The transcription of the video is below. 

 Introducing Cynthia Adams and Pearl Certification

Nico: Hey, welcome back solar warriors. If you’re new to the show, I just want to say thank you for giving us the only non renewable resource that you’ve got. I won’t get back. So hopefully you get a return on that investment. That is your time and your attention of course is a precious resource as well. And I’m glad that you’ve dedicated both to the next 60 or so minutes.

Of your education. Today’s entrepreneur is someone that I met serendipitously while I was traveling to Earth X down in Dallas this year. Cynthia Adams is an entrepreneur who has experience across the construction landscape as well as policy and developing sustainability protocols and green building standards for the last couple of decades.

Cynthia identified it. We just don’t have a way to help homeowners value homes that have made substantial sustainability or green updates the way that we do in the commercial space. If you like me have worked in the commercial space, you’re familiar with lead. A certification protocol that ensures that buildings get graded and qualified for the sustainability measures they put in place.

Well, as you’ll hear today, that doesn’t exist for homeowners. And as a result, tragically homeowners who thought they were investing in an improvement to their home, which in fact, we all agree they are, are getting docked for things like solar and other efficiency upgrades. Pearl certification is here to solve that.

We’re going to hear how the idea and the business occurred to Cynthia. As we get into the story, I hope that you will take a moment and subscribe to the show. If you listen through, and this turns out to be exactly the kind of thing that you’re looking for education to help you improve your business or your career.

As you seek to make meaning in the clean energy revolution, you’ve found the right place. More than 600 episodes in our back catalog are proof that we have invested time. interviewing the who’s who of the industry on the front lines taking on climate change through energy transition and transformation.

For now, let’s get ready to tune up your skills, Solar Warrior, as we tune into another powerful conversation here on Sunkast.

I want to review something that I found on the PEARL certification website by way of introducing Cynthia Adams. It says every home has a story, just like the family that lives in it. My education on how a house can impact your life began quite personally with a family member who developed Asthma like symptoms after moving into our quote new home that had moisture issues and quite sketchy ventilation.

I think we can all, uh, appreciate that. Certainly those of us live in the south, whether it’s a health comfort or high bill issue, we don’t have to just quote put up with our homes with pearl. You get a chance to help own homeowners of existing homes, upgrade what they’ve got into the comfortable, high performing and affordable to operate home that they deserve.

Uh, that of course is on the homepage of Pearl certification. The founder of Pearl is Cynthia Adams. Cynthia, I’m so glad to finally have you here on

Cynthia: Sunkast. Thank you so much, Nico. I couldn’t be more pleased to be here today. Excited for the conversation.

Nico: Absolutely. So I’d love to ask, uh, well, I’d like to start off in the beginning.

I’m a bit of a quote hoarder. And so I’d like to start off with some of my favorite or most inspiring quotes. Today’s quote is by Annie Dillard. And it’s quite simple. The way we live our days is the way we live our lives. It’s a reminder to each and every one of us that, uh, you don’t have to look to the past or the future, but rather what you’re doing right now as evidence of what tomorrow is going to look like, uh, because success leaves clues and hopefully you are taking action.

Certainly listening to the podcast is one. Concrete action you can take towards living today in a way that’s going to impact yours and many other lives in the future. Cynthia, do you have a quote that you find particularly inspiring you’d like to share with the Sunkast audience?

Cynthia: Sure, and I’ll also say that I’m a big Annie Dillard fan, so I love the quote that you shared.

Mine is from the poet Rumi, and it is, You are not a drop in the ocean. you are the entire ocean in a drop. And what I like about it is powerful. Yeah. It underscores the connectedness that we have, um, as, as creatures to our planet and to each other and the way in which we can share perspective and pull from a sort of communal source.

Yeah. And I think in the, the various sorts of climate challenge times that we live today, it’s. It’s really important that we take in, really understand and absorb that sense of connectedness because it’s, it’s, uh, it’s an issue that affects us all. And it’s an issue that we all have a role to play in addressing.

Nico: Indeed. I’ve found as I’ve introduced this quote segment to the beginning of the episode, I’m, I’m pleasantly surprised the number of folks. Who bring Rumi as their quote. So I love, I love Rumi. Um, and, uh, and lots of philosophers, um, look to Rumi as an inspiration. Um, that’s a quote I had not heard. And it is, uh, it’s phenomenal.

I think that we could spend an entire portion of the conversation just unpacking the wisdom of, uh, of the ages that have been passed down in quotes from folks like Rumi and Rumi. And, uh, Andy Dillard. So if we had the time, we would, but today we want to dig into the core problem that we wanna discuss, homeowners and solar installers extracting them most value possible from their solar and other home upgrades.

Could you enunciate, generally speaking, the problem that you identified and are. Attempting to solve with, uh, with the business that you’ve created. Yeah,

Cynthia: happy to. And I’ll, I’ll begin by referencing your starting point, which was the commercial building sector. I’ve worked before as a U. S. Green Building Council lead AP and so understand that whether it’s energy star or lead or some of the other certification systems that are out there for new construction and specifically the commercial building sector, the ability to translate features and the benefits.

Features meaning, you know, different types of of high efficiency and maybe even somewhat complicated equipment and systems that are in buildings translate that into a quality of life benefit in some way is really what helps people get excited about these sorts of properties and willing to pay more for them.

And it helps the, the appraisers, um, and, and the real estate agent or the property managers understand what’s special and different about these properties. Mm-hmm, , and therefore why they should be worth more. The problem that we have in the existing homes market today is that information about high performing features may be in the mind of your builder.

It may be in the mind of your home improvement contractor, but it’s likely not something that you’re. Your listing agent or a future appraiser, even a home inspector is aware of people know how to ask if something is new, but they don’t really understand how to rate or verify performance features and homes and now solar people may say, well, I mean, that’s kind of obvious, isn’t it?

Like, you’ve got panels sitting up on your roof, you get a report from your, your software system that tells you how much energy you produced and therefore how much of your utility bill you’ve offset. But that doesn’t mean that an appraiser knows how to take that information and translate it into contributory value.

It doesn’t mean that a real estate agent understands how to talk about that in a way that it becomes something exciting for the buyer and not something like, Ooh, I don’t know about that. How hard will the solar system be to take care of? Will the contractor be around? Is there a warranty associated with like, everybody’s mind goes to problems and.

Without, you know, sort of a counter set of no, no, no, no, this is the value you get from it and delivered in a way that those stakeholders can use and can understand you end up as a homeowner making, you know, tens of thousands or whatever it is of investment in these home improvements that you might not realize.

And in fact, in most cases, people are not realizing when they go to refinance or to sell their home.

Nico: I think that many of us under appreciate the follow on the knock on effect. After the homeowner has the euphoric experience of, uh, in the old days, watching a meter run backwards, right? But today, watching your electric bill go down, they’ve invested in not only the future high performance of that home and its ability to be interconnected with the grid and ride resiliency, the grid, but they’ve 

Understanding Pearl Certification’s Role in Home Valuation

also invested in.

The potential in the hope that it will not only maintain but increase equity in the home value. You use the term that I love and I had not heard it before you and I began engaging on this topic and that is contributory value. So I’m going to reword or sort of give a paraphrase of what you just enunciated so eloquently, which is homeowners today are trapped in a system where the folks that are.

Responsible for assigning contributory value to the various elements of the home in the resale process, they lack understanding and they are therefore undervaluing the assets. If they’re valuing them at all. Yes. Can you then introduce. Me to Pearl the certification process, the company and why this business is going to solve the problem that we’ve just enunciated.

Cynthia: Happy to. So Pearl certification. While we do work with real estate agents and homeowners, our go to market has been primarily through the contractor segments. So specifically solar companies, HVAC companies, HVAC companies. Home performance, insulation, we’re expanding into, into plumbing and a number of other trades.

But, but we started there particularly with solar and HVAC because these are systems that cost a lot of money and the real estate community by and large doesn’t know how do I take that into account when I, when I go to value the home. If you’ve got a spare bedroom or a pool, you know, I think. You know, the again, appraisal and real estate communities used to figuring out how do I price the home higher?

How do I, how do I do my appraisal in such a way? Um, and my comps specifically so that I can give this home, um, the, the fair opinion of value that, that it deserves. The problem with the high performing features is that. Because most of them are newer and because real estate agents aren’t used to putting them into the listing, and they’re not sure what data they should be collecting to do it in a way that doesn’t get them sued, we don’t have comparables out in the real estate market.

I can’t tell you how many listings I’ve seen, actually, where there’s solar on the roof, but there’s no mention of solar in the multiple listing service, which may seem crazy to us in the industry, but actually takes place fairly frequently. in the field. And I hear stories at least, you know, every few months where real estate agents have recommended to the homeowner that they actually remove the solar from the house before they put the house on the market because they see it as an impediment to the traffic.

We have companies that, that install solar that are on call for real estate agents to uninstall solar because the agent is concerned that it will be an impediment to the sale. It’s, there’s that level of crazy that goes on out there. And I’m not saying that happens every day and it may happen more in some areas than in others.

But it, the fact that it happens at all is, is a really clear signal that something is hella broken and needs to get fixed. So I concur,

Nico: I concur, hella

Cynthia: broken, hella broken, like 120 percent broken. So in this particular instance, what Pearl does is first of all, we, we qualify the contractors that are able to offer a third party certification on their work.

And we do that through a variety of ways, everything from how the company manages its customer service. And that, that also looks at. What are the, um, the ratings that that company has in in social media and other other venues? Um, but it looks at the training that they have in place in the case of solar.

Do they have someone with an upset certification, for example, on staff and a number of other things. But once the company is qualified, then we set up a data. Interface with their usually their CRM and this is really powerful because when we want to talk about the accuracy of the data, the company CRM is what they use for invoicing.

And it’s what they use for inventory. So it’s really important to the company that they are accurate. And that gets us better data than asking the company to fat finger in a bunch of new numbers and and whatnot directly into our system. It’s better just that we set up some kind of an API or a batch export.

So the corollary benefit is that it removes. A data burden from the installer company, so we get better data. They have less work to do. And and with that information, we can then parse it and put it into a green and energy efficient appraisal addendum, which is a supplemental form for the U. R. A. R. 1004 that every.

Appraiser has to fill out as a part of their work, and we also then use that information to populate our certification report. And these 2 documents go hand in hand. The certification report is the backup for the information that’s in the green and energy efficient appraisal addendum. And what these documents do.

In conjunction with our solar equity calculator is they essentially do the job of the appraiser for him or her. Now, there’s additional work they’ll have to do on the back end, but we really make it easy for them by collecting the data and crunching the numbers and then it’s, it’s up to them to kind of add their expertise from their, you know, specific market.

To the contributory value that they then calculate for that particular property. So, to kind of recap here, we provide the certification typically through an installing contractor and then that information is given to the appraiser vis a vis the listing agent at time of sale. And, um, we give them all the information that they need basically to do their job.

And we remove a significant amount of of legwork and education that they would otherwise have to have to assign that contributory

Nico: value. What’s required of the homeowner? In order to ensure that the listing agent or appraiser is aware of Pearl and this sort of removal of obstacle or hurdle or friction in the process.

Cynthia: So, when we issue the certification, we send it directly to the homeowner and actually what we do is we send them an email and we invite them to go into green door, which is our consumer facing version of the certification app and in green door. All of their documents live in a PDF form and they can they can download that part of that document package is a letter to the lender the appraiser and the buyer so separate letters for each that they can give to their real estate agent and there is also a.

Marketing package for the real estate agent and depending upon how many features your house has that marketing package can be quite robust, but it includes everything from placards that are hung in the home to social media posts, uh, an MLS listing report where we tell the agent exactly what data fields they can check off in the MLS.

So they don’t have to figure that out. No, we, we, we. Here, this is your cheat sheet. Go forth and check the boxes is essentially what we provide the agent. We it’s really a turnkey approach and that that’s how we’re solving the problem. Nico is that we’ve created the right set of what we call investment grade documentation.

For the right stakeholder to use at the right time and for the homeowner, it’s, it’s really a turnkey package. You can download and give all of this to your listing agent. And we have instructions for the listing agent on how to utilize this different types of documentation in the transaction.

Nico: That’s amazing.

I captured that Pearl is a certification process and we referred you referred to your experience in green building and lead certification. We might go a little deeper into that as we unpack kind of how this whole idea came to be, but it’s the homeowner equivalent of a lead certification. The way that.

Buildings are certified in the commercial space to show that they’ve made material effort towards sustainable, high performing upgrades. As you mentioned, um, there are many from fenestration windows to energy efficiency upgrades to building envelope and it just didn’t exist for homeowners. Pearl stands in the gap there and there are a lot of smart ways that you have Made not only the certification possible, but the marketing of the certification and the valuation of the building there.

They’re certified to actually add to the homeowner selling experience. What up till now before Pearl existed were solutions that were available for solar installers and homeowners. In particular, let’s focus on the solar space. Not really the building envelope or the high performing home, but

Addressing the Challenges of Solar Home Valuation

 specific to solar.

What, what existed up to, up to now, what other tools were are being used?

Cynthia: So a couple of things. One is that there was a study done by, um, Lawrence Berkeley National Labs that showed there was an increase in value. Um, and I believe that study was published in 2015 when they looked at properties, um, that had solar.

And so when I see proposals from solar installers frequently, they quote that LB and L study. But it was, it’s a little dated and I, I believe it really focused on California and I don’t think that that study alone is, is moving the needle for appraisers say in North Carolina. The other thing that, that companies can use is again LBNL and the Appraisal Institute work together on coming up with a methodology that would allow one to assign contributory value based on something called the income method.

There are different ways that appraisers. Assign contributory value. Comparables is is the industry standard. You have a house and you look for other homes that are very, very similar to it. And that is sold in the last 3 to 6 months. And you look to see what price they they sold at. And that helps you justify.

As an appraiser, whether or not the market values this property or these, this property’s features and the income method is where you say, all right, we, we treat it almost like it’s a, it’s a rental property. And in the case of solar, you’re generating an income stream by offsetting the energy that the homeowner would have used.

And so you can assign a dollar value to that through a discounted cash flow number and PV value is the name of an existing tool that some appraisers can use, um, and, and is another way to calculate that discounted cash flow the approved, PV value is the same methodology that we use for our solar equity calculator.

The difference with the solar equity calculator is that. Yeah. We have made it more market friendly. So a solar installer can use the solar equity calculator to include what the discounted cash flow value would be for that purchaser as a part of their proposal. We’ve backfilled it with most of the types of equipment that are out there.

So the process for inputting data is really just selecting something from a drop down and then everything auto populate. So it makes it available for the solar installer and it makes. It’s easy for them to use and and similarly on on the appraisal side. Um, the appraiser can use it in a similar way. But those are the so you have the study from LBNL and then you have the PV value and and that’s that’s pretty much it because as I’ve said, the.

The comparables out there are hard to compare, um, what’s the kilowatt size of the system? What are the warranties associated with it? What’s the inverter type? There are a number of different components to that installation that can make one installation be worth much more. What, you know, what’s the degradation factor, you know, this, and, and you don’t get that from just looking at a checkbox in the multiple listing service that says, yes, this home has solar.

So this is the conundrum, right? Like there, there’s a lot of other information that can make one solar system, really a better and more valuable one than a similar solar system. And, and part of what we help the appraiser understand, or what are those other features? And, oh, by the way, here’s a number that you can use.

Nico: I’m curious about the, the timeline for introduction of a product like Pearl. Is there anything that. Really needed to be true in order for this business to work. Kind of timing is everything with businesses. Uh, you know, if you’d started five, 10, 15 years ago, why would this business have failed to succeed?

And what has come about that has enabled you to be able to take this approach to certifying homes?

Cynthia: I think a couple of things. Um, one is certainly that. Climate change is more real and the urgency to do something about it is more real. It’s not a hypothetical anymore. We’re, we’re living through it and seeing the data on it.

People’s attitudes have changed in terms of whether or not they value sustainability. So when I worked as a green builder back in the first part of the early 2000s, we were always justifying to our customers why they should spend more. In order to have a greener home, and it wasn’t a lot more. It wasn’t like the 20 percent more that other builders tried to tell them it would cost, but it could be more.

Um, and now we find ourselves in the situation where buyers value. Green and sustainability that they’re willing to pay more for it. It’s not like you have to convince them to do it. The problem is that it’s really hard to find in the existing home because that as we’ve been saying that information is largely invisible to the naked eye, the performance characteristics.

But I think you look at the millennial demographic. These are our people, they, they own more houses, they make up the largest percentage of our labor force and, uh, they are the ones that had been, had the most purchasing power, um, for, for homes and for home improvement and that particular demographic cares a lot about climate change.

And and so I think, you know, the real estate industry wants to try and be fair in terms of what the market values and they want to see data that the market actually values these features. And we’ve been in this bit of a catch 22 situation where if we don’t make the features visible, how do we know that they that they exist?

And how do we know to value them? So Pearl is like, Okay. Definitely helping us out of that, that conundrum, but I, I do believe that macro forces have also shifted. People value sustainability more. There’s an urgency for us to do something about the, the issues with our existing housing stock. And now we have the inflation reduction act, which is a multi billion dollar.

Piece of federal policy that is meant to really spur the acceleration of these types of home improvements. Um, and, and I don’t, I think that we’re all, you know, as an industry, very excited about that and expect to see it make a big impact.

Nico: Yeah, yeah, it’s interesting when you and I were first working in, uh, in green building, uh, in the aughts and early teens, the, the been to that industry as it were from a policy perspective was the American reinvestment recovery act that by and large helped folks, uh, tackle the, the broader, easier, lower hanging fruit, the upgrade in windows.

Tightening the envelope of the home insulation and things and things of that sort made it easy, like under 2 year payback kind of things. It’s encouraging that the IRA does in fact, build on that by focusing on the electrification of the home, the improvement of how the home integrates with a smart electric grid and I think it’s really critical that, um, that not only homeowners, but installers, yeah.

Are aware of the tools that are available to help sell those upgrades to homeowners in a way that give homeowners assurance that they’re going to, in fact, be able to harvest the value sometime down the road, not just on their utility bill. But in the investment that they make to the asset itself, I guess a question that comes up, I’m sure for a lot of folks is who is it that actually buys or pays for this certification?

We can get into a conversation later about how you sort of set up your payment structure and the sort of the, the, the business model per se, but. Is this a product that the homeowner buys or who do you sell through?

Cynthia: We sell through the contractor and the contractor typically bakes into their pricing the cost of the certification.

So the answer to your question is, I think ultimately the homeowner pays for it, but they don’t, they pay for it like a cost of goods sold, like, like marketing or some other, um, some other. Expense that might be built into their monitoring

Nico: system and all of the other expenses.

Cynthia: Yeah. Yeah. And it’s, it’s really an incremental cost, uh, that we charge where we’re a SAS business.

So contractors, you know, sign a 12 month contract with us. They pay a set monthly fee based upon volume. And the more volume you do, the less the per certification cost is, but. You know, not to beat around the bush here, we’re talking about anything from, you know, 30 to 40 to on the high end, 60 or 70 per install.

So it’s, it’s kind of a rounding error when you think about the cost of the installation, and it’s not hard for contractors to bake that into their pricing. 

Milestones and Success Markers for Pearl Certification.

We were talking briefly about the IRA, though, and I, there’s 2 things in that that I’d really like to double click on. 1 of them is that there’s a rebate program that may be very relevant to solar companies that are thinking about electrification and how they can have multiple bites at the apple, whether that’s lead gen to an HVAC contractor, or actually starting to bring some of these other services into house.

The homes rebate program requires. A 3rd party certification in order to access the rebate and you have to capture information about what was installed the projected energy savings and you need to issue that certification to the homeowner on behalf of the contractor in a way that helps them capture the value for resale so it describes exactly what it is that we’re providing to the market.

And yesterday, the, the DOEs. IRA guidelines came out, and in that is a new requirement that was not initially a part of the legislation, but it, it, it says that the states have to submit within a year to the DOE their market transformation plan. This market transformation plan has to include a description of how they will help to foster the transmission of information about high reporting features in homes.

Into the resale transaction, so the state energy offices are actually being tasked to think about how do we create this flywheel effect where we’re making the high performance features value visible in the resale transaction so that we move these high performing homes from the fringe. Into the mainstream and we have a market based mechanism that persists beyond the rebate timeline to really accelerate our energy transition.

It’s it’s it’s very exciting to see that language in the guidelines.

Nico: Yeah, that’s fascinating and what great timing because we’ve had a couple of times where we needed to delay the recording of this. So it’s great to. Have, uh, that information now available. I’d love it if after the recording, if you would send me a link that we could guide, give, guide, give folks best guidance to how to read up on those guidelines, uh, that you’re mentioning.

Sure. Um, if you could share with me an easy, an easy link, that would be wonderful. We’ll include it in the show notes. You know, one of the things that in our prep for the conversation, when I ask like, how, how does this get sold? How do people sort of bake it in? Or do they bake it in? Do they pass it on to the contractor or to the homeowner?

You said something that really stands out to me and I want to highlight it. It is de minimis. It really is something that, um, is a negligible cost. It’s, uh, it’s, it’s less than the cost of. The average like snack that the crew installing the system is is paying for on their break while installing your system like this.

And it has a 100 or 1000 fold impact comparatively on on the value of the system. So I think that is something that it really does bear mentioning that this is a product that adds measurable value to The value of the asset you’re selling, it’s equivalent in some ways to an insurance plan, right? Like, if you think about paying for the, the, the tech insurance at Best Buy and everybody’s used to saying, Oh, 4, great.

I’ll just tag that on because who knows, I might drop this thing in the, uh, in the sink, uh, someday. So I would encourage folks to really just think about it like that. When, even when you have to explain it to a homeowner, it is, um, in many cases. A that they should not see it as something that is a cost rather saying, we’re including for you this service and they don’t even need to know the cost of that service because it is in fact the minimus.

It’s something that it has a negligible impact on the overall return on the system cost. So you started Pearl in what year? And since then, What milestones would you point to as sort of success markers that you’re making progress and traction towards being able to provide this service as a value add to the, to the contractor community and

Cynthia: the homeowner?

So my co founder partner and I started Pearl, uh, before May of 2015, actually, because there was a lot of nights and weekends while we were working the jobs that we had, but we raised 250, 000 in angel investment and started full time and then some on Pearl in May of 2015. And You know, initially, we had a lot of work to do developing the certification system, and we worked closely with you in the national labs to ensure that the building science that the system was based on was something that the industry would accept.

We, if you’re, if you’re setting out to create a national standard. For high performing homes, particularly as applied to the existing home, you want to know that the gatekeepers are going to approve of what you’re doing. And for us, coming from the energy efficiency community in particular, we really wanted the energy efficiency community and the U.

1. Department of energy and others associated with it to be supportive of what we were doing. Ultimately, not explicitly. So, but, but definitely not. Yeah. You know, behind the scenes saying negative things to to folks about about our approach after we had evolved that system. We then wanted to engage the appraisal in the real estate community because these are the other 2 gatekeepers that were really important for our particular type of certification.

So, um, in 2017, we applied to and were accepted in the National Association of realtors. technology accelerator. They made an investment in Pearl at that time through their VC firm called 2nd Century Ventures and have since followed on in subsequent investments. But the relationship that we have with the National Association of Realtors, I think, is unique in, in terms of the type of startup that we are and where we’re going with our work.

And, you know, from NAR’s perspective, they’re not a mandate. Friendly organization, they, they believe in free enterprise. They, they, um, service over a million realtors and they want them to have as much flexibility and professionalism and how they do their work. And they saw Pearl certification. I believe as an alternative to a state mandate that says.

You know, you have to have energy disclosure at time of sale or some kind of mandatory home energy labeling pearl highlights, high performing features, help those houses sell for more. We support the realtor and the transaction. All of those are really positive things and everybody kind of wins from it.

So that was a big milestone for us. We do have a licensing agreement. That is a big milestone. Yeah. Yeah. We have a licensing agreement with the appraisal institute to complete their green and energy efficiency addendum as a independent third party. So, um, that was, that was important. Um, having a good, a good relationship with, with AI, but beyond that, you know, we now have Ferguson ventures as an investor on our cap table and having, you know, the largest distributor of home services.

Nationwide to work alongside us and help us scale has been a very big deal. In addition to that last year, we participated in excellence to see to I climate accelerator and that gives us a unique line into the utility landscape and their rebate programs that they have out there right now. How can we augment those rebate programs?

How can we provide an additional service to their customers? We have some really great, uh, industry partners now that we’re starting to sign up. Uh, we announced a week ago, a partnership with mosaic where we will be providing a special network benefits to their, their contractors that, that use their financing.

And we have a very interesting pilot right now we’re doing with good leap and I’m not going to go in the details about because I, I hope to have a paper we can publish in 6 to 12 months as a result. But, um, yeah, just some fantastic new industry partnerships that are, are getting started and rolling out as well.

So I think about milestones. I think, you know, getting over these initial hurdles with the gatekeepers. Um, certainly IRAs passage is a big deal because of the requirement for certification, but. Yeah. This alignment between public and private is something that we, we really helped to foster and we’re seeing it kind of aligned for us as a business right now too.

And that’s fantastic.

Nico: Yeah. And I love that you are going through the, uh, the catalyst organizations in the industry. Um, namely good leap mosaic. There are others, obviously, sunlight, dividend, get on the train that, um, that can, that can offer this in a more broad way to installers, right? They are vectors to installers.

Cynthia’s background and the personal heroes who influenced her early life.

I wonder if, you know, some of these programs also in others, other sectors tend to work like HVAC through the manufacturers like train and, um, curious how, if at all, you’re having conversations. With manufacturers, like, I’d note, you know, some of the inverter manufacturers that are closest to the homeowner and also the installment have nation, nationwide dealer networks, distributors, that kind of thing.

Is that how are those vectors working for you

Cynthia: right now? They’re working pretty well. We, we have. A couple of very well known brands on the HVAC side that we’re speaking with. We also have within the solar space, a panel manufacturer and in an inverter manufacturer that were have proposals out from us right now.

Hoping to have them signed by the end of August and making an announcement there. So, uh, we’re very much I, I think it’s really interesting. The, the manufacturers sometimes, and this is maybe this is more in the HVAC space than in the solar side, but there can be a kind of pent up frustration on that.

They have because they. These high performing types of equipment, they’ve, they’ve been manufacturing them for a while and there can be a reticence on the part of the, the installer, the salesperson in the household to recommend to the homeowner, the more expensive stuff. Because they don’t want to lose that customer to the Dan in the van or the two chucks in a truck that are going to come in and underbid them.

And, and you, you don’t want the homeowner to feel like you’re taking advantage of them so many different stories that I have from people in the utility industry and in our, our space that are basically ones where they’re arguing with their contractor. No, no, no. I really do want the higher efficiency thing.

I really do want to spend more. I think if we can working with the manufacturers. Give those salespeople some additional messaging and confidence in that conversation with the homeowner to actually upsell. Uh, they would be, the manufacturers would be very happy about that. Um, that it’s a higher profit margin for them on the higher efficiency types of equipment.

It’s better for the contractor and, you know, ultimately it’s better for the homeowner as well. The problem is that we just need to be able to frame this, that this really is in your best interest, Mr. and Mrs. Homeowner. And you can trust the contractor when he or she tells you so and presents this information for you.

And Pearl is going to help ensure you get an ROI from this investment.

Nico: I’m really intrigued as I’ve shared with you a number of times by the phenomenal traction, but the traction is emblematic of the thoughtfulness that has gone into. The business, the programmatic way that you thought about who the stakeholders are, and I don’t know that I’ve done an interview in a long while where we were able to, in the first 30 ish minutes, really unpack the business before I talk about you, the founder.

So, let’s, let’s take a time. Let’s take some time to do that. I’m sure folks are wondering a little bit more about your background. Um. And as am I. Cynthia, where did you grow up in the world?

Cynthia: So I was born in Washington, D. C. and I grew up in Prince William County. Yep. Yep. In Virginia. I had an interesting childhood in that when we moved from, so initially we lived in Alexandria and then we moved to a new development at the time called Lake Ridge in Prince William County.

And now it’s this sprawling subdivision of subdivision subdivisions within subdivisions, um, type of, of community. But when we moved out there, uh, my backyard basically abutted to acres and acres and acres of woods over the course of my growing up there from basically first grade to graduating from high school.

All of that acres and acres and acres of woods since became somebody else’s backyard or some strip mall. And it was kind of heartbreaking. Uh, you know, I come back from college and get lost. Literally I would get lost. What the hell street am I on anymore? Cause everything was. was changing. And I think while I had a strong grounding in nature, um, literally, I, I watched it, I watched it disappear.

And that very much informed, you know, my sort of conservation, environmental, sustainable perspectives, um, throughout my adulthood, my, my, both my appreciation for the natural environment and my understanding of how, uh, how quickly it’s evaporating and how fragile it is.

Nico: That’s really beautiful. I love the, how you connected the perspective that led to the adoption as an adult of a very acute awareness of and desire for protecting the, the woods, the environment, the, the nature of the culture around you, that, that gave you a sense of appreciation for, um, for what the, the earth and its natural benefits provide for us and, and for humanity broadly, is there an element of, yeah.

The way that your family operated that also contributed in some way, uh, from a childhood to either your sense of entrepreneurship or, uh, and or environmentalism,

Cynthia: I don’t know about the environmentalism. I think, I think just living where we did, uh, kind of like, gave me that opportunity to connect with nature as, as.

As a child, as opposed to we were living in an apartment complex in Alexandria before, so I imagine if I had grown up there, I’d have very different perspective than with the acres and acres and acres of woods in my back yard, but, you know, my, my father was a quadriplegic, uh, he broke his neck as a sophomore in college, uh, doing a racing dive into a river in Colorado.

Uh, he was at school as in college in Colorado and, um, he later overcame through an immense amount of physical therapy, a lot of, uh, hardship and was able to go back to school, get his doctorate in economics, um, and took a job for the, the government working in the Department of Interior and was actually instrumental in getting him Legislation passed to create ramps on sidewalks so that people stuck in wheelchairs, you know, like him could actually get like on and off sidewalk.

Yeah, yeah, exactly. Exactly. So my dad instilled in me. I think this like. Attitude of you. You can do it. Um, you, you’re, you’re smart enough. You’re passionate enough, whatever you set your sights on doing my daughter, you can do. And it’s not like I don’t mean to diminish my mom’s support by any means, but my dad and I had a lot of conversations around this.

And I, I definitely want to give him, um, credit for instilling that kind of confidence to, to go forth and be entrepreneurial.

Nico: Yeah. And, um, you know, what an example as well to see someone who was literally broken in body, but not broken in spirit, who was able to overcome and, uh, and in many ways triumph, uh, not just intellectually, but professionally.

Um, that’s amazing. Besides your father, are there any other early life personal heroes that you looked up to that gave you sort of a sense of direction in life?

Cynthia: Uh, so I, I got a master’s. I know it’s a deep question. Sorry. Yeah. Well, I mean, we’ll see how deep we go with this one, but I have a master’s in English.

And, um, 1 I was in college, particularly in my, my graduate school days was, uh, a deep immersion into post structural critical theory. And, um, this is basically a way of breaking down and taking apart how Any ideology that you’ve been exposed to because you understand the role that language plays in shaping perspective and that that culture plays and shaping law and morality and other types of things.

And I had a teacher. A couple of teachers that I would go in and talk to because basically I felt like at that time, all bets were off in terms of society. There was no right viewpoint. There was no right religion. There was no, uh, cast in stone anything and rather than drift off into some Nietzschean nihilism, how did I put meaning back together in my life?

Cynthia’s Career Path from Building Premium Homes in Idaho to Founding Pearl

And there were a couple of, uh, women actually who gave me some really practical advice on, on balancing one’s, you know, sort of awareness and larger perspective with the sort of tactical day to day that is our lives. And I think. As an entrepreneur, while that may sound really heady, you do things like that pretty much on a day to day basis.

That ability to move between the vision and the practical. Yeah, you’re nodding, you get it.

Nico: Exactly. Absolutely. You have to, you continually have to learn to be present in the activity today, but still hold a vision for the future that not only Are you yourself motivated by, but your team can build confidence from, right?

Like we have to simultaneously be the bridge between today and the desired future state of the business and not lose, not lose track of the like actual activity. That’s going to get us there and, and help prioritize that. That’s really cool. I like, I like the, the interpolation there of how your professors helped.

Really, as I heard it put meaning back into your life when you were trying to balance the awareness between the larger perspective and the tactical day to day of life. As such, you got a master’s in English. Was there a desired or, um, as at one point preferred career path that you ultimately thought you would take, but did not?

Cynthia: Yeah, there was, uh, I thought that I would become an environmental lawyer by I was getting a master’s degree in English in, in part, um, yeah. Well, for a whole host of personal reasons, but it was, it was meant meant to inform my application to law school. And, uh, what, what happened was I kind of fell in love at the time with teaching, and then I thought I would go back and get a PhD and actually work, you know, in the university system.

And, um. You know, life had a habit of throwing a bunch of other curveballs by way of children and marriage. And, um, we, we, I drifted in a, into an entirely different career, but I will say that having that language, English background in terms of the, the writing in particular has served me very well in every career.

Path that that I’ve had the ability to communicate is so important.

Nico: It really is. It really is. I remember. So I, um, I don’t think I ever talked about this, but, uh, I had very modest or mediocre SAT scores, mainly because my math skills weren’t particularly strong. I scored an 800 on verbal, which is perfect score and, and decided not to go into some sort of like a, like go down the path of.

or English studies or whatever. Um, and instead went down the hard route. Like I scored a, I think 400 on math and decided to go into engineering. Exactly. That’s the right response. Laughing is the right response. And I, um, and I ultimately went to business school because if you are, um, you know, if you are capable with.

The I learned pretty quickly in college, like, if you’re capable of holding, um, confident and, um, coaching conversations and you understand how communication works, um, and you understand also the fund found the sort of foundational principles of math, then where you really should be is in the business of employing people who are much stronger than you on those skills.

It’s a business release that for me and I see in, I see in you and the work that you’re doing with Pearl, especially the reality that you have to parse language very specifically is that your job has built upon years and layers of the ability to navigate. Very difficult to negotiate and complex policy landscape where we’re talking thousands of page documents to be able to get through them quickly.

Right? Which would have made you a good not only a lawyer, but but probably litigator with that strong verbal skill. It gives you the ability to. Um, to convey meaning in a useful way, I’ve heard you do that in this conversation better than lots of folks that I’ve had the privilege of interviewing. And it, it, yeah, I think it points to your commanding sort of understanding of the language.

Like you introduced me to the term de minimis, which I was, you know, I remember on that call, I was really frustrated that I didn’t know that word, but now I’ve, uh, And I’ve internalized it and, uh, and I, I, I just, I wanted to acknowledge that I think that a command of language and communication is a critical skill for, for CEOs.

It’s one that all too often CEOs have to learn when they get to, uh, the, uh, executive chair, right? Vice president and, um, sort of the VP and C suite. So I think that that is certainly a, um, a credit to you. I wanted to get into the work that you did. As I recall, you, you just alluded to sort of marriage and children and a new career.

At some point you found yourself building premium homes in Idaho. Can you talk to me about kind of walk me down the path from building premium homes in Idaho to the, uh, to the, the, the kernel of an idea for Pearl and how you like walk me down that career track. Sure,

Cynthia: sure. So I will say that getting into home building was a result of, um, my husband’s career path.

Uh, he had a degree in environmental science from UVA and had been playing the Beltway Bandit Superfund route with a large consulting firm that he worked with and was both burnt out and, and also seeking to do something more meaningful with his, his career. And after a stint with Habitat for Humanity, We decided, um, he asked enough skills that we would buy an old house and fix it up.

And then after we had gone through that and sold it, we bought land and we built a house from the ground up. He apprenticed with an architect and we thought, all right, we want to do our own construction company. We would like to focus on building homes that people want to have last for hundreds of years.

Like, yeah. The house that we had renovated and not build these giant McMansions, which were popping up all over the place, you know, the late 90s. Um, and and so we, we ended up moving to Idaho to a resort town called McCall a couple hours north of Boise and there was a brand new ski resort. Going in, and so there was this huge construction boon, uh, with people are trying to get into the ground floor because prices and land values had increased literally 5 fold.

So that that gave us an unique opportunity as a, as a GC firm, just starting out to kind of get in at the ground level there and hook up with some architects and. Stone metal wood was the name of the, the green building company that we had out of that. I, I spun off a design build showroom called blue hair and Thailand interiors.

And then later merged with another company that had also a strong environmental focus. And that’s when I got my U. S. green building council lead AP and started doing consulting work there. So cut to the market tanking. In 2008, like the bottom dropped out and it dropped out first in the resort communities, people’s second and third homes, which McCall was, and we had to sell off our businesses, um, in a fire sale.

There were builders that I knew that were going to Canada, so they didn’t end up in jail because they had been robbing Peter to pay Paul when. When the market tanked. I did a sideways career maneuver. I ended up moving back to Virginia for family related reasons and took a job as the climate protection program coordinator with the city of Charlottesville and in my lap landed a grant from the Southeast Energy Efficiency Alliance.

We applied for it, and we, we want it the city, the county, the university kind of work together with our state energy office on that application. And then they had to hire an executive director for a nonprofit to administer this grant. So I applied for that position. I want it. And then, you know, built up the local energy alliance program or leap, um, as as a next career move, um, also starting the Virginia energy efficiency council, co founding that along the way.

So, so moving from green building into this, this particular idea with Pearl. Has has felt a bit like a common sense and, you know, evolution as a builder. You, you have to manage multiple subs. You have to understand how the different systems in the home work together. And we were keenly interested in efficiency and renewables and the work that we did.

And so in running. Leap the goal there was to work in public private partnership to administer energy efficiency and renewable energy programs on behalf of the city or the county or the state.

The challenges and successes of building Pearl Certification 

 And it was there that I met my co founder partner Robin. He was running the, um, he’s managing director for the national home performance council, and they were kind of a think tank and you could consider leap a do tank.

And together we, you know, ended up working on a lot of different projects, including how to get energy efficiency information into the real estate. Transaction, um, HP XML, which is a data transfer standard for energy efficiency data and a number of other things. And we spend a lot of nights, um, at conferences sitting next to each other at at at dinners complaining about all the things that were broken in our industry.

And out of those conversations, you know, was born. You know, Pearl and by the way, Pearl is an acronym, property, energy, asset, registry, and licensing, which we don’t say very often because it’s a mouthful, but it’s, it’s Pearl while being unique, like everyone’s home is unique also has a, an acronym basis for it.

And

Nico: of course, cause it was birthed out of the government. So so wait, I want to hear Pearl was what I missed that as property,

Cynthia: property, energy, asset, registry, and licensing. So we have an energy asset registry on our website where all of the certifications are, um, stored and we license the ability to do the third party certifications, you know, to qualified companies.

That’s, that’s

Nico: brilliant. I love that. Thank you. What assumptions did you and Robin have to challenge in the first year or two of starting the business?

Cynthia: So many, um, a couple of, so the whole dot com thing, you know, uh, where a whole bunch of investors got burned when companies related to the internet kind of lit fire and crashed.

There was a similar thing that happened in the, um, Yeah, exactly. So we were trying to raise money in clean tech at a time at which a lot of companies had just gotten majorly burned and they looked at what we were doing and they said, you know, your contractors are a hugely disaggregated market. Real estate is a hugely disaggregated market.

You know, I think your idea is really great. I don’t know how the hell you pull it off. And and so it was. It was a lot of headwind. I mean, honestly, particularly from the investment community getting going. Yeah. And how do we overcome it? You know, we, we had some investors that really bought into the vision and we’re, you know, really supportive and they laid out milestones for us.

And we were able to meet them. And while it did feel like we kind of swung from investor, or I should say investment round to investment round, like a trapeze run, like one to the next. And at any point there was free fall underneath. We, we did make those, those transitions. And we have investors that are on our board today that were, you know, our, our earliest angels.

Um, so they’ve, they’ve really been supportive and great mentors.

Nico: How many rounds of it? How many rounds? Oh, yeah. I want to talk about that in a minute too. But how, how many rounds of investment have you gone through?

Cynthia: Aside from the angel rounds, we had two seed rounds and then we’ve done an A1 and an A2.

Nico: Okay. Are you comfortable sharing roughly how much it’s taken to get Pearl to the place where I would say you’re, uh, you found product market fit and you’re like looking to scale the business?

Cynthia: Yeah. We’ve raised about 29 million all in.

Nico: So on the surface, folks might look at this business and think. How in the heck have you raised $29 million?

Both. How does it take so much and why does this idea merit $29 million? But on, on the back of, um, this business is a software business, is a software as a service layer to accelerate the sale of, and the electrification of asset of, of apparatus that improve. The home experience for homeowners, um, which if you’ve been involved in, if you’ve been listening to climate avengers or our other show about climate investing at all, uh, if you’ve been involved in kind of investing the ability to do exactly what Cynthia and her team have done, right?

Which is to create a product that can reach a disaggregated market in this case, both contractors and And realtors or real estate, everyone, since I started my first solo company in 2006 has said, like, if we could just figure out a way to get the realty community to like, to, to help with sales, right?

That doesn’t include by the way, like lunch and learns by every installer to every local realtor group, which doesn’t scale. Which doesn’t scale. Um, that is why like 30 million dollars needs to go into building a program that helps empower installers, uh, and home performance, uh, home performance contractors will call them of which solar installers fit into that category.

That’s remarkable. I mean, kudos. To you, it’s, um, to have gained the momentum you’ve gained, um, and the capital that you’ve been able to raise in, um, in less than a decade is remarkable given the amount of bureaucracy you have to deal with in your business. It’s really tremendous. Yeah. I mean, talk to me. Go ahead.

I know. I’m sure you want to respond to that.

Cynthia: Well, I just, I guess what I would say is that like Pearl is an ecosystem play, you know, we’re, we’re really uh, We’re a platform and our, our customer segments include home improvement contractors, builders, real estate agents, the, the, the public, um, by the public, I mean, like, state energy programs, local programs, potential utilities, et cetera.

And with each of those customer segments, while they all care about the same thing, Hey, we want to put more solar and more efficiency in homes. Their particular needs are slightly different and how you go about engaging them is slightly different. But if you, if you want, we are a company that is, is enabling catalyzing market transformation.

And. One of the big headaches for us is as a platform play getting those customers sufficiently engaged and seeing the network effect that that awaits them. Uh, it’s, it’s, it’s a lot. Um. I think it’s our moat because it’s so goddamn hard to do, uh, but I, but it, the, it puts us at the intersection of very, very large markets, um, like 44 billion, you know, size markets, because you have construction, home improvement, lending, insurance and real estate kind of all circling what we do.

Um, so I, well, it may sound like. Oh, you’ve raised a lot of money and I, I’m, I’m proud of the money that we’ve been able to raise and I’m excited about the investors that we have on our cap table. We have a big vision that really, truly can be transformative for. The folks listening to this

Nico: call, I concur how, uh, how did you get the early, I mean, it’s, it almost feels like I can assume or guess the answers, but how did you get to product market fit?

Can you talk about. The early attempts at finding the right buyer or the right product that would allow you to really lean in and start building. How did you build those early pieces that you could monetize to start to show tracks in for those for that investment?

Cynthia: So Pearl is a B to B to C business and the.

Side of that customer wheel that I spoke of a moment ago that my co founder and I knew best was the contractor side. And so for us, it seemed obvious to start with that, the B2B, like I say, HVAC and solar. Now, we had to bring along the real estate with it because the first question out of any installers mouth, any contractors mouth is, if I go and I sell this to my customers, they’re a real estate agent in my community that’s going to know how to sell a Pearl certified house or has heard of a Pearl certified house.

So I want to know that when I’m telling my customers is something real. So we had, we had to like both sell the contractor and then we had to also kind of sell the real estate agent. The product market fit part for us really came into play in two ways. One is contractors don’t want to do double entry on the data.

And they, they don’t want to be caught up in a long, complicated sales explanation for your particular product. The longer they’re stuck in the house, the fewer customers they’ll see on any given day. 

The Role of Investors, Financing Options, and Preparing for Business Scale

So, we really needed to streamline for them the, the data capture. And then we needed to streamline for them how they message Perl to the homeowner.

And that took a fair amount of work for us to kind of figure out the ins and outs of both the messaging, the marketing, and then the data part. But we did. I think the other component, though, here is that Pearl is meant to be a trusted brand. We are a third party certification. And the contractors and the real estate agents had some concern that if the consumer had never heard of us before, Would they care?

And what we found was that homeowners haven’t heard of any certification unless they’ve gone out to buy a product recently that has it. Yeah, absolutely. Energy star. But but it’s not like on a day to day basis. They’re googling third party certifications for my home. Like nobody does that. So when you introduce a certification to them, their next question is, all right, well, No, I like certifications.

They give me peace of mind and confidence in, in the purchasing I’m about to do. And I’ve, I’ve certainly looked for them in other aspects of my life. Tell me about this one. And that’s where, you know, being able to point to Pearl as an energy star partner and you know, and affiliation with the NASA Association of Realtors and the Appraisal Institute.

Kind of back to that gatekeeper thing, those logos. Are really important for creating confidence in the mind of the consumer that yes, Pearl is a legitimate third party certification. We’re not a marketing scheme that the contractor created one day. And those, those are the kind of twin things that we, you know, we struggled with around product market fit.

Initially, the logistics of getting the data. And helping the contractor message Pearl to their customers. And then secondarily, the, the credibility and the fact that no, nobody has heard about Pearl. We’re new in every market that we go to, but I promise you, you will be able to close more deals and help your customers see the benefit and purchasing the higher efficiency thing, leveraging us in your sales discussion.

Nico: Yeah, I love that. I’m sure you get into some conversations where you’re saying, look, most homeowners don’t realize that there’s IGCC for certifying the installation value of their windows, and they don’t know what the hell our value means for the installation in the walls. So how is this any different,

Cynthia: right?

Yeah. Yeah, it was. Yes.

Nico: Oh, yeah. Um, okay. Well, I would love to hear what were some of the objections beyond will the homeowner recognize it? What were some of the objections? By solar installers as you specifically try to drill into that market to, to get your first kind clients.

Cynthia: Uh, you know, solar installers are, are super price sensitive.

Um, I mean between the, the chaos of the supply chain and, um, what’s happening on the federal level and how that impacts their business policy, I think has impacted solar installers businesses far more to date than it has HVAC, although with IRA that’s about to change. But, um, you know, I think part of it was.

Getting them over the yeah, you’re going to have to add some cost if you want to bake this into your pricing and not take it out of your profit and not take it out of your marketing, which we know you don’t want to do. Uh, the, the other thing I think with the solar companies has been. There’s a lot of different models out there for solar contracting.

Um, some are strictly, you know, online sales lead. Jen, you know, others do everything soup to nuts and we needed to have a slightly different value prop and an onboarding process and and all of that with with a lot of different types of. Solar sales models, and I think that we had to kind of, that was a learning curve for us as well, because the, the same, you know, sort of, Hey, here’s the value prop to you didn’t fly depending upon the business model that the solar installer was using.

Nico: Did you find like a chicken and egg where you had to get a couple of installers to agree before you’d find financiers who also wanted to participate? Or did you always kind of have those running in similar, similar parallel tracks?

Cynthia: Well, the fact that we came out of that space meant that we already had companies that we had worked with in our past lives that that knew us as people that respected what we were doing.

So that that initial network was pulling from relationships that we already had. And then. You know, moving to the next level to selling strangers is its own thing. And then moving to the next level to selling really large businesses that technically don’t need you to be successful. They’re already successful is its own thing.

And then from there, we just laddered up to the OEMs because once the OEMs. Realize that we were helping their dealers sell a lot more of their stuff. They, they wanted to figure out how they could double down.

Nico: That makes a lot of sense. Um, I appreciate that you gave the walkthrough there. And I think that’s going to be helpful for folks that are thinking about how to wrap their head around the business model and the platform, building a platform generally.

Like what I hear, um, as an entrepreneur is not how to build Pearl, but how to think about a two sided marketplace and how to build a platform where. You’d write like the lessons under not underlying the business of Pearl are applicable to many different types of businesses. So, uh, you mentioned, and I think it’s often one of the most invaluable things like folks will, uh, often him and how about whether or not to raise capital, especially if they’ve got something that they can monetize early.

And the advice often given is if you don’t already have a very. What a entrenched deep network of people who will advise and refer you for free in some way, then getting investors who have a stake in the industry is one of the best ways to gain market traction and momentum. Talk a bit about the, uh, the influence or impact of the various investors you mentioned who have become mentors and who have had direct impact and how the business has grown.

So.

Cynthia: It’s interesting what you just said there because my mind is still kind of like swirling on, on, on, uh, how do I grow as a, as a business as an entrepreneur? And I, I think that there, there has been this idea out there that everybody has to have venture funding in order to be a successful business and, you know, maybe every entrepreneur out there dreams of, you know, a gazillion dollar, uh, Acquisition and exit.

Maybe they don’t. I mean, maybe you would be happy with a lifestyle business where you continue to have ownership and control over everything that that is there for you and you, you kind of, you, it’s okay to bootstrap. It’s okay to get debt financing after you’re at a place where you’ve got, you know, a customer base that you can, you can leverage.

Um, I don’t, I don’t know that everybody has to go out and and seek. Yeah. You know, third party capital, because it’s not just a lot of work. It’s it’s also, um, it’s an emotional roller coaster and sometimes the investors are there and are not there for reasons that have absolutely nothing to do with your business.

They can have everything to do with. The success of them being able to raise their own capital or what’s going on in the broader markets right now. Um, you know, a couple of years ago, it was a growth market. It was much easier to raise capital at much better valuations than it is today. And that doesn’t have anything to do with how successful your business is.

It has to do with the backdrop, you know, in which you are. Raising capital and seeking to grow your business. So I just, I want to put that out there that, you know, you can have a very successful business and it doesn’t, it doesn’t necessarily mean the only way to get there is, is through outside investors.

But if you are going to use outside investors, then I would say, pick them very carefully. In an ideal world, you’re not just getting a check. You’re, you’re getting. You’re getting mentorship, you’re getting support, you’re getting a network, you’re getting, um, a whole bunch of things that you don’t know you need, honestly.

Like, I think one of the interesting things that we’ve, we’ve learned from our investors is what, what does it mean to prepare for scale? What. Positions do you have to have in place in your company so that the wheels aren’t coming off the bus at exactly the point you hit the accelerator and that’s really different from the deep market expertise that my co founder partner and I have we’ve run businesses before but running a construction company or design build showroom is not the same thing as preparing a company for scale you know from hiring to how you manage your finances to to all of those things so 

Lessons Learned and Valuable Advice for Entrepreneurs

I think that.

That’s been, that’s been a really great relationship that we’ve had with our investors is we don’t know what we don’t know, and they’re here to tell you and help you figure it out. Yeah,

Nico: I’m going to turn some of those questions back on you, but I want to know how many people does it take to run a company like Pearl?

Cynthia: We have about 50 people working for the company right now. And, um. I, I think different division heads will tell you that they still feel that they could have some more positions here or some more positions there, particularly given the momentum and the, the upswing that we’re seeing with our industry partners and IRA, could you break

Nico: down for me?

Like. Who, like the types of roles that make up that 50 employees, like, where’s the bulk of the talent?

Cynthia: Yeah. So we have different customer segments and we’ve organized the company along P& L. So we wanted to provide that, say our VP of contractor, the ability to manage everything from marketing to sales to, you know, success, customer service, onboarding, et cetera.

So his division. Has, you know, multiple salespeople, multiple success people, uh, industry partnerships, person, a marketing director, um, as well as someone who helps with sales force. And, uh, so it’s, it’s, it’s kind of its own business unit, frankly, and we have one for homeowner. New construction industry partnerships and what we call P3, which stands for public private partnerships.

Now, not every division is as built out. We have some divisions of 1 because they’re, they’re still developing their product market fit and and sales such that it makes sense for us to hire each 1 of those divisions. Has an important role to play in the ecosystem that, that Pearl has is animating and, and enabling.

And we, of course, you know, we have software folks, we’ve got HR, we’ve got, you know, the, the other sort of ops types of positions that, uh, one would have to have for a company that is, you know, preparing to scale.

Nico: Thanks. That’s super helpful. So. I know we’re getting close to the end of our, uh, sort of allotted time here.

And I have a few questions that I want to drill down on. Um, perhaps it is fodder for a follow on conversation, but, um, because we’re talking about talent, I think I’ll leave, uh, as an open line item for us to talk about later. What does it mean to prepare for scale? Cause I think that alone is an episode.

Um, but what positions do you need in your company in order to scale and not have the wheels fall off? What did you learn that you didn’t know?

Cynthia: My co founder partner and I, um, I’m CEO. He’s president. We have a CTO, uh, ACK part who’s been with us. Um, not since the very beginning, but he was the next, you know, important employee hired and he’s been in companies that have been larger as well, but between the three of us, we do not have that defined experience of riding the rocket ship, you know, of, of going from, you know, five to 50 to 500.

And, and, and a successful exit. So one of the things that we are hiring for now is a chief operations. It’s a COO and, and we are also hiring for a CFO. Uh, we have been working with an outside firm and a fractional CFO up until now. But as we think forward, raising a series B next year and, and again, thinking about scale, we’re specifically looking for people that have.

ridden that rocket ship before. Um, they’ve done successful fundraising. They’ve maybe done MNA, uh, so that we can, we can ensure that we have those skill sets in house at the senior level. And, you know, Robin and I can continue to focus on strategy and BD and other things that only we can do, but, you know, having very seasoned professionals.

You know, at the helm of, of, you know, sort of the ops and the finance portion of the company is something that the board is very supportive of. And, um, we’re, we’re really excited to bring these people on board. Um, so the CFO position is open the C. O. O. position. You know, there’s an offer letter out. I think I’m, I hope to make an announcement about, about that person, um, in the coming week.

Nico: Very cool. Um, is this the kind of business I I’m ignorant to how, like what an exit looks like for investors in a company like Pearl, is this the kind of business that would eventually go public or is it more of a strategic investment, um, and acquisition opportunity?

Cynthia: I definitely think it is a business that could go public.

If we are successful in achieving the sorts of numbers that are in our proforma, um, and IPO is certainly an option. I recognize that those are extremely rare. So I’m not, I don’t mean to be flippant about that, but given the nature of the business. And by the way, we are a public benefits corporation. We do see ourselves acting in the public interest with the work that we’re doing.

Um, given the, the, the size of the markets that we’re dealing with, it, it is definitely an option and aspiration in terms of an acquisition, though, I think Pearl is an interesting company for a number of different types of verticals. If you are a data company, we are going to have proprietary data on homes that you will not be able to get through the public record.

And, and that could be really valuable to lots of different types of, you know, sort of data focused companies.

Nico: I’d love to dig in a little bit to lessons learned along your journey here. Was there any advice that you feel like you got early on that served as foundational insight that in hindsight really did set you up for success thus far?

Cynthia: One of the pieces of advice that I heard frequently was things always cost more than you think they will and take longer than you think they will. And I heard that repeatedly from an investor who’s, who’s. Still with us today and be damned if he wasn’t right. So I, I think as an entrepreneur, just, just start with that as your, as your, your opening mindset, it, it will probably be true and, um, it may be hubris to think otherwise.

Um, yeah, wow.

Nico: That was lucky. If it proves otherwise.

Cynthia: Yeah. Yeah. You probably are. And, and the other thing, wow. There’s a book from Ben Horowitz called the hard things about hard things or the hard thing about hard things. And, uh, I remember listening to that. book on audio after I had already been through a few hard things.

And it was really validating, you know, to understand that here’s a person who had been immensely successful in their career and had gone through, um, you know, the sort of gut wrenching soul searching moments that I know myself and Robin had gone through over the course of this business, because, yeah, there have been some scary moments.

And I, my, my advice for founders who will inevitably One or more of those moments is, is it really is about assuming you have a good product. Like you can’t, you literally can’t sell, you can’t force the market to take something. The market doesn’t want, I want to, I want to put a caveat out there, but you will inevitably face a really hard moment and, uh, you gotta, you gotta dig deep and you gotta lead.

I think one of the most important things that a founder can do is kind of. Hold everything together when it really wants to fall

Nico: apart that that book has been recommended a lot in the course of 600 plus episodes on sun cast. I, in fact, just looking at Amazon now real and seeing that I originally purchased it in 2014 and have, uh, and have referred back to it often in my entrepreneurial journey.

What other books have shaped your, uh, or influenced your sort of thought process or leadership style that you recommend to others?

Overcoming Critical Obstacles to Home Performance Value,  Cynthia’s Recommendations and Closing Thoughts

Cynthia: Essentialism from Greg McCown is another really important one. I think particularly for founders, when you’re in the throwing spaghetti at the wall phase and, and you may have a lot of things you’re juggling, essentialism was a really great book.

We will pay for anyone in Pearl’s staff to read it. We’ll buy them the book, I should say, uh, cause we, we. Know that we struggle with that, given the complexity of our business model, uh, measure what matters from John Doerr is another good one in terms of, you know, your organization operations, things like that lean startup classic, uh, if, you know, fail fast, fail early, get your hypotheses out there, test, test, test, um, and then, you know, one that I really like that’s on a much more personal side is braiding sweet gas, sweet grass.

Yeah. Yeah. Robin Wall Kimmerer, which to me is sort of like the, why do I care about what I’m doing in the 1st place? How can I have a positive impact? So those are

Nico: books that I talk about. I just want to underscore. Uh, I love that. You just recommended braiding sweetgrass. My wife is going to love. To know that you did because I’d never heard of it until my children started telling me about this book that we listen to audiobooks all the time.

They’re addicted to audiobooks. Uh, go figure this book that they had been listening to called Braiding Sweetgrass. And it, um, it really, I’m curious now. I’m going to have to go back and listen. I’ve listened to, um, portions of it with my kids, but I haven’t connected the dots in the way that you have. So I’m going to go back and listen to it now with the perspective that this is a book.

That Cynthia Adams has recommended my kids are listening to that. My wife somewhere found some.

Cynthia: I hope you’ll share with me what your thoughts are after you’ve had a chance to, to get. Yeah,

Nico: absolutely. Um, uh, as we bring this to a close as we must, unfortunately, I want to give folks the opportunity as I’m sure they will like to.

To reach out and connect with you. Where do you like to be found? Where is it easiest for folks to engage with you and with

Cynthia: Pearl? So Pearl’s website is pearl certification. com. And if you are in any way interested in becoming a network partner, because you come from a trade or a business that. Could benefit from working with alongside us, I would say, uh, go ahead and feel free to learn more about how we work with different customers on our website.

And, um, we have ways for you to get in touch with us there. I like to be talked to via email as as opposed to text or a phone call. So Cynthia. Pearl certification.com is how you can find me.

Nico: Gotcha. Perfect. Well, we’ll link to both of those as well as your LinkedIn account. Yeah, absolutely. On

Cynthia: that. That’s another option for sure.

Mm-Hmm.

Nico: then. Fantastic. Well, let’s end, as we always do with, uh, what we call a bold prediction. And I am, uh, I’m curious from your perspective as a platform. And market maker, what do you see as the critical path obstacle that we need to overcome to really unlock the true potential for home performance value and homeowners appreciating and enjoying that value long term?

Cynthia: So this is going to sound counterintuitive, but I believe that we need very clear market signals from home insurance and lenders that they understand the risk associated with these homes. Today, and 50 years from now, or let’s just say 30 years, which is the life of the usual mortgage right now, the mortgage rates, um, don’t accurately reflect the, the risk associated with certain properties, nor well, I think insurance is in a different place.

You see insurers pulling out of places like California and Florida, because they understand all too well, the climate risks that are in play, but I think that homeowners. Are are kind of being given mixed signals about how much or whether or not they should care about resilience measures or performance, you know, solar efficiency measures, water efficiency, depending upon where in the US you live, because, um, we’ve been able to kind of band aid over.

The risk and and so I think if we really want to accelerate the energy transition, we want people to live better, healthier, higher quality lives in the homes that they’re at the sort of financing community. That’s in the real estate industry in particular needs to wake up and begin to understand the risk to their businesses if they don’t.

Nico: Yeah, I love that. Um, I’m going to rephrase it slightly. Um, I’m just, I was listening. I usually will try to write my own version of what you’re saying and, um, think through it and mortgage rates don’t accurately reflect the risk of certain properties, but they also don’t reward the choices homeowners make to improve their assets as high performance climate resilient homes.

Yes.

Cynthia: Well said Mika. Thank you.

Nico: Pearl can help you do that. Cynthia Adams is the co founder and CEO of Pearl Certification. Hopefully you will take some time to go connect with her on LinkedIn. You’ll find all that you need to do that in this show notes. Cynthia, I look forward to having you back on and, uh, I look forward to hearing all the wonderful things that are to come with Pearl.

Thank you for coming

Cynthia: on Suncast. Thank you so much. And thank you for a thoughtful conversation and a set of questions, Nico. It was my pleasure.