YC Winter 2018 application

We think the YCombinator application format makes a quite good general description of our startup. Further it might serve as inspiration for other startups so why not put it online! We replaced sensitive parts with … or X.

COMPANY

Company name: KiteX

Company url, if any: http://kitex.tech

If you have a demo, what’s the url? For non-software, demo can be a video. https://youtu.be/Kbe4u23m5MM?t=20s

Describe your company in 50 characters or less. We make very efficient wind turbines that fly.

What is your company going to make? We are developing a new type of (flying) wind turbine that does not need a tower or large foundations and because of this its material usage is around 10 % of a conventional turbine. Long term it can cut the price of utility scale wind energy by more than half.

The other great advantage over traditional systems is that shipping, installing and servicing it takes only minimal infrastructure. This opens up vast geographies in the developing world, currently underserved by wind energy - often not electrified at all.

The wind turbine works on the same principles as looping kites or sailboats on a reach and is controlled using drone technology.

A tentative datasheet for our future first product can be accessed here.

Which category best applies to your company? Energy

Is this application in response to a YC RFS? No

Where do you live now, and where would the company be based after YC? Copenhagen, Denmark / SF + Copenhagen

CONTACT

See contact-link.

FOUNDERS

Please enter the url of a 1 minute unlisted (not private) YouTube video introducing the founders. https://youtu.be/MjIB47x3I7M

Please tell us about an interesting project, preferably outside of class or work, that two or more of you created together. Include urls if possible. We worked together in Vaavud, the largest smart wind meter/wind measurement crowdsourcing startup. Andreas had started the company, designed the hardware and written the signal processing software. Gustaf joined later and worked on software. Vaavud was featured in the first 8 seconds of Apple commercial “Dreams”: https://www.youtube.com/watch?v=bSPZzMNtpKs

Additionally, Gustaf and Andreas worked on a Dropbox for data project called Purple with which we applied to YC last summer: https://www.youtube.com/watch?v=boCkAD_9XSw

How long have the founders known one another and how did you meet? Have any of the founders not met in person? We have worked and kite surfed together since 2014, when Gustaf joined Andreas’ startup Vaavud.

PROGRESS

How far along are you? We have a 1:4 scale prototype that can fly autonomously in the desired patterns. Our aggressive plan is to initiate a full scale pilot in 2018 and mass production in 2019.

We are in contact with potential clients and project developers (in most cases they would be the ones commissioning our turbines) from several geographies.

How long have each of you been working on this? Have you been part-time or full-time? Please explain. Andreas has been working full-time on the project since June 2016 except for smaller freelance programming projects. Gustaf worked part-time initially, also spending time on freelance work but full-time since February 2017.

Which of the following best describes your progress? Prototype

How many active users or customers do you have? If you have some particularly valuable customers, who are they? We have no clients yet but we are talking to potential future clients of our first product, planned for 2019. This includes both end users and project developers, and the most promising and useful one so far is perhaps X…

We also have high hopes that E.On will be a client in the future, given that they believed in us enough to include us in their accelerator programme.

Anything else you would like us to know regarding your revenue or growth rate? While we don’t have any revenue yet we could mention that we have been progressing very fast on the technical side, with an autonomously flying prototype within a year. In fact a well funded and long tenured competitor recently contacted us asking for our assistance in developing their flight controller, based on our open source work on github.

We have also moved quickly on the business side, having formed many relationships and dug deep into the business case.

How much money do you spend per month? X

How much money does your company have in the bank now? X

How long is your runway? X

If you’ve applied previously with the same idea, how much progress have you made since the last time you applied? Anything change?

Business:

We have priced out the first product, run simulations with actual wind and energy usage data for potential client sites and calculated exact savings. We have developed business cases based on our production costs, typical client energy costs, usage etc, under the major relevant business models (“turn-key” and “power purchase agreement”), and based on this we have made a business plan and budgeting.

Relationships:

We have joined Innovation on Wings, a project at University of Southern Denmark giving us access to drone experts, composite production facilities and a testsite. 
 Talked to competitors and industry experts such as: X, X, X, X, X, X as well as one key X.
 We also built relationships with academia: PX4 (the team behind the flight controller stack), ETH Zurich power electronics department, Technical University of Denmark wind energy department.

Built relationship with off-grid providers like:
X, X, X, X, X.

Company:

We have secured funding from two wonderful business angels, a VC and the accelerator program of the world’s largest energy company, E.On.

We have engaged two employees as well as two new advisors, one ran a company selling solar power in Africa, the other has a very innovative company that uses cheap technology and clever processes to monitor and repair rural roads in East Africa.

Tech:

While the focus during the period has definitely been on the business side, we have managed to make some technological progress.

We finished building prototype 5 (actually two of them) and have succeeded in making it autonomously fly in loops, as well as transition into and out of looping. We have written simulator software that lets us quickly test and iterate on the physics and control schemes of our kites, as well as several helpful tools such as a parser-visualiser for flight logging data.

If you have already participated or committed to participate in an incubator, “accelerator” or “pre-accelerator” program, please tell us about it. We are part of E.On’s accelerator program so E.On, which have already invested in two other kite wind energy startups, now has a small equity interest in our company and this have been very helpful in giving us access to relevant people.

IDEA

Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you’re making? Producing cheap clean energy using kites is both a worthy goal and an incredibly fascinating technical challenge (especially for kite-surfers), requiring the fusion of multiple competencies (of which we already have many). While the basic theoretical concepts are solid and known, the solution space is still vast and there is large sense of pioneering spirit about it.

The project has the potential to make a huge positive impact (with commensurate profits) and we strongly believe that kites are the future of wind energy and that this technology can make wind energy, and renewable energy in general, the cheapest option in most places.

While kite energy proper is a very new field with few experts, we do have an advisor with 19 years of domain expertise from wind power and another with a background in integrating renewables into micro-grids in East Africa, our initial market.

We have priced out our initial 100 kW system (to $145 k) and validated a demand in our initial target market given this price and power output, talking both to project developers and potential end customers. Existing renewable (hence intermittent) solutions at higher price points than ours have proven quite viable at numerous sites.

What’s new about what you’re making? What substitutes do people resort to because it doesn’t exist yet (or they don’t know about it)? Compared to traditional wind energy using our technology can significantly lower costs, and also unlocks the vast untapped wind resources of places like rural East Africa where infrastructure for traditional wind turbines (good roads, giant cranes, bulldozers etc) is lacking.

In terms of current substitutes (for our first stage product) most sites in these locations use diesel (or worse, heavy fuel) generators. This very expensive solution hampers the growth of business.

Most households lack electricity and almost everyone uses biomass to cook food, leading to deforestation and respiratory problems.

Who are your competitors, and who might become competitors? Who do you fear most? From a technological standpoint, there are a few dozen companies in various stages working on kite energy. We have been in contact with many of the most promising ones and have been struck by how focused they tend to be on research, making for a solid product but very slow progress.

Having said that, X, X, X and X seem to have the best combination of technological expertise and business acumen.

The elephant in the room, Makani - our most well funded competitor that is owned by Google X - is going straight for the utility market whereas we will start from the bottom with smaller, distributed installations so they are not a direct competitor at this stage.

From a market point of view, in the remote micro grid market we are mostly competing with solar panels in supplementing or replacing diesel generators. The projections we have seen do not indicate that solar will undercut kite energy in the coming decade, but even if that happens there are large parts of the globe where solar will never be the best option.

What do you understand about your business that other companies in it just don’t get? We believe that the best approach is to quickly produce something that is good enough to sell to someone. Therefore we do not focus on things like optimising aerodynamic efficiency or writing our flight stack from scratch. Our contacts with major players in energy and wind turbines clearly indicate that there will be time and plenty of money for that later if we can only show that the concept works in practice.

In terms of technology, we believe that it will be very difficult to reach acceptable risk levels for the majority of our competitors that have solutions where the kites have to land and take off like airplanes (rather than quadcopters). Conversely, we think they overestimate the complexity of a dual kite system, relative to the rewards - it’s not that much harder.

As mentioned Makani is focusing on grid size systems… We strongly believe that instead going to this market by way of the micro grid market will give us much better chances to mature and start price competitive mass production of the larger systems once we reach that point.

How do or will you make money? How much could you make? The end game is to upend the $ 200 bn global wind energy market where the current leader (Vestas from Denmark), has annual revenues of around $ 11 bn.

In the shorter term we believe we could manufacture and sell a mix of systems for $ 550 m in 2024. This would involve creating 470 MW capacity, which for comparison is about the capacity of a large wind farm.

The two main business models are: to sell (and service) systems, and to sell energy from SPVs that are part owned by us. The latter model is called PPA and is very common, quite lucrative but more capital intensive.

How will you get users? If your idea is the type that faces a chicken-and-egg problem in the sense that it won’t be attractive to users till it has a lot of users (e.g. a marketplace, a dating site, an ad network), how will you overcome that? Our go to market strategy has three stages. It can be summarised as “start with a small system and sell it to clients with high margin businesses that have very high alternative energy costs, then gradually go for more mature markets where the volume is larger but margins smaller”.

  1. Sell the 100 kW version in X and X. Many coffee growers, sawmills and other small businesses there are located far away from the grid (which in any case is very unreliable) and have very high energy costs for their diesel generators, which typically gives an investment into one of our systems an IRR of over 60%, more than high enough even in this region. At the same time poor infrastructure makes traditional wind turbines unviable.

Both countries have rural electrification programs and a third of grid electricity is provided by private actors so there is great openness.

….

  1. Finally for the long term, we plan to build very large systems (5-10 MW) for the grid in developed countries. Here we will have great help from our relationship with E.On and the connections we have made at Vestas, Dong Energy etc.

EQUITY

What kind of entity and in what state or country was the entity formed? Denmark, LLC.

Please describe the breakdown of the equity ownership in percentages among the founders, employees and any other stockholders. X

List any investments your company has received. Include the name of the investor, the amount invested, the premoney valuation / valuation cap, and the type of security sold (convertible notes, safes or stock). X

Please provide any other relevant information about the structure or formation of the company. X

Are any of the founders covered by noncompetes or intellectual property agreements that overlap with your project? If so, please explain. No.

Who writes code, or does other technical work on your product? Was any of it done by a non-founder? Please explain. Both founders participate in designing and building the hardware and software (mechanical, aerodynamical design, electronics and ground control and embedded flight control software), but given our backgrounds Gustaf is more focused on the software and mathematical side of things, whereas Andreas skews towards the hardware and engineering.

OTHERS

If you had any other ideas you considered applying with, please list them. One may be something we’ve been waiting for. Often when we fund people it’s to do something they list here and not in the main application.

Renewable cold storage and transport in Africa. A major drawback of most renewable energy sources is that they are intermittent and time-shifting with batteries is still quite expensive. Energy production is also geographically localised and the energy needs to be distributed to a larger area to become really useful. Now ice blocks have been used for millennia to store and transport cold (and hence energy) in a very efficient way, It seems clear that a clever combination of a good business model, good processes and some frugal innovation could be used to radically improve the currently very poor state of cold storage and transportation in Africa with the help of wind and solar energy.

Please tell us something surprising or amusing that one of you has discovered. In Shenzhen it’s sometimes faster to receive your embedded device by the post than to download the source code for the toolchain. Further, most hacker spaces provide VPN backed wifi despite being government funded…

CURIOUS

What convinced you to apply to Y Combinator? We’ve been in contact in various contexts with numerous YC alumni and they all have had very positive experiences of the program and the network.

The week we spent in SF for the previous interviews also showed us how useful the mere presence in the Bay Area can be for connections for both funding and development!