William Leonard
Hey everyone. Welcome back to the Atlanta Startup Podcast. My name is William Leonard, your host for today and I am excited to be sitting down with one of the Valor portfolio founders, Connor Offut, who is the CEO of Aetos. Connor, welcome to the podcast.
Connor Offut
Hey, William, how are you doing? Nice to see you.
William Leonard
It’s really interesting. Aetos is crushing it when it comes to building in this space of innovative solutions for green buildings, the built environment, and facilities management. One thing that stood out to me over a year ago when we met you was Robin, when she first met you, our first internal conversation, was about you as the CEO. She said Connor is charismatic, extremely knowledgeable about the space, and is a rockstar, venture, and bankable CEO. I think that just speaks the world of you, especially coming from Robin. But I want to dive into your background. Connor, in your path to becoming CEO of Aetos, let’s start there. What’s your story, Connor?
Connor Offut
First off, that’s incredibly humbling. I don’t know if I deserve the praise, but I try to live up to it. Robin’s incredible. She’s been one of the most amazing board members that you could have ever asked. And she saw it. She comes from industry, right? Blackberry, AT&T, managing data centers, she immediately understood and saw the value when I presented on stage. It was amazing to have that instant connection, quite frankly. As far as my background, I like to kind of take people through just a bit of a journey here. I was born in California but raised overseas in a third-world country, primarily in Central Asia and a country called Kurdistan and then Kazakhstan. So my entire youth was in the backdrop of a country that was former Soviet Union, nodal infrastructure, a fledgling Republic, learning how to do capitalism in Central Asia, and so many things that we take for granted here in the United States, how easy it is to start a company, people who want to work, know how to work, treat free commerce, that didn’t exist over there. If you didn’t know and have some connections to pool, you couldn’t start a business. The backdrop there of seeing what the world is really like, and then growing up there, but I also had some very early access to the internet. I remember lugging my desktop computer, all the way to the PC Cafe to get non-dial-up internet to download whatever that was the latest patch of Warcraft, or get on forums and learn about computer coding and game engines. I was obsessed with that as a kid, that was kind of my escape outlet and my connection to the Western world in Central Asia. I think those are, looking back, very formidable years for me, where I learned both to handle adversity and also, even at such a young age, to grasp the power of technology. I’ll never forget such a juxtaposition scene when we were at the border between Kazakhstan and Kyrgyzstan, this is way back about 1998 to 2000 era, and it was a guy on his cell phone. That was when cell phones were just coming out. I was thinking, here’s a guy on a donkey shepherding a bunch of sheep across the border on a cell phone. I was like, wow, we’re in New Times. I like to start there because it just shows you how far we’ve come, quite frankly, in the last 20 years, and how fast technology is evolving. I built my first video game when I was 11 years old, and just kind of learning and studying on my own. I always had a vision of what technology could do in the real world. I’m very much a pragmatist in that sense. Coming to the United States, I ran a tennis academy for a few years, I dropped out of college, it was, I guess, not my speed. I didn’t really get a lot of gratification there and I was like, I feel like I can Google a lot of the things that I’m being taught in business school. I wanted to kind of just run at my own speed. I started my own tennis academy, did that successfully here in Atlanta for a better part of 10 years, and then got into green building the built environment and tried to understand how our world works and how we make it more efficient? How do we tune up these buildings to replace old infrastructure with new infrastructure but do it sustainably? I really got obsessed with the built environment, but I also saw how far behind the industry was, and it was ripe for disruption. That brings us to the desire to find Aetos to go and solve that.
William Leonard
I didn’t know that you were raised in Central Asia. I think that just even adds to your story as an entrepreneur in your journey to where you are now. I find it so fascinating that when we were diligent seeing Aetos and really trying to understand the business, Robin on our team has incredible experience with operating facilities and data centers, but the rest of our team, we’re not experts on prop tech or facilities management. There’s a lot of education for us regarding the problems in this space, and you did a really good job of showing us the problems, but also we’re able to talk with a lot of customers. But for our audience today, let’s talk about the building ops and facilities management space, how antiquated and manual the industry is, and why you are building Aetos to be a complete deviation away from this antiquated status quo.
Connor Offut
It’s a great backdrop. I would say, and I’d like to start by painting the picture that every facility is somewhere on the spectrum, it’s not really binary, they’re somewhere in the process of digitizing their world, right? Everybody has a cell phone, so nobody is completely off the grid, and yet, very few people are what they would consider fully optimized. People exist on this sort of gradient, whether you’re a manufacturing facility, a Class A commercial real estate building, quick serve restaurant, or any asset where there’s physical space, and there’s equipment to be maintained, you’re somewhere in the process of digitizing your operations in order to gain efficiency, right? The cool thing that we’re seeing here is there’s this backdrop of a push to what’s called industry 4.0. That’s a little bit of a catch-all phrase but for people listening here, what that really means is, how do we automate, digitize, and leverage technology in order to better facilitate the best practices that we would want to maintain on an ongoing basis for all of our assets? When I was starting to really get exposure to this, I was shocked, quite frankly, William. There are major facilities, and huge trusted operations that are still running mainly on pen and paper where they’re logging, when was this boiler last maintained on a spreadsheet? Not even in Excel. Then you have, okay, we’re in Excel, we’re using some documents, but where is that? Are we getting any kind of data from that? And then you have all the way to what I consider the holy grail of predictive maintenance, which is, I’m getting IoT data on every single sensor, I’m using that to action work, and I can actually holistically look at the entire performance of my assets across multiple different locations and make informed decisions. A lot of companies struggle with actioning that data, so they might get a lot of that data, but it just sits there. You still need to get people to go do things as a result of that data. For example, you might have a device that says your vibration is exceeding the threshold of accepted value for a very expensive piece of equipment, like a boiler, a chiller, or an HVAC unit, right? But if that’s just sitting there, as an alert, you still need to take that information, provisional work orders, send somebody to go inspect that machine, do the labor, track that, right? There’s a big gap between just getting that data and actioning on information. What nobody is doing is bringing that into a visual context and that’s really where Aetos is completely differentiated, right? Where we’re actually leveraging a visual technology to bring this to the cutting edge. What we’re really thinking about is, where does all this end up? Forget where we are today for a second, what is the end state, that would be the most optimal system? Well, you’d have perfect information on all your data, and you’d have a visual representation of what that looks like. You’d be able to access that on the cloud from anywhere in the world and all that data, all that information would be seamlessly integrated into your business in order to affect real change and get efficiency, right? That’s what we’re building today.
William Leonard
It’s so funny, because as a VC, and being at the forefront of innovation and learning by so many different technologies and industries, you get to learn that oftentimes, the industries you think would be most tech-forward have the highest stakes, like you mentioned, large buildings, large operations, people’s lives are on the line, but it’s being met in a completely manual siloed and paper-based fashion. I just think it’s so interesting to see that but you and the team are crushing it right now. You’ve landed clients like Chick-fil-A, Pepsi, Heinz, and even locally with Portman, I would love to talk about this customer type as a whole how you’ve landed them, and how you are transforming their facilities from day one, as being their provider now.
Connor Offut
It’s been a privilege, man. Well, we realize, especially in 2023, that we need to get good at selling to the enterprise. The barrier to entry is very, very hard. There are definitely some learning curves there but today, we are successfully delivering value for all those organizations that you just listed in and more. It wasn’t easy to get there, it took a tremendous amount of hard work. Alright, for any entrepreneur looking at this, there’s a reason that those that are successful talk about shooting losses during to the vest, it’s, it’s just a lot of work to get there. One of the things that is interesting about Aetos in terms of day one value, the immediate thing that we can bring is visibility into what you actually have. Just take a step back for a second and imagine any system of record, SAP, Google Sheets, or whatever an organization is used to consolidate it, think of it as an inventory of everything that you have, at any location. Really important, right? If you want to know, well, gosh, we want to replace all of our pumps, well, how many pumps do I have? I need to replace all of our electrical bosses, we need to run supply to this location, right? All these business decisions are based on, what do we actually have at this location? What is the current state? Well, the problem is, William, over time, people don’t keep perfect records. You might install a new, perfect piece of equipment, and never log that to your platform of record. And so your CFO is not making an informed decision, because he doesn’t know that that exists. You’d be shocked at how prevalent this problem is. You look at any database today of the assets and the inventory that they manage across their portfolio, they don’t trust the data. They don’t trust that what they have on record is a true representation of what’s actually there. Well, guess what’s the best source of data? Reality. Go scan the facility and capture everything that’s there. If there’s anything missing, we can find it, we can see from our sort of point of view of anywhere that’s connected to the cloud, you can get access to that facility and see, oh, you’ve got three refrigerators on record. In reality, I’d only see two. You’re actually over-shipping supplies to this location because you have a phantom refrigerator in your database. You need to update that. The immediate value is the consolidation of this true state of what’s actually there, across the board. And the amazing thing is William from there, that’s where the real magic starts. From there, you can start to optimize the maintenance of your assets, you can optimize the communication, and I can get on a call, just like we’re doing this interview over Zoom. We can actually go in together, look at a facility that’s halfway across the world and make informed decisions, plan, strategize, show that to a contractor, show that to a subject matter expert, and save them an entire trip so that they know the right tools to replace that piece of equipment. You start to have this cascade of value derived from that fundamental concept of capturing the true state of the world. It’s incredibly powerful.
William Leonard
As you were prefacing that statement, you mentioned that in 2023, one of the team’s biggest learnings was understanding how to sell to the enterprise, right? It’s complicated, it’s nuanced. You’re dealing with long sales cycles, you have to kind of work your way up the chain sometimes. What were some of the biggest learnings that you had when it came to finding success selling to an enterprise customer?
Connor Offut
It’s a lot of keeping your promise, it’s about to hit. Trust me, I promise. The support that we’ve gotten from you guys has been incredible, right? But it really does feel like that. The thing about selling to enterprises, you don’t have anything until you have it all. Because a new lead can take six to nine months to materialize into a serious contract. Now our strategy was, we believe that if they try it, they’ll buy it. We landed a lot of pilots and early proof of concepts in 2023. We had this core conviction that the industrial space would just see tremendous value from Aetos because the maintenance management of their equipment is directly related to their EBITDA, production capacity and downtime, and operational efficiency of all those assets. We had this core conviction, but we didn’t have any industrial leads. The new leads that we were nurturing in February and March, didn’t materialize into deals until October, November, and December. I guess any other entrepreneur that’s trying to get into the enterprise, just realize, you’re walking into this canyon of despair, where you’re hoping and believing that it’s going to transact, and you’re gonna get this big prize at the end, but you don’t know, for six to nine months. You need to have a spine, you need to have conviction, you need to work incredibly hard, and constantly listen to your clients. What are they telling you? Where is the value? There’s something that we can land that is strong enough that it will have the legs to go right all the way internally within the organization to have a transacting event. Also get ready to roll up your sleeves, get your SOC2, and your cybersecurity, get your MSA process in place, and make sure you’ve got a good legal team to evaluate these contracts. You don’t get these things done without a level of sophistication that sort of the SMB or B2C types of strategies can get away with. You need to be buttoned up, you need to have a sophisticated product, and you need to have a really good engine behind it in order to get them but once you’re there, it’s really worth it. It’s incredible and you can build these lifelong relationships. It’s been incredibly rewarding.
William Leonard
I think that’s a really great point around having the SOC2, having lawyers review your contracts, ensure that if you’re a SaaS company, you want to make sure you have a SaaS contract in place, and that the work represents that. That’s a huge thing that a lot of investors harp on and founders do as well. Because when you think about your company and fundraising, all of that impacts it. It’s a tangential effect at the end of the day. Really interesting insights, Connor. I wanted to get your perspective on fundraising. It’s historically a black box for founders. A lot of our audience are early-stage founders, pre-seed, sometimes series A and B, but you successfully raised a few rounds of venture financing. Curious to hear from your perspective, two to three insights for increasing the odds of securing venture dollars that you’ve discovered as a CEO of Aetos.
Connor Offut
So first off, understand exactly what you need. Don’t take more than you need. I think that’s something that people say, but when somebody offers you a big deal, you need to be prepared to evaluate that realistically, right? Hopefully, you can get there. Start the conversation with what you need, because they’re going to grill you on that anyways. Hey why do you need this amount of money, you need to have a really good plan, if you’re asking for a lot of how you’re going to deploy it. You know, a lot of times I see founders that are trying to go bigger than they need to. And really, they just need a little bit more product market fit, a little bit more revenue, and a little bit more conviction to get the round that they really want and then it’ll be at a higher valuation, right? So think about where you’re at, where’s your product? Where’s your revenue? Where’s your opportunity? And then size bounds based on what you actually need in order to get to the next milestone, right? That would be my first little advice. The second is, that you can’t have skeletons in the closet, man. They’ll find it. There’s this thing called due diligence where they rip apart every contract, they look at your employment agreements, they look at your cap table, they look at your structure, they understand your clients, and the earlier you are, you have a little bit more grace around a lot of these things. I remember when we did our Valor round. Those contracts are not great. We’ve improved a lot but you guys saw enough of the air, transacting events with incredible enterprise clients that there was enough substance there. The best thing that you can do is be truly a valuable company, you have to stand out from the other 99 that are pitching the same venture firms that you are and don’t get to the Yes. The best way to guarantee that you’re gonna be successful is just to run a great company, have a great team, have a great product, have momentum, and have defensibility. If you focus on those things, then they’ll come to you. You’ll be turning people down rather than chasing people for a yes. Focus on the things that really matter. The last thing is, guys, it’s no secret, but fix revenue. If you don’t have a sales engine that works, that you know the insides and outs of it, that you can put more money in and grow revenue, you’re not focusing on the right things. The product is super important, and product market fit is super important, but if you don’t know how to grow revenue, you’re dead in the water. Fix that early and make good hiring decisions around who you bring in, to grow that with you. Because every investor is going to want to see that you can grow away from founder-led sales. You have to bring in the first four or five deals yourself if you’re a founder. You have to, nobody else is gonna do it for you. But after that, you need to show them that, okay, this is not just a founder gimmick, we can actually have somebody else go take a lead and grow it from start to close, without you in every single conversation. That’s tough to find. Make sure you screen the right candidates until you find that the sales leader or the sales guy you need to carry the torch from the founder.
William Leonard
That’s a really great point there on founder-led sales. At this next sort of inflection point of growth in the business, you have to hire the right head of sales. Oftentimes, we help with that as a VC and a venture firm. But oftentimes, a founder can also do that on their own. Really great insights there, Connor. As we wrap up the conversation here, Aetos is solving problems on a multibillion-dollar vertical, right? As the company continues to grow, it’s so funny, that everyone’s talking about AI right now. What makes a lot of AI companies extremely valuable and differentiated from the other 50 AI companies that are building the same exact vertical, is the uniqueness of data that they have. Aetos is just accumulating so much rich, raw data, right? You’re scanning the world, you’re getting deep, intimate knowledge of facilities, and it’s not just abstract, 2d data. You all are getting real data points on reality, as you mentioned earlier. I’m curious to hear what is your grand vision for Aetos years down the road from now.
Connor Offut
Great question. Wow, it’s such a good framing of the position that we’re in. I think this is maybe something that has become even more clear to me, especially over the last six months, that we’re actually sitting on a goldmine here. This is way more valuable than I could have ever predicted. I mean, I knew my gut was saying that this is going to be valuable, right? If we’re training in the real world, we’re understanding what maintenance procedure leads to the most optimal performance of the asset and pairing that with the physical representation of all those step-by-step procedures that need to take place. Surely, that’s going to be valuable. I was looking at the quarter recently and looking at some statistics, the average seed stage valuation has actually stayed fairly consistent, but it’s skewed entirely by hyper-inflated valuations for early-stage companies that have exorbitant value of their data. So if you just take those out, we’re actually seeing seed-stage valuations go down and series A especially, going down. Just ARR growth, subscription-based revenue is not being valued at the same multiples as it was before, but the mean is still the same because these data plays are just so, so outsized, and we’re looking at 40 to 80 times revenue in some of these cases if there’s really a moat and surreal defensibility there. That’s a little VC ask, but I think what really excites me is, that this is gonna change how people manage and run the world. If you think about our clients, we’re looking at the backbone of our GDP. Clients like Chevron, Chick-fil-A, Oglethorpe Power, and Pepsi. We’re really scanning the production facilities of the world, and learning to understand how to optimize them based on this visual data. If you take that to its end, I really do see a world where Aetos is able to autonomously scan and capture a facility, immediately understand where there are inefficiencies in processes and assets, and then immediately suggest and implement the strategic initiatives to the holy grail of how it ought to be run, based on all the accumulated knowledge that we’ve possessed and then we’ve trained on. I don’t want to get people scared, but that kind of puts a lot of these consulting jobs out of business, doesn’t it? We’re displacing the consulting labor and turning it into intelligence. It’s pretty exciting. I think that we’re just starting to scratch the surface. And the beautiful thing is, I was thinking about this the other day when people would have to pay to go in and collect this, but we’re delivering so much value as an operating system of VMMS, where they can immediately see the value of the work order system, the training, the ACID data aggregation, that were able to collect this with our clients and give them results so much faster than they would have before, where now an operator can just interact with their facility and understand what is my most inefficient process, who are my employees that are crushing it, and how do I copy what they’re doing across all my portfolios? We’re able to give them that information in a tangible way. This is the pragmatic application of artificial and generative intelligence. Now we’re sitting on, I think, one of the most exciting treasure trove of that data that the world has ever seen.
William Leonard
I agree. Our team agrees and that’s why we’re excited to continue to back you as you go on this journey of building and scaling Aetos to transform the built environment. Connor, I think that’s a great place to wrap. I really appreciate your time today, man.
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