The earth is an incredible source of energy and there are three sources to choose from – energy generated from the sun, the mantle, and the core. However, traditionally we have only sourced energy from the sun for consumption. What if we were to harness the other sources effectively and efficiently? That’s where Dandelion comes in. It is an energy startup that brings geothermal heating and cooling to homeowners. The company replaces existing heating and cooling installations that typically rely on fossil fuels with their innovative system that harvests energy from under your home. Currently available in parts of Upstate New York, the savings to homeowners is tremendous with minimal environmental impact when using Dandelion.
AlleyWatch sat down with Dandelion cofounder and CEO Kathy Hannun to learn more about how the company’s technology works, its future plans, and its recent round of funding.
Who were your investors and how much did you raise?
Dandelion announced that we hasveraised $4.5M, bringing our total seed funding to $6.5M. The round was led by New Enterprise Associates (NEA), with participation from BoxGroup, Daniel Yates, and Ground Up, as well as prior investors Borealis Ventures, Collaborative Fund, and ZhenFund.
Tell us about Dandelion.
Dandelion is a residential geothermal company that offers homeowners clean and cost-saving heating and cooling technology. Dandelion’s innovations have cut the cost of home geothermal heating and cooling systems in half. The company’s geothermal systems provide heating, cooling, and hot water, and include built-in performance monitoring and a Nest thermostat.
What inspired you to start Dandelion?
We started this project because we realized millions of homeowners are using expensive, truck-delivered fuels because they don’t have access to better options today. We knew if installing a geothermal heat pump was a simpler and more affordable process, these homeowners would have access to a better product that’s also better for the climate.
How is it different?
Dandelion’s innovations have cut the cost of home geothermal heating and cooling systems in half. The company’s geothermal systems provide heating, cooling, and hot water, and include built-in performance monitoring and a Nest thermostat.
What market you are targeting and how big is it?
Dandelion is initially targeting Northeast homes that burn oil and propane. There are about 7.3M homes.
What’s your business model?
Dandelion sells geothermal heating & cooling systems to homeowners and works with local installation partners to get the job done.
Right now, how does the cost of geothermal solutions compare to the cost of conventional systems and when do you think it we will hit the inflection point when it will be comparable?
Dandelion geothermal is already more cost-effective than oil or propane heating. Customers often save 20% annually, starting right away, paying nothing up-front. For example, one customer needed a 4-ton system, which is the size most homes require. He formerly spent $2,621 on fuel oil annually (832 gallons over the year at $3.15/gallon). To run geothermal, he requires $803 in additional electricity costs. With Dandelion pricing, starting at $115/mo, geothermal heating costs for his home are $1,380 + $803 = $2,183. This is about 20% savings annually for heating alone. His air conditioning will also be over twice as efficient with geothermal than it was with conventional a/c. We expect to be cost-competitive with natural gas in the future as well.
What was the funding process like? What are the biggest challenges that you faced while raising capital?
One of the biggest challenges in raising money for Dandelion is also what I think makes the company particularly compelling as an investment: we are doing something original. There aren’t many example companies to point to that did something similar. On top of that, many investors aren’t familiar with home geothermal, many Silicon Valley investors don’t have as personal an experience with how critical heating and cooling is (because the weather is so temperate) and energy and hardware tech for home conditioning are not crowded sectors right now for investment.
All of that said, the fact Dandelion is working to define a new industry is one of the things that ended up attracting the investors that did come on board for this round. They recognize the size and potential of the opportunity and that the fact Dandelion is charting a new path means the company could make outsized returns.
Paul Graham writes about this tension in a piece of his called Black Swan Farming:
…The best startup ideas seem at first like bad ideas. I’ve written about this before: if a good idea were obviously good, someone else would already have done it. So the most successful founders tend to work on ideas that few beside them realize are good. Which is not that far from a description of insanity, till you reach the point where you see results.
The first time Peter Thiel spoke at YC he drew a Venn diagram that illustrates the situation perfectly. He drew two intersecting circles, one labelled “seems like a bad idea” and the other “is a good idea.” The intersection is the sweet spot for startups.
—Paul Graham, Black Swan Farming
What factors about your business led your investors to write the check?
Our investors understand that our home heating infrastructure is outdated and that geothermal is the future of home heating and cooling, so they are excited to participate in this transition.
In the words of one our investors for this round, Daniel Yates, “Over the next decade, homeowners across America will replace their expensive, conventional home heating systems with Dandelion geothermal.”
What are the milestones you plan to achieve in the next six months?
Our next big milestone will be launching our new and improved product offering in May and expand across New York State and other parts of the Northeast United States.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Because fundraising timelines are often very uncertain, Dandelion used the months ahead of our most recent raise to audit and organize our company’s expenses, review and refine our company strategy and roadmap, and make sure we were spending money to most efficiently achieve our goals. This process was extremely helpful because now that we have a fresh injection of capital in the bank, we can execute with confidence against a well thought out and detailed plan and we can operate knowing we’ve been rigorous about cutting unnecessary expenses.
Where do you see the company going now over the near term?
In the short term, we’re working through our sales backlog and bringing additional installer partners onboard to grow our operational capacity and make Dandelion geothermal more widely available throughout NY and, soon, the rest of the Northeast. We will continue to announce new product developments throughout the next few months.
What’s your favorite restaurant in the city?
My favorite NY restaurant so far is Bar Bolonat, but I am still a new resident in the city and looking forward to trying all the great restaurants my friends tell me about!