An Interview with Graeme Rae & Costas Soler - HyperKelp Inc.

1. What is the problem you are trying to solve? 

Remote sensing misses basically half of the ocean on any given day. Weather comes from the ocean; everything comes from the ocean. So if you want to measure wind speed over Minneapolis, or you want to know whether it's going to snow in the Alps, you've got to know what's happening on the surface of the ocean in a previous couple of weeks. When you measure temperature or wind from space, it's often two or three days old. Right now, the data from the ocean surface is patchy, at best.

2. How did you come to work on this problem?

So initially, we were working on a NOAA phase two grant together. The mandate there was basically for us to build an affordable, modular water quality monitoring platform that would serve the needs of citizen scientists. So we built the KSB, the Kelp Smart Buoy, as basically exactly that sensor-agnostic hosted payload platform. And the point of that was to be able to work with as many different sensors as possible. Once we started looking for customers, we started to get some surprising requests for sensors. One of the most memorable requests was from Lockheed Martin, they basically asked us if we could host a sensor that will detect missiles flying over the water. So once we started researching that problem, we found out that not only was the answer, yes, we can do that– it turned out that sensors mounted on buoys were the most efficient way to track threats moving on and over the ocean surface. So that's, I think, the meandering path for how we got to doing this.

3. Resiliency in founders is crucial, as nothing ever goes exactly according to plan when starting a business. Tell us about a time (either in this business or another experience) when you struggled or had a failure. What did you learn?

I think one of the most depressing things was writing proposals and getting turned down. We sent in five new proposals last year, and they all got shut down. And even with ridiculously high scores, they still didn't get funded. And it was just the amount of work that we put into writing those things, which were beautiful proposals– we didn't get one. The other thing that we've struggled with, and it's not really the struggle, but it's sort of the use of time, is actually fundraising. We've spent so much time fundraising, talking to venture capitalists, talking to angel investors, and talking to everybody. And the same thing, you do all of that work, and almost all of it goes nowhere. And part of that is while we're fundraising, we're not working on our buoy systems. So it's just difficult and time-consuming.

4. Who is your ideal customer?

We have a couple of customer sets, we are a dual use platform. So there are different shapes of dream customers. On the government side, the wealth of government people is the size of a country. I think very broadly, there are signal intelligence and maritime domain awareness customers throughout the government to name a few organizations, there's Indo Paycom, pack fleet, navor, NORAD, North com, the list goes on and on, there are lots of acronyms filled with people who need the type of data we can deliver. On the commercial side, there’s a huge variety of commercial markets, the ones who want to go after first our marine researchers and scientists, as well as weather forecasters and climate scientists.

5. Why are you (and your team) the right people to solve this problem?

I've got a PhD in ocean engineering. Costas has two degrees in Marine science and astrophysics, so we make a perfect team. Costas is ridiculously smart, he's unbelievably dedicated and has endless energy. As you can see, I'm ridiculously old, maybe somewhat wiser. But I've got a lot of experience in this world. So I taught engineering in college, which means I've got a Rolodex a mile long of former students and colleagues. It's just an amazing availability of contacts. And then I think the other thing that really, really helps is we are both exceptionally optimistic. I do not think you can have a startup without always hoping and wishing for the best.

6. How is your product/service 10X better than what’s already out there?

I think the cheeky answer is this: there's nothing like this. That's why it's better. I think the more thoughtful answer is we're getting maritime data, but we're doing it in a way that is intended to make us a monopoly. We're doing it in a way that no one else is doing. We're basically using buoys to do the job of a satellite. That's why we're better– no one else has a platform that can do this. No one else has a data infrastructure that can build the data products that we're building.

7. Walk us through your business - business model, economics, how you make money.

Our business model is really, really simple. We are going to deploy buoys as fast as possible using our DOD contracts. We are going to gather vast amounts of persistent data about the ocean. And the way we're going to make money is we can sell subscriptions to those data feeds, and we can resell the aggregated data.

8. Can you talk about current traction? Sales, users, growth, retention, etc.?

We've worked with NOAA and North[throp] Grumman. Those are our first customers, and there's some other agencies that we're not allowed to name right now. Right now, we're going into customer discovery. This is the next phase of our business. And we're getting really, really positive feedback from everybody we’ve talked to. And we're getting an awful lot of feedback on how our product can be better as well, which is really useful.

9. Tell us about the market you are addressing.

There's two, we're a dual use platform, which means we've got two parallel markets. We've got the government, particularly a maritime domain awareness, which largely revolves around missile detection systems. But it also revolves around ships and submarines, to some extent. And then there's also sort of a Homeland Security Avenue there as well for anti-drug smuggling, anti-human smuggling, things like that. And then there's the commercial side of things, which we've sort of hinted at earlier to, which is weather forecasting, climate, science, ports, and harbors, aquaculture- which is going to be enormous over the next 10- 20 years,- renewable energy farms, people are putting out wind farms, current farms, wind farms, they all need either baseline monitoring or security, or just monitoring the conditions around those. We're perfectly placed to do all of those.

10. What is your vision for the future of the industry you are operating in?

Right now, there's really not much IoT in the ocean, there's smart buoys that are focused on really specific sensors, but that's about it, there's no platform that can just break open the wealth of data that's on the ocean surface. It's difficult to measure what's happening on the ocean surface– satellites miss over half of it every single day. And as the climate changes and the weather becomes more erratic, it becomes even more difficult to measure the drivers of global weather and the global environmental conditions. So in a couple of years- not everyone agrees with us on this- but in a couple of years, we think that the only companies that are able to navigate the world and the only navies that will be able to safely navigate the ocean will be the ones using our data. That's what we think the future looks like. It's scary, but we're building the tools we need to get through it.

11. What are some of the biggest obstacles you see in the next 6-12 months?

From a business standpoint, the biggest obstacle we faced over the last year, and one that we probably will face over the next six months, is funding. But we see vast opportunities for us in the next few months. Our pipeline is well-filled right now, and it's not an imaginary pipeline full of wishful thinking. These are people we're actually in serious negotiations with right now. The other obstacle that we have faced and we are going to be facing is dealing with the DOD. Everyone told us at the beginning that this would be a very hard road to take. They told us it would take us about a year to start reaching the right people. And that's been accurate within about a month, and we're finally making the contacts and starting on the contracting with the DoD contacts right now. 

12. What is your long-term (i.e. 3-5 year) vision for this business?

We built this business because we believe that our survival as a species depends on our ability to understand the ocean. Today, we as a species do not have the tools to do that properly. So over the next three to five years, we are building the tools and the data infrastructure we need to take to remove that uncertainty from the question of whether we'll be able to live on Earth.

13. What are potential exits for your business?

There's a really clear path to an IPO for us. With this change in climate data, it just makes it hard to gather remote measurements. So ocean data is going to be critical to everything from governments to large companies. Everybody depends on ocean data, even if they don't realize it. The other possibility is for us to sell in the next three to five years, either to one of the larger defense primes or to smaller Defense Department. 

14. Why have you chosen to raise via equity crowdfunding vs. other traditional capital-raising methods?

We've tried lots of different ways to raise money. This one seemed like a really interesting one. And one of the things we really liked about it is that we get immediate feedback and guidance from people with experience in space. And because we're approaching the maritime domain like the space domain, a lot of those things crossover such as the way we're doing business, and that's been really useful. The other thing we really liked about Spaced Ventures and crowdfunding in general is it reaches people who get us. We would spend time with traditional VCs where you'd have to get them up to speed about marine science and about the marine world, about ocean data and things like that. But by opening us up to a whole world of potential investors, you're immediately going to reach the investors that are in that world. And then we don't have to convince them of our business model and the need for our data.

15. What brought you to equity crowdfunding and how do you intend to use the money you raise this round to scale the business?

Fortunately, we're building off of a really mature product. The hardware, the buoys, and the enterprise software, the ocean data dashboards don't require any more development to start serving customers, they're pretty much good to go out of the box. What we need now is to actually just get the stuff we've built into customers' hands, and as we do that, build the data infrastructure we need to maintain and feed into these big data products that cover the scale of Earth. So to do that, we're going to use the funds to hire a business development specialist and also a large scale data engineer.

16. Anything else you would like to say to investors who may be on the fence? 

One of the concerns we hear from investors a lot is that we're too hardware focused and we're too focused on government customers. So I'll answer these in kind of an order. Well, it does look like a hardware play. At first glance, our plan is to follow in the footsteps of Earth Observing platforms in space like Spire and Planet Labs. So again, just like just like these guys did in the near term, while we're an early stage customer, we're deploying our sensor infrastructure. So yeah, we have to deal with hardware. But this ultimately lets us offer and maintain comprehensive ocean data as a service which does not exist today. To preempt the question about dealing with the government, this is one of the other reasons we are applying a space-leaning business model to the ocean. So just like Spire and Planet Labs, rideshare payloads for government customers who are traditionally a little more willing to foot the bill for hardware infrastructure. We're also doing the same thing with our smart buoys. We can ride share custom payloads for government customers and use that to deploy hundreds of 1000s of buoys onto the ocean surface. Once we've done that, by ride sharing commercially valuable sensors, we can leapfrog other commercial ocean data competitors, literally in a matter of weeks. So it's a longer way to get started, but as soon as we get a medium-sized government contract, we pretty much instantly become hyper-competitive in commercial markets.

17. What’s a fun fact about you/your company that not many people know? 

When we had our first ever business development meeting, which was in my back garden about a year ago, one of the things we needed to do was come up with some names of things that we were building. And you can see behind me we've got two buoys here, the white one and the big yellow one in the back. And for want of a better term, we named them the BYFT and the SBFT. That stands for the big yellow floaty thing and the small black floaty thing. Now they've been turned into the KSPs, which are the Kelp Smart Buoys. Another fun fact is on one of our very first ocean deployments when we were younger, and not quite as experienced in ocean deployments, one of our buoys broke free from his moorings and shortly thereafter lost its communications as well. So we wrote it off as it's just the price of doing business in the ocean. About four months later, and after about 150 miles at sea, the buoy washed up about a mile away from where we're sitting right now. So we just drove down to the beach, picked it up and brought it. 

18. What do you do for fun when you’re not busy building this company?

Costas: I try to maximize my time on my surfboard and also my skimboard, that's what I do with my free time. I also build a bunch of robots, take care of aquariums and I got a bunch of coral tanks.

Graeme: I try to surf as much as I can. It's nowhere near as much as I used to when I was younger. But I have two young boys, so I spend a lot of time with them. I coach their soccer teams, which is really, really fun and entertaining. And for fun for myself, I get beaten up trying to do jujitsu.

HyperKelp is raising on Spaced Ventures. View all deals here.