The following interview is a conversation we had with Claudius Jehle, CEO & Co-Founder of Volytica Diagnostics, on our podcast Category Visionaries. You can view the full episode here: $9 Million Raised to Build the Future of Battery Diagnostics
Claudius Jehle
Brett, thank you very much.
Brett
Not a problem. So were joking there in the pre interview. Your last name is a little bit difficult for us Americans to say. I didn’t want to start off insulting you with pronouncing your last name wrong, so you just go ahead and tell us how to pronounce your last name.
Claudius Jehle
That’s the easiest part of the interview, I guess. My last name is pronounced Jle.
Brett
Amazing. But I’ll start things off now on a better foot. Now we can dive into the real question. So I’d love to just learn a little bit more about your background and really what you were doing before building the company.
Claudius Jehle
Well, initially I was studying mechanical engineering once back in the days and designing diesel engines and stuff like that. So this is what you learn in the germane technical university if you want to become a mechanical engineer. But I soon realized I want to do something with e mobility and that has also an impact on the climate and on the transition of energy and mobility. And quite soon, with some steps in between, I started to make a PhD in a research institute in Germany. That was twelve years ago already dealing with the first electric buses. And I thought, okay, electric buses, how crazy is that? I mean electric cars were not even really a thing back then, but huge batteries on a bus public transport. I found that super interesting.
Claudius Jehle
So twelve years ago I started to do my PhD in analyzing this very expensive, very complex, very unique wearing and degrading part. So I, little mechanical engineer went to work on electrochemical systems and on analyzing degradation and wear and tear and whatever whatnot of bus batteries more than a decade ago, which was really everybody was crazy. As I said, electrical cars were not even a big thing yet. Something very asian and electric, not to speak about electric buses. So yeah, I was doing research there in my laboratory soon realizing that, well, with a lab and with test beds and whatnot, you cannot tell much about batteries in the field that are driving, in passenger transport, that are on the road. You cannot just take these hundreds of kilograms of battery acid from the vehicle and put it into a lab.
Claudius Jehle
So we had to come up during this research with ideas, with algorithms, with models to estimate battery quality while the asset was on the road. So we started to equip the first buses with telematic IoT devices, gathering huge amounts of data, and to come up with algorithms that analyze field data, continuous data coming streamed from the assets, all sorts of chaotic sensor information, and we wanted to crack that open to understand batteries while they are in application. I gloriously failed with the PhD because I never finished it. I got the opportunity to become the group manager in this research group for twelve people eventually. And were developing a first version of what now is the core ip of analytical diagnostics from scratch, because this was another thing back then.
Claudius Jehle
We designed from scratch algorithms and concepts and ideas, tools, libraries, algorithms and models to analyze this very complex, very expensive, degrading component. So I was doing that for quite a while, from 2012 until 2019. And around 2017, I would say we realized. So the group and me, we realized, okay, this can be a big thing. Residual value of electric vehicles by that, also leasing contracts around EV’s, large stationary systems in containers. Gigawatt hours of batteries worth billions or even trillions will be around us, and nobody’s going to know how they are. And they’re degrading, super complex, all financing, insurance, everything, leasing contracts, everything around the quality of the battery will be a thing in some years.
Claudius Jehle
So we realized, if this shall fly, if the technology that we’re developing in our tiny offices and labs, if this should fly, we have to build a company. And this can be a multi billion company eventually, because batteries will be everywhere, not only in cars and buses and trucks and even in planes. And everybody or a lot of stakeholders will want to understand in an easy way, how is that thing performing? What’s the value? Is it safe to use? Can I use it longer? What do I have to do to prolong lifetime? So me and my business partner, we quit and founded Validika Diagnostics in 2019, right before COVID Perfect time.
Brett
Great time. Great time to start a business. Exactly what were those first six months like then? Building in the heart of the pandemic. What was that experience like?
Claudius Jehle
Yeah. So we incorporated the company in October, finished some stuff at the research institute. Well, I have to say, I didn’t say that my business partner was with me at this research institute in my research group. But just for a very brief, Cindy, he has an industry background. He was designing cloud based data analysis platforms for his entire career now almost 15 years. So back then, he just briefly joined the group to go out with me again to found this company.
Brett
Yeah.
Claudius Jehle
And the first six months after we incorporated, the company was like having one employee and trying to rebuild a lot of stuff from scratch that we knew we did wrong during the time when were at this university, because we made a lot of mistakes. We learned a lot of things during this research time how not to do it. So were building from scratch a lot of new concepts from a new plain slate. Yeah. So completely from scratch struck. We wanted to get our seed. Our first pre seed round closed. We were already in conversations by then to close that in March. But then in February, the first lockdown came. So this was a very challenging.
Claudius Jehle
We had to gather some money from our families, my business partner and me, to bridge until we got remotely convincing the investors to still give us the money during lockdown. So we did emergency loans to the company, and this was a very challenging time. We were also negotiating a license agreement with the university, which was very challenging because at least in Europe, I think in the United States, this is very different, but in Europe, many universities and many research institutes are not like, they don’t understand, or did not back then five years ago, understand that this could be a revenue source for them as well, these spin outs. So this was, negotiating a license agreement with our alma mater was really difficult.
Brett
At what point did you start to commercialize and sell the technology? Or when did you have your first paying customer? How long did it take from when the company was founded?
Claudius Jehle
This is actually a good question. While were at this research institute, we had already paying customers and we thought, quite naive as were, we’re going to spin that out, found validity diagnostics, and we’ll just take these clients with us, because what should go wrong? They then don’t have a research institute as their supplier, which they also didn’t really like, but they will have a proper company, but they didn’t follow because they said, okay, what happens if you fail? Particularly during COVID So the first two clients that were actually thinking we could just take with us, they said nay. So our first paying client, I think was after nine month ish, because I was, I mean, I did that, what I’m doing now. I did that for quite some years already. I mean, not just research as I mentioned I didn’t finish the PhD.
Claudius Jehle
It’s still in some drawer. But I was very active in this scene already. I was making contacts and building a network in the utility scale stationary system area. Also public transport and heavy duty. So I knew quite some people. So we had the first friendly customers within the first nine months. I would say tiny ones to be fair. Early adopters.
Brett
How do you find more early adopters? Obviously that’s always the low hanging fruit. That low hanging fruit. It’s still hard to get them. But how do you find early adopters?
Claudius Jehle
Well, I can only answer for my industry or e mobility or energy mobility transition. I don’t have the blueprint for other sectors, but for me, early adopters and finding interested people, my recipe would be to speak at as many events and exhibitions as possible. For me it is really having an interesting story to tell. Simplifying for me, I’m trying to simplify with a bit of a tongue in cheek style, the complex battery and telling the people that we are making life easier for them. And then you get attention. This is how we did it, or was helping us. And then of course drawing from our network that we had before and making. Yeah, speaking on events. And so I would say this is how we did it. But this doesn’t scale very well.
Claudius Jehle
I think reflecting today we would probably do more webinars and more online marketing, but with content, because we are dealing with a very complex technological component. So the market and early adopters and everyone needs to trust you. So you need to come up with a trustable story and not just marketing alone. If you’re a high tech venture, just.
Brett
So we can understand the scale that you’re operating at today, can you give us an idea of the growth and the traction and adoption that you’re seeing.
Claudius Jehle
The e mobility all the battery industry is. Well, it’s probably wrong to say it’s early because it’s everywhere. Tesla is everywhere. Chinese manufacturers are everywhere. But in an innovation cycle, thinking the stuff that we are doing comes a bit delayed. For instance, one of the most promising product lines of political diagnostics is a car quality check. Car battery quality check, residual value determination, because residual value or resale value, determines the profitability of a leasing company. So leasing companies interested in reselling used cars, particularly EV’s, at the best possible price. So an independent quality assessment makes a lot of sense for them. But this doesn’t follow the sales of new vehicles. It is one, two or three years delayed, obviously, because new cars don’t get immediately resold. So long story short.
Claudius Jehle
At the beginning, it was quite a challenge because nobody really urgently needed what were doing. It took until I would say last year. Last year was pivotal. It was the first year where really inbound requests were flowing in, and the first years were really early adopters and trying to educate the markets. And now that e mobility and batteries on utility scale, on large fleets is becoming reality, and problems and questions around this black box are popping up. Only now, only since last year, I would say we’re really kicking off. You were asking for the scale. I mean, we are monitoring way more than a gigawatt hour of batteries for scale. This is more than a million kilowatt hours. Tesla has 50 kilowatt hours, 80 kilowatt hours.
Claudius Jehle
So a huge amount containers in the desert of Texas, south of Dallas, in Arizona, and in Mexico City. We are monitoring buses in Mexico City and in the Netherlands, and in Germany, and in Sweden and Norway and in Canada. Soon, hopefully really global. And we are expecting a huge growth in the next years. Now that this understanding or that people want to understand this complex component, now the time is right.
Brett
This show is brought to you by Front Lines Media podcast production studio that helps B2B founders launch, manage, and grow their own podcast. Now, if you’re a founder, you may be thinking, I don’t have time to host a podcast. I’ve got a company to build. Well, that’s exactly what we built our service to do. You show up and host, and we handle literally everything else. To set up a call to discuss launching your own podcast, visit Frontlines.io podcast. Now back today’s episode. What do you think you’ve gotten right to achieve this type of growth?
Claudius Jehle
Patience. And this is something that is driving me crazy still today. Because on the one hand, you need patience. You need a Runway that is long enough. Trying to convince your potential investors of giving that trust, particularly in a growing market and not in a market which is already established, and you’re just revolutionizing something. Or just revolutionizing. I mean, this is.
Brett
Oh, that’s it.
Claudius Jehle
Just revolutionizing something in an existing market, no. But in something where there is nothing to revolutionize because everything is new. You need a lot of patience. And I think we had patience, and it is good that we made some of the mistakes early on, but what have we, other than that, gotten right? I think we didn’t. And this is controversial also due to Covid, we didn’t grow too quick, too large to maintain efficiency in the team and being still able to react on the client needs. Don’t burn. I would say we didn’t burn the money, that we got too quickly, but we’re kind of cautious because of a Covid B, because the market is not yet able to tell us exactly, like with a specification document or something like that, what they exactly need.
Claudius Jehle
So we need to be able to react on client or on requests in the market, on streams, in the market. But on the other hand, we also need some manpower. We are a bit more than 30 people at the moment. So balancing that not too quick growth of the team to be still able to be efficient and react. But on the other hand, having some substance, because people also, clients want to see some substance. And you need people to do all the work from sales and marketing and customer success, and of course also development. I think we got that quite right.
Brett
How did you learn marketing? Because it sounds like you didn’t have a background in marketing. You weren’t a marketing leader or CMO at a company before this. What’s that been like for you to learn the art and the science of marketing?
Claudius Jehle
I’m still learning. I have to admit that being an engineer, a german engineer in particular, you don’t learn that in university. I mean, we have one colleague who is doing that very well because she comes from a similar industry, from wind turbines. Diagnostics of wind turbines was something completely irrelevant when the first wind turbines came into the european market. But soon the market realized, okay, wind turbine diagnostics, because the blades can break off or the gears can break or whatever. I’m not an expert. So she was with this industry and she learned what words to use, what channels to use in a similar industry. And this helps a lot. We underestimated in the first years the aspect of marketing. I think this is also a european thing in general, but now I think we’re quite good, or we’re getting better and better, at least.
Claudius Jehle
And how did I learn it? Well, the hard way, failing thinking, okay, why don’t people not know us? We once said, we are known for not being known. This is not a good thing. So at the beginning I underestimated it, and now I would say this was maybe a mistake. And now we’re learning, or we are getting better and better.
Brett
To date, what do you think has been the most important go to market decision that you’ve made?
Claudius Jehle
We think that the battery itself will become a commodity, and thus information around the battery must become a commodity. For something to become a commodity, it has to be affordable. Not to say cheap, but let’s say affordable. And it must be easy for any stakeholder interested in his or her, in the particular information around battery that they want to know to get this information as quickly as possible. That’s why we early on decided the software that we’re developing must be integratable into existing fleet management systems, into existing processes in the utility company. It must be integratable as a widget, for instance, in an app or something like that.
Claudius Jehle
So early on we decided tech wise to focus on API is well documented API and guidelines for partners to integrate our insights that we deliver into their product, and thus partnering with companies that are already established in, let’s say, they have route planning, dispatching tools in the logistics industry. So this is a controversial decision that we took because we are just second line, if you will. We don’t necessarily have, or will have in the long run, a direct client relation to the ones owning the batteries or that are interested in quality information, but rather are an intermediary, or will go via intermediaries to our clients.
Claudius Jehle
But I think this is and was and proves to be a super important go to market decision, not to target the eventual beneficiary of the information only directly, but also trying to go via resellers and channel partners and building your tech, according to that, this was one of the most important decisions because now it’s paying out. But it comes with a huge set of challenges as well.
Brett
What are some of those challenges?
Claudius Jehle
Well, very bluntly speaking, you’re at the mercy of your reseller. If they are big, you have to embed yourself into them. I mean, first of all, you always have to be fair and have to negotiate good contract. But you have to also see that those are just commercial actors, commercially acting companies. And I, you are not on the front line speaking to the beneficiary or the user. They are always in between you. And this can be a great multiplier. But on the other hand, yeah, you give away a bit of control and margin.
Brett
What about your market category? Is it battery lifecycle management? Is it battery diagnostics? How do you think about the market category that you’re in and that customers are buying based on?
Claudius Jehle
That is also a very interesting question. It ties into, well, it’s related to the question that you posed before. We are a building block, API based building block. We are almost an SDK or software developer kit, if you will, for a huge amount or a huge spectrum of possible business cases that need some information around the battery, be it in e scooters, in utility scale, grid scale, stationary battery containers, be it in public transport, be it in private passenger cars, be it wherever you find a battery. So are we a battery lifecycle management software company? Well, I don’t know. We are delivering insights around the battery into all sorts of different industries for different applications. Yeah, lifecycle management is a big thing. I had a conversation today with a client visiting us here in Dresden in Germany. It was about lifetime lifecycle management.
Claudius Jehle
They were interested in long scale degradation, monitoring, forecasting of replacement of batteries, and extending the lifetime. But there are also clients that are not interested in that at all. They’re just interested in uptime every day, how much the range, how much energy can I get in or out? Then a third thing is safety. Insurance companies are interested in safety, so the question is not easy to answer. We are a layer, a building block and not a vertical. I would say we are difficult question to answer with a simple one sentence reply.
Brett
I have to admit, I think most category questions are a lot of times, especially when you’re innovating something so new, I think it’s very difficult to fit into any of those existing buckets that are out there, and it’s hard to even fit into a new bucket that you’re creating because it’s being created as you go. I’ve had many founders answer that question in a very similar way.
Claudius Jehle
Good.
Brett
Now let’s talk a little bit about funding. So you’ve raised over 9 million to date. What have you learned about fundraising throughout this journey?
Claudius Jehle
A lot, and not enough at the same time. What have I learned? First of all, at the very beginning, I wasn’t super familiar with these stages. What is pre seed series a? I mean, there is still no absolutely clear cut definition. So I’m also still learning. But I underestimated how important it is to know where you are and to find the right investors at the right time. And what I learned is, the first thing is, I think you got to understand the interest of the party that you’re speaking to. What are they interested in? I mean, I wouldn’t say that we made a lot of stupid mistakes at the beginning, but we learned as went. How is a venture capitalist working? What is a CVC corporate venture? What’s their interest?
Claudius Jehle
And I think this is one of the first things that you got to understand what they’re interested in and then stretching your story. Oh, I already said stretching, but building your story, which will be different from the story that you tell your customers. This was also a great learning, and it’s still difficult for many people that I know, including myself, to distinguish between the pitch towards your clients. And if you are a CEO and you love the product and you love the technology and you love the market, you will always pitch towards clients, even if you have a head of sales or something. And the pitch that you give to the investors because theyre very agnostic unless theyre strategists and you might not want them at the very beginning. So you have to have a split brain.
Brett
Final question for you before we wrap up here. Lets zoom out three to five years into the future. Whats the big picture of vision look like?
Claudius Jehle
If someone wants to know something about a battery in a bus or a truck or a car or something, and they find it in the whatever tool that they have, their fleet management tool that they have had for, and they find an information as smiley the battery is still good. My vision is that it is highly likely that in the background, behind the scenes that this information has been provided by our product. We want to be global. We don’t necessarily want to be in the front line, but we want that most battery information, battery health information, particularly for heavily used batteries, will be provided by us in the background. This is my vision and this is the product vision and analyzing the market and the growth potential. This can easily grow our company and the product.
Claudius Jehle
The value proposition that we have can easily grow to dozens, if not plus $100 million business SaaS business easily. And this is what we want to achieve. We want to build the most scalable platform for battery diagnostics possible.
Brett
Amazing. I love the vision. We are up on time here and I know it’s Friday, end of day in Germany there. I don’t want to keep you any longer from your weekend and appreciate you taking this call, you know, so late. So we’re going to wrap. But before we do, if there’s any founders that want to just follow along with you and your journey, where should they go?
Claudius Jehle
They should add me on LinkedIn and we have a virtual beer. That’s easy. Or they should go to visit me in my beautiful headquarters here in Dresd, which is 2 hours drive from Berlin. Or I’ll be in New York in a few weeks. We can meet up in New York City if you want.
Brett
If you’re ever in San Francisco, you have to let me know as well. We can do a real life beer.
Claudius Jehle
Yeah, we can also do that. San Francisco. I’m just there for four days, so San Francisco is a bit out of reach in April, but next time I’ll let you know.
Brett
Amazing. Thank you again for taking the time to chat. This has been a whole lot of fun. I’ve learned a lot, and I know the audience is going to learn a lot from you as well.
Claudius Jehle
Thank you, Brett.
Brett
This episode of Category Visionaries is brought to you by Front Lines Media, Silicon Valley’s leading podcast production studio. If you’re a B2B founder looking for help launching and growing your own podcast, visit Frontlines.io podcast. And for the latest episode, search for Category Visionaries on your podcast platform of choice. Thanks for listening, and we’ll catch you on the next episode.
Twitter
facebook
linkedin