house than not having it. And you see this with obviously kitchen appliances. people have their wolf range and their subzero fridge. And that is it certainly adds value to the home. So why would you think that there's this very core system to the home, the HVAC that somehow wouldn't be able to benefit from that. And of course, the Nest Thermostat is part of the HVAC system. So we've kind of already disproved it. And yeah, just people want to express themselves and they want to be proud about the decisions they're making in their home. So yeah, we're trying to give them that service area and ability to do that.
[00:17:59.16] Eric Fitz: I'm sure there are lots of other people thinking the same question. All right, so Ductless, there are lots of folks in the HVAC industry would say, well, I don't know about Ductless. 90% of the housing stock in the United States have have ducts already. So why are we pushing for Ductless? Do you have plans to ever build a ducted air handler? Can you talk about that?
[00:18:21.18] Paul Lambert: Yes. Why ductless to start? Because it felt it was a place that we could really differentiate, and I wanted to have things that we could point to that we were just way, way better than the status quo. Not and leveraging, I said, was this kind of fundamentally new architecture of ductless because you couldn't do that without it's native to the post energy transition world, meaning you could not have fossil fuels ductless systems, at least in principle. Yes, some people have kind of wall heater things, but in general that's true. And so if we could leverage things unique to this to deliver value propositions that were fundamentally better than it's, you can create a new category and you can create a story around it and you can grow it. Again. This happened with EVs, right? Where EVs were not just electric cars. The reason that a Tesla or a Rivian or whatever can accelerate in three seconds is fundamental to the way electric drivetrains work, right? And so what are the equivalent in HVAC? Well, I go back to how do you create value for anyone as a product creator, you want to create value, you solve problems. So what are the problems people care the most about when they come to their home? Whenever I talk to an audience, I say, do you have at least one room in your home that you struggle to keep the temperature you want? It gets too hot or too cold? 90% of the audience every time, no matter where I am, put their hand up, at least in America, because it turns out having one system that averages energy across and it's not even perfect.
[00:19:44.63] Paul Lambert: Averaging. As we know, the end of the ducting gets different than the stuff closer to the blower across rooms that have very different thermal characteristics, right? Age over time, different insulation levels, different windows, different solar load. You're going to get a bad experience. And the thing that we hear the most from our customers that is a paradigm shift game changer, when we survey people after the fact and say,how are you, you know, have any feedback about your Quilt system? The thing we hear the number one most common thing is room by room control has changed my life. it has actually changed my life. my kids are sleeping better, I am sleeping better. Things this, it is really a paradigm shift for people and we're pretty big believers that this room by room control idea and I said, taking this monolithic system and making it granular, which is, by the way, a pattern that we see in computer science all the time and almost always works, is a fundamental thing, and that the world is moving in that direction.
[00:20:36.63] Paul Lambert: Is it going to be exactly the ductless system we've created forever? No, I'm sure it isn't. The idea is the important part is, can you have granular control over the spaces in your house, which also leads to better efficiency, right? , it is just insane that 90% of Americans are heating their living room all winter while they're asleep in their beds, and the living rooms tend to be the largest rooms with the largest windows and also their kitchens. Right. And just totally wasted energy. So to your question of , will we be building a central system? I think everything Quilt does will be about leveraging this room by room concept and allowing people to realize the benefits that are unique to the things you can do with heat pumps and also the granularity, as I mentioned. But I'm not going to lock us into one product category we care most about is elevating that home experience and accelerating the energy transition. That's what we're trying to do accelerate the energy transition and elevate the home experience. As a side effect of that. And anything within that is fair game.
[00:21:30.22] Ed Smith: That's awesome. All right. So if I'm a heat pump installer around the country, I'm here in a variety of things. I'm hearing Silicon Valley based tech company that's only been around two and a half years is now manufacturing mini splits. That might make me a little bit nervous, right? But then I'm hearing it looks better. It's fully integrated and designed top to bottom. It performs well and it looks good on the wall. And so it's taken out one of those things. One of the major drawbacks for Ductless and that gets me intrigued. If just knowing our sort of our customers and our listeners, there's going to be a bunch of other questions they have how hard is it to install? What's tech support going to look , what distributors are distributing it for you guys, because distributors are massively important in this space. What are my unit economics going to look ? , I know how to install a Mitsubishi system and I know I don't do ducts for that. And so my margin looks this. what's my margin going to be on a Quilt. So we're getting a little bit nitty gritty. But I think that's the next level of questions that a lot of contractors would have. Take it in any direction you want there. But if we could go next level down, that'd be great.
[00:22:41.34] Paul Lambert: Okay, so I'll start from the top. I think when we get into margin structure, maybe they should actually just call us and we can talk to them also because things will depend a little bit on where you are in the country. But in terms of how easy is it to install if you can install a competitive ductless system from any of the big brands, you can install a Quilt. It is not fundamentally different, other than our indoor unit is a bit lighter because it's smaller. So in some ways it's easier. You don't need. It's not as heavy to, it's not as heavy to pick up. And obviously that matters when you're lifting them every day. We use R 32. We pick that as the lowest GWP refrigerant. That was also part of the new standards and was readily available. Of course, there's the whole refrigerant thing, but but that's what we use. We're a very standard, very standard mini split from sort of a that perspective. you're running your line sets are exactly the same. Right. Condensate is exactly the same. this is all the same stuff right now. We're doing a lot of direct to dealer distribution. So we are actually partnering directly with contractors and shipping them inventory. That's because we having close relationships with especially our first partners. We want to get feedback from them. We want to understand their needs very closely by having that direct line of communication. And I said, we really want to see them succeed. And so not being disintermediated and being , understand how it's going for them, especially as they first start working with us is pretty important, but it's kind of a phased approach.
[00:23:56.87] Paul Lambert: We will definitely be working with distributors as well. I want to share the names of yet, but we are already doing direct to dealer and direct to contractor however you want to talk about it. Distribution. The margins I think are pretty competitive. I think as most I mean, all your contractors will know when you look at the actual kind of final bill to the invoice to the customer. The OEM hardware is not the majority of it, right? It's labor and materials is usually over half of it. And and that side of it, that labor and material side doesn't change with Quilt might be a little bit less labor. I said, in some places we're a little bit lighter, so you might be able to do a little bit less work. This is getting really detailed, but our thermostat can either be wall mounted or tabletop mounted. If your wall mounting it, it's kind of a more permanent install. Looks really nice, does require a bit more work because now you're going to wire it into the wall. But if people don't want to do that, it can be on a tabletop or any kind of hard surface. It'll it'll live there as well. It looks really great on that. I'll stop for now, because I think I've just kind of rattling off things now.
[00:24:49.50] Ed Smith: No, that was great. I loved your video on LinkedIn of you guys testing the thermostat that was very cool.
[00:24:54.96] Paul Lambert: Thank you.
[00:24:55.56] Ed Smith: It's worth checking out if folks haven't seen it.
[00:24:57.48] Paul Lambert: Yeah. Can I actually answer one of the things you mentioned, you said two and a half year old company, a bunch of Silicon Valley tech guys , hey, is this kind of implying hey, is this equipment going to last? , is this going to be around? So just to call that out and I think that video on LinkedIn is a good example. So our manufacturing model is actually the same as Apple's. So we partner with contract manufacturers globally that are very very, very good at what they do and have been doing this for many decades. And our engineers work with to produce the designs. And of course, we do the industrial design and we're very deeply integrated in it, but we don't actually own our own factories. We don't own our own manufacturing lines. And I said, this is actually very common in the tech industry. I said, it's how Apple operates. And so that video that you've seen that is at a world class consumer electronics production facility. And so those the tooling you're seeing there, the jets and the drop testing those aren't Quilt machines. Those are actually machines at our manufacturing partner. And it's great because it allows us to leverage the decades of experience and hundreds of millions, if not billions of dollars of capital investment they've been putting into these factories and testing machines. And the same thing goes with all the heat pump equipment, too. And we'll be releasing more videos there that we're able to tap into extremely mature supply chains and manufacturing capabilities, which not only allows us to have a higher quality product at a competitive price.
[00:26:13.10] Paul Lambert: It allows us to do volume because we can scale quite rapidly if as needed. So yeah, I think that was a very, very key decision that we made early on. And it has also given us, I mentioned sort of this maybe unexpectedly high confidence in what we're making, because when you break it down, if you take apart the Quilt outdoor unit, you'll find the actual compressor in there. The actual compressor is the same as you'll find in the top of the line systems of competitive products. So literally you're going to swap it out. It's easy to go get it. You don't have to buy the Quilt compressor. It's I'm not sure if I'm supposed to say the name, but anyone who takes it apart will see it. But it's one of the big, big brands of compressor makers, and you can go find a replacement and, and, you know, buy it from many different distributors. So that's the other important part is we don't have a lot of kind of one off components at the mechanical level. They're we're purchasing kind of the best of the best that's in the industry today. And the way that we're able to then get additional efficiency is happening in our software. So we're starting with kind of the best in class from a mechanical level, but you can do a lot of things with compressor timing and decision making. That's happening at a low level firmware and software that still gets you more efficiency. So that's how we're able to break the efficiency records while using the same hardware.
[00:27:20.40] Ed Smith: By the way, those contract manufacturers are also manufacturing for the major brands that most homeowners see on their wall. Right. It's that sort of base layer of manufacturing is similar across you guys and across others. So that's that's a very helpful answer on that one.
[00:27:33.36] Paul Lambert: Yeah. Correct. In fact. So when I go to the factory you can literally walk down the street and you see all the big brands that you're talking about everyone knows who they are. And that's exactly who you see. And they're right beside us. So yeah, it's all the same place.
[00:27:48.09] Eric Fitz: Can you get even just because just knowing our listeners, even more granular. So it sounds most of the hardware components are you could find from a distributor. There are all kinds of different common components. Are there any pieces of hardware that truly are unique, the motherboard, if you're getting into firmware, if a board dies. Is that something that you would have to purchase directly from Quilt to replace it? Is there any.
[00:28:12.55] Paul Lambert: The. Yeah, the PCB as the printed boards that will come from us for sure. The actual heat exchangers are shaped differently. Certainly the indoor unit is quite small, and actually a lot of what we did there was actually geometrical optimization of the actual heat exchanger on both the indoor and outdoor unit. Those are shaped differently. I think most of the valves and compressor pieces are standard though.
[00:28:34.51] Eric Fitz: Awesome. So that's so helpful to know that a lot of your I'll call it your secret sauce. Your special sauce is in the the controls, the firmware, the software side because it's it's been fascinating to see for just other manufacturers. It's been clear that there's there hasn't been a lot of innovation there. And it's great that you are doing that and you're pushing the whole industry around those improvements because there's a lot there's a lot to do just from optimizing the controls and making smarter decisions about how you ramp up or ramp down the compressor, how you control the indoor fan speed, how you control the outdoor fan speed and all these things interact. And it's,that's that's awesome. That's what you're doing.
[00:29:11.10] Paul Lambert: Yeah. Thank you. I can't I mean, I can't take that much credit for doing it individually. I have great people at the team who on the team who do that. This is kind of a fun stat, but we looked at our the actual chips we're including and we have, I believe it's more than a thousand x compute on board than the next best mini split. So we have a pretty powerful computer on board to make these decisions.
[00:29:32.67] Eric Fitz: Awesome.
[00:29:33.18] Ed Smith: The Tesla analog continues Tesla had a multiple orders of magnitude more chips in the car than any other thing on the road. this is great. This is super exciting. Thank you for sharing all of this with us. what about price? Is that also something we shouldn't talk about?
[00:29:49.80] Paul Lambert: Or we can always ask. Okay. So, yeah, I mean, our kind of wholesale pricing that we're giving to our distributors, dealer partners.Generally, it's been pretty well received by all the folks who've been talking to so far. When we did the direct to consumer model and this is on our website, we were pricing all in for the end consumer. So it was including labor and materials plus the hardware. And that was 6500 per room. We learned, and this won't be news to the contractors on your audience, that the flat pricing, unfortunately, incentivizes you to get kind of the most complicated and expensive jobs, because you're not taking into account all the labor that goes into the more difficult to install homes. So we pretty quickly ended up having to add some caveats to that. Say, okay, you need to do an in-wall line set run, that's going to be more money and things that. And so that was kind of our pricing there. But the way we had anchored it was that that was what we saw to be the market average for a competitive quality ductless system, from one of the Japanese brands in the Bay area on average. So that's kind of we were trying to come out essentially at market, not below and not above. Our wholesale pricing ends up being a little bit above, but it's not dramatically more. And I think when people get in touch with us, they'll be they'll be pleasantly surprised.
[00:31:08.14] Ed Smith: That's great. Helpful answer. So competitive, which I think is the is the key point to take away.
[00:31:13.42] Eric Fitz: I would love to get into a bunch more technical performance characteristics, all that kind of stuff. But I also feel this might be a good moment to talk more explicitly about the shift in your business model from direct consumer to B2B. What do you guys think? I want to make sure we get to that.
[00:31:29.05] Paul Lambert: I'll follow your guys lead. Both of those topics are fine to me. I will say that, at the end of the day, I'm not the engineer.I know, I know some of the stuff, but,I'm not. At some point I'll go past my technical knowledge. But you're welcome to find where that limit is.
[00:31:41.14] Ed Smith: Paul, this has been awesome. So you just mentioned, you have been doing your own installs in California testing this. what? Tell us about the shift now to going across the country and looking to work through existing contractors and dealers.
[00:31:55.72] Paul Lambert: So I used to use a franchise analogy when talking about this. And it was , if you and this has been really part of the plan since before we launched, is that if you had a vision for a franchise restaurant that you wanted to deploy across the country, new burger restaurant or something on day one, you wouldn't write up a business plan and try to go sign up a bunch of franchisees. On day one, you would open up your own restaurant and you would figure out how to make burgers, and you'd figure out how to market it. You'd figure out how to price it, and you'd figure out how to acquire customers. And because it's really, really hard to give someone guidance on how you think something should be done if you don't know how to do it yourself. And frankly, you don't have the credibility to do it. And so it was really, really important to us that we understood the whole thing so that we actually could develop a POV on how these installs can be done and how. And also just get empathy for the realities of, of what it means to be a contractor out there serving homeowners and serving businesses. And that was also it gave us a ton of great product insights. Right? So the fact that people doing the installation every day can come back and sit beside the mechanical engineer who's literally designing the mounting bracket, and we can move where the hole is and widen this part and thicken this part for the next build we're doing next month.
[00:33:03.65] Paul Lambert: That's been really cool. we've gotten really fast feedback loops on product iteration. And the same thing happens on the customer side, right? They can give us feedback on the product because we have a direct relationship with them and get that quite quickly. So that has all been fantastic. But the reality is that to make a big impact, and that's what we want to do with this company, right? We want to help accelerate the energy transition. That's a big thing. You need to start working with people, not just doing it alone. And there's a lot of really, really great folks out there who, I said, know their local markets and have relationships and know a lot of stuff we don't. And so we believe the right way to make an impact at a faster scale is now to shift, to kind of grow up, kind of grow past the fully vertically integrated DTC business and into working through the existing distribution channel or subset of that distribution channel that already exists.
[00:33:53.33] Paul Lambert: And that's been built over decades, and we don't have to reinvent the wheel. And frankly, for us, it's also just just a lot faster, right? That's where we'd want to be spending our time. We want to do what we're uniquely good at. We want to do it. I would like to see us spend as much of our resources as possible on the small subset of areas that we can be truly ten x better than what's out there today. And most stuff that's not true. We're not going to be ten x better at most things, but the areas that we are are going to look at core product and technology and design and some of the consumer brand stuff where we're pretty strong at those areas. So what this allows us to do is focus more on those and work with other people to do what they're fantastic at, which is working with their own customers and selling and installing products. Finally, I'll also just say that it allows us to be part of a broader conversation because our partners, our dealers, are not just selling Quilt, right? So they can actually go and talk to a consumer or a homeowner and offer them a number of options.
[00:34:53.68] Paul Lambert: And they can provide and they can put together a more holistic solution. So that might mean on one half of the house, it's a ducted solution, and they have an extension where they need to put ductless in and they put a Quilt in there. Or it might mean that, hey, these people actually need a service upgrade, so they need to do a panel, but hey, they're going to do solar at the same time. Some of these people are doing full electrification. So it's just all these things that we are able to participate in that we couldn't before. And the other big one is service maintenance, right. We aren't out there repairing furnaces or repairing AC. But we all know a lot of the sales happen when someone's old system is not working anymore and they get someone out to look at it. So for all these reasons, it kind of motivated this shift. And the company is really, really excited about it. And it really feels inevitable. It was just kind of when we were going to get there and now is the time.
[00:35:35.08] Eric Fitz: Got it makes a ton of sense. So you got experience on the direct to consumer side. Mostly in California, you're able to have these really tight iterative loops on product development and kind of build this experience of what it's from a consumer's Consumers perspective what it's from an installers perspective. I mean, that's amazing to have that full kind of end to end all the stakeholders in the process to kind of feed into your design and your product. So when are you making this big shift? Is there a particular timing that you're looking at in 2025 for going kind of make the shift to B to B to B?
[00:36:10.37] Paul Lambert: I'm not entirely sure when this podcast is going to air, but I'm pretty sure the answer is we already have, mostly because as I'm sitting here recording this, we already have. So we've already signed up a number of partners. We're already working with them daily at this rate. And we've we're also already shifting the sort of backlog of DTC that we have over to our partners. And we actually believe for a lot of those folks, this is actually going to be a better experience. Because the other thing is these partners have they have service that they've been doing for a while. They have plans around that. We never got around to building that yet. So ,there were some things that we just we were a very young company on this sort of in our when we were acting as a contractor. And. Yeah. So it's happening. It's happening now. It's already happened.
[00:36:50.40] Ed Smith: How many homes have a Quilt system right now? Just curious.
[00:36:54.96] Paul Lambert: It also depends on when this airs because it's quickly growing.
[00:36:57.54] Ed Smith: But we can time data as of. Yeah. As of.
[00:37:00.54] Paul Lambert: March, as of March.
[00:37:02.58] Ed Smith: Early March.
[00:37:03.39] Paul Lambert: Early March, we're probably just past 60. And then we have a little over 100 sold. So that means contracts signed. They just haven't been installed yet. Yeah.
[00:37:14.40] Ed Smith: Cool. Very helpful. And I imagine so as you guys grow, I know you're looking to you said earlier you're looking to go deep with your partners in new geographies, which while you're capacity constrained and how many contractors you can work with as you guys grow this would be a really differentiated offering in a specific metro area. If you're the 1 or 2 contractors able to install it. , I know we know Mark over at forge, and it's been cool for them to be able to talk about Quilts and the only ones who can do that.
[00:37:42.75] Paul Lambert: Yeah, I mean, that's definitely one of our value props is that we give real differentiation to our partners. And I hear this quite a bit, actually, is that people realize that 2 or 3 more contractors are going to work and walk into the same home and offer a product that probably looks pretty similar to what they were offering, and the fact that we can give them something that looks and feels quite different is unique. We're not generally doing full geographic exclusivity for our partners, but we are providing scarcity in the program. So it's a limited number, and it kind of depends on how big the metro is as to what we're limiting the number to be. But because we want to go deep with them and we do want to provide them real value, which includes this competitive differentiation that we can give them, that we're basically creating scarcity. So we're limiting the number of partners we're working with.
[00:38:25.09] Eric Fitz: Interesting. And what does that kind of partner onboarding process look like ? Are you doing an official certification process. So you someone reaches out, they're interested and they have to go through a bunch of training steps. Can you just talk more about that, what that looks for prospective partners? Yeah for sure.
[00:38:39.85] Paul Lambert: Yeah. So we have a certification process. And because it's relatively early in this journey, it's pretty bespoke at this point, right? We're bringing people on figuring out what arrangement works best for them, but generally we're doing in-person training. So for Forge in Boston, we're flying out and spending a bunch of time with their team. They've already been installing hardware for quite a while at this point, but it really is to scale it throughout their whole organization and make sure that they're not just getting the technical training, but also the strategic stuff and everything else that we're kind of working on together. On the marketing side and things that. And once someone comes on. Yeah. So we have training. We have, obviously, the sort of warranty obligations we have, the way that we're going to distribute how often we can get inventory to them. Since we're doing the direct to dealer model right now, we're generally working with folks who are comfortable holding at least two weeks of inventory, ideally about two. So usually they have a small warehouse. But yeah. So we're I mean, we're building our certification program right now. I mean, I think you asked me about five minutes ago, hey, when are we going to make this shift? And my answer was, well, we're making it. But it's pretty fresh. So, next time we chat it'll be, I'm sure, much more fleshed out.
[00:39:43.32] Eric Fitz: Exciting. Got it. So that is helpful clarification though. So it's not at some point in the future this your products will be available through traditional distribution channels, but for quite some time in order to actually do the install, you can't just go to your distributor and just pick it up off the shelf. You're going to be you have to go through some kind of formal process with Quilts corporate to say, yep, you're certified, you can install our product.
[00:40:08.40] Paul Lambert: That's right. But it's not that abnormal in the industry. Yes, most stuff goes through distributors, but I believe Linux sells. Still direct to dealer mostly, and I know Dakin does a lot of it as well. So this direct to dealer model isn't that wild. But yes, it is sort of how we're starting for the reasons I already mentioned. And I can't give a fixed timeline on when we'll show up in your local distributor to anyone particularly listening. So yeah.
[00:40:30.42] Ed Smith: Awesome. And so we'll plug it in at least one more time. So if folks wanted to reach out hello@Quilt.com
[00:40:35.85] Paul Lambert: hello@Quilt.com or go to Quilt.com exactly as it sounds and click on the partners page and they will have a contact form.
[00:40:45.82] Ed Smith: Paul, this has been awesome. We asked you a bunch. Is there anything that we should have asked you that we haven't?
[00:40:52.63] Paul Lambert: I think you covered a lot of the details and thank you. There are great questions. It's honestly a privilege to be able to share this. And thank you for inviting me on. I think I would just end with a thought that's , we are in this really for the long run. I mentioned I started this company. I was trying to solve the answer of I'm going to be in it for at least a decade. How can I start a company around that? As I got into it, it was very clear. I'm going to ideally work on this for the rest of my life. And we are. Long term thinking is one of the core principles of what we do at Quilt. And we. That means a few things. And so we're looking for long term partners as well that want to be part of this journey with us. We're still very young as a company and things are going pretty well. But the vast, vast, vast, vast majority of anything that's ever going to happen for us is in the future. And so we're really excited to partner with other people and grow, grow with them, grow, grow our businesses together over the decades to come.
[00:41:42.37] Paul Lambert: And then also just this idea that I really think this is an opportunity to be part of something really, really special. When people talk about this era of humanity, 500 years from now, 1000 years from now, it's going to be defined by the energy transition. the way that we talk about the industrial revolution. And for me, that's kind of what gets me up in the morning. It's none of the near term stuff. I do believe that this work really does matter. And I mean, obviously you guys are doing it too. And I think that we are all going to feel very proud about having been part of this movement and helping, I said, brought forward help, healthier homes and healthier families as a result. So to anyone listening, I think hopefully they can all feel good about that and they join us and continue to work on this. That's all I got. But thanks.
[00:42:20.92] Ed Smith: That's awesome. And that all of that resonates deeply with Eric and I. , we've been out for three years with amplify three and a half and we're always , we get the question a ton from , oh you guys got a really good software product, when are you going to sell? And we're , we're 42. we want to. This is our retirement job. what I mean? , we're going to do this until we're ready to not work anymore, which it's cool to feel that way. And it's anyway, I feel the energy of how you speak the same way about Quilt. We've got one more question for you, which is recommendations. We always ask entrepreneurs for books, podcasts, whatever. For other entrepreneurs listening to this in the HVAC space, what would you recommend they check out to advance their knowledge?
[00:43:09.92] Paul Lambert: I don't know if this is I'm gonna go with some deep cuts, and I don't think this is HVAC entrepreneur in particular.I think these are just some books that I have found influential and influential in my thinking. There's one called Getting to. Yes. It's a negotiation book. It's written in the 80s, and I have found it to be so much more useful than what you would think about. Just typical negotiation to be After reading it, it really influenced how I started thinking about product as a dialog between two To people, right? Someone who has a set of problems and needs that they need solved, and someone who's designing a solution to that, and how to dig into what the problems really are and how to find a unique solution. And that's what negotiation is. It's understanding. So getting to yes is really for me a really influential book. And all levels of my thinking at work, and of course it was really helpful for interpersonal relationships as well. Another one may be from the same era, and this was for a while a very popular book. I don't know if it's read as often anymore, but I still go back to it sometimes, the seven Habits of Highly Influential People. It is. There's a lot of wisdom in there, and I found that I've kind of I think I first read it when I was about 20 and I've gone back maybe, every 5 or 10 years to kind of go through it. And I always kind of get a new read on it at a different stage in my life. It's kind of an interesting book where the author had just compiled, great kind of wisdom from many, many, many other people and compiled into a couple principles. So those are kind of two just kind of influential books in my life that I think anyone should read, regardless of what kind of industry they're in.
[00:44:27.24] Ed Smith: That's awesome.
[00:44:27.81] Eric Fitz: Paul, this has been so great. We were. We'll put a whole bunch of links in the show notes to your website to some of the product specs. Super exciting that you've made this shift from the kind of the B2C model to the B2B to work contractors across the country. Thank you so much for coming on the pod.It's been great.
[00:44:45.67] Paul Lambert: Thank you for having me Eric. Thanks, Ed. And yeah, thank you for having the show. Thank you for your work at amplify. And honestly, this was really fun, so I'm looking forward to hearing it.
[00:44:55.00] Ed Smith: Awesome. All right. Thanks, Paul.
[00:44:59.77] Eric Fitz: Thanks for listening to the Hip Hop Podcast. It is a production of Amply Energy, and just a reminder that the opinions voiced were those of our guests or us, depending on who was talking. If you've heard and haven't subscribed, please subscribe on your favorite podcast platform. We'd love to hear from you, so feel free to reach out! You can reach us once again at hello@amply.energy.Thanks a lot.
