Episode 133: Brendon Merkley
In this episode of Be EPIC, Matt is joined by Brendon Merkley, Chief Operating Officer at GoodLeap to discuss his ten year career in solar and how solar can improve sustainability of our world’s energy. Read more...
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In this episode of Be EPIC, Matt is joined by Brendon Merkley, Chief Operating Officer at GoodLeap to discuss his ten year career in solar and how solar can improve sustainability of our world’s energy. Merkley explains the logistics of residential solar power and how the industry is ever changing and improving.
0:00:07.2 Matt Waller: Hi, I'm Matt Waller, Dean of the Sam M. Walton College of Business. Welcome to Be EPIC, the podcast where we explore excellence, professionalism, innovation, and collegiality and what those values mean in business education and your life today. I have with me today, Brendon Merkley, Chief Operating Officer of GoodLeap. And Brendon has a really impressive background, in solar and in other areas, but in solar in particular, he has been with Vivint Solar as Chief Operating Officer, he has been with SolarCity, and that was at the time when Tesla purchased SolarCity, so we'll talk a little bit about that. And now, he is the Chief Operating Officer of a growth company that has a really interesting story and business model, called GoodLeap. Brendon, thank you for joining me today.
0:01:10.9 Brendon Merkley: Glad to be here. Thank you, Matt.
0:01:12.5 Matt Waller: Brendon, of course, I got to learn about your company a few weeks ago, when we met for the first time, and you've opened office, here in Bentonville, but I was really intrigued with your business model for GoodLeap. But before we talk about GoodLeap, you've been in the solar business from different perspectives, over the past 10 years. What really attracted you to that industry?
0:01:38.7 Brendon Merkley: That's a good question. I wish I could say I was so thoughtful and deliberate about that choice, as something that I sought out, but the truth is, I was really interested in energy and the energy industry generally, and in climate change and in how technology could improve just the sustainability of our energy consumption. I can't claim that I identified residential solar and wanted to specialize in that, but I looked for broad opportunities, and the specific opportunity found me.
0:02:11.9 Matt Waller: And that was Vivint, correct?
0:02:13.4 Brendon Merkley: That's right, yes.
0:02:14.7 Matt Waller: And so when you were with Vivint, where was that company at the time?
0:02:18.8 Brendon Merkley: Vivint Solar and Vivint Inc. Are based in Utah.
0:02:22.5 Matt Waller: And they focus on residential solar?
0:02:25.7 Brendon Merkley: They do. So Vivint Inc. Is a large residential services platform. So they provide home automation, home security, energy management. And joining that company, we worked on a few different ideas to expand the energy product line up, and residential solar was one of those opportunities that we pursued and eventually incorporated a sister affiliate company, Vivint Solar.
0:02:49.2 Matt Waller: And of course, that was almost 10 years ago.
0:02:52.8 Brendon Merkley: It was.
0:02:53.5 Matt Waller: That you started there, and I know, residential solar's changed a lot over the years. What are some of the ways you've seen it change the most, over the past, say, 10 years since you've been in the business?
0:03:07.1 Brendon Merkley: It's definitely gaining momentum. I think it's becoming a little bit more of an accepted home improvement. When we got started, everything was new, every conversation with investors, with homeowners, with employees, and labor was new. No one knew what residential solar was. There was a lot of necessary explanation required, just to promote the business. Even in the past several recent years, I feel, I sense, that it's becoming a lot more mainstream. I was in New York City just a couple of weeks ago, meeting with investors and banks, and where it used to be a very fringe asset class that only people prepared to do a ton of work were prepared to invest in, it's now become much more mainstream, much larger capital markets are attracted and interested in the environmental and sustainable components of this asset class. And so, I think the biggest shift just over the 10 years, has become the more mainstream nature of the industry.
0:04:08.4 Matt Waller: And of course, a lot of that mainstreaming is a result of, I guess, consumer acceptance?
0:04:16.4 Brendon Merkley: It's the result of a lot of hard work by many different professionals and entrepreneurs and salespeople and installers, operators, and the result of some real good innovation. My partner, when we co-founded Vivint Solar, had a background in the manufacturing perspective and sort of had identified that the hardware costs of solar were going to fall precipitously, and then, that would enable the product to become more compelling to homeowners. And that's borne out, that's very true. When I first bought solar panels, as Chief Operating Officer at Vivint Solar, I think we paid close to $2 per watt for a solar panel, $1.70 something, and today you can buy solar panels for 30-40 cents a watt.
0:05:00.8 Matt Waller: That's a big difference.
0:05:01.1 Brendon Merkley: So the price has fallen incredibly and then there's been other innovations around the financing. Early on, with solar, the predominant form of financing was a lease or a power purchase agreement that required complicated tax equity structures, and today, you've seen both as the purchase price of the product has come down, it's become more attractive to homeowners, at a lower purchase price, which also enables personal financing for that home improvement, to enable loan platforms to facilitate that purchase for homeowners, and see a lot more adoption, just both in the cost decreases and in the financial innovation that enables more adoption.
0:05:45.3 Matt Waller: So, clearly, the cost came down a lot. How about the productivity of the cells? Have they improved over the past 10 years?
0:05:56.7 Brendon Merkley: They do improve. There's a good rule of thumb I heard a long time ago, that suggests, an average solar panel is sort of four feet by six feet, and that improves at about five watts of capacity per year, which is pretty small. It's a slow march of improvement, and we've also got pesky physics at work, that impose a bit of a ceiling around our theoretical understanding of the universe, that suggest that they can't get exponentially more efficient. They can get a little bit more efficient and they keep getting a little bit more efficient. But the thing I like about solar, and one of the things we talked about frequently with people is, there really is no obsolescence of the product to worry about. If you bought 20 solar panels five years ago, today, maybe you only need to buy 18 solar panels, but they're the same technology, they're the same solar panel. They'll produce power for 20-30 years, no problems. And so, it's about demystifying the technology aspect of the product.
0:07:07.3 Matt Waller: So next, you went to SolarCity. You went there before Tesla purchased it.
0:07:10.6 Brendon Merkley: I did.
0:07:13.1 Matt Waller: What was their focus? What was their market focus, when you went there?
0:07:17.6 Brendon Merkley: Our goal was to fight climate change and promote more sustainable energy. One of the marketing ideas that I was rather fond of, was one of promoting this notion of abundance. I embrace an outlook on sustainability, that says we can innovate and still maintain an abundant lifestyle. And so, our goal was to provide that abundant mentality and provide people cheaper, more sustainable energy for their homes and we scaled SolarCity to a 40% market share. We were the largest residential developer in the country, by far.
0:07:53.3 Matt Waller: So at one point, Tesla started looking at SolarCity. Were they an investor originally?
0:08:01.1 Brendon Merkley: So Tesla and SolarCity always had a very close, close history. Elon Musk was the Chairman of SolarCity and his cousins were leaders and founders of SolarCity. So Elon was always aware of SolarCity and our progress.
0:08:20.4 Matt Waller: And did things change at SolarCity much, from a cultural perspective, during that time?
0:08:27.4 Brendon Merkley: Yeah, there were a lot of changes. I think the mission remained the same, and those two companies are very aligned on missions of sustainability, approaching different industries and different markets, but Tesla was just a much larger company. Any merger, I think, is complicated and can be difficult, but there were a lot of great people on both sides of that, that worked to integrate those companies and figure out what the respective goals of those different business units would be.
0:08:56.0 Matt Waller: Now, you're with GoodLeap, Chief Operating Officer of GoodLeap. Would you tell us a little bit about GoodLeap, what they do and how the business model works?
0:09:06.5 Brendon Merkley: Absolutely. So our vision is to be a platform that connects investors with homeowners and contractors, where investors have capital that they want to deploy and they increasingly want to deploy it with an eye towards sustainability and environmentalism and things like that, with homeowners who may want to invest in their homes and improve their homes and improve their carbon footprint, and with the contractors ready to provide that service for them and that we can provide financing for those homeowners.
0:09:37.5 Matt Waller: So let's take me as an example. I don't have solar panels on my house.
0:09:43.4 Brendon Merkley: We could change that.
0:09:44.3 Matt Waller: Yeah, we could change that. So let's suppose I contacted GoodLeap and I said, "Look, I'm interested. I have a house that faces south, with a large roof."
0:09:54.5 Brendon Merkley: That's great.
0:09:55.5 Matt Waller: And so, let's suppose I contacted them. How would the process work?
0:10:00.5 Brendon Merkley: Our platform is positioned as a point of sale offering with a contractor. So typically, you would reach out to a contractor, there's some great partners of ours, here in Northwest Arkansas, that offer financing through GoodLeap to homeowners like yourself. Your first step would be to meet with the contractor. They would likely evaluate your property, provide a proposal, explain to you what the value proposition of a solar installation could provide to you and your home. And then from there, they would say, "Hey, Matt, how do you wanna pay for this?" More often than not, lots of people say, "Well, I'd like to make payments. Can I do that?" And the contractor would say, "Absolutely. Here's GoodLeap. Provide them a couple bits of information and we'll get you approved and then we can proceed with the project."
0:10:42.5 Matt Waller: Well, that sounds really easy, compared... I would think, in most cases, you would take out a home equity loan and then that takes a long time.
0:10:51.5 Brendon Merkley: It does. That has been a common way that these home improvements have been financed in the past. That's the opportunity we recognize. Sometimes we think of innovation as if it requires massive ground-breaking new inventions or breakthroughs and I think a lot of the innovation we've seen in the last couple decades, is just marginal improvements to everyday life. Uber did not invent taxi service, they just made it that much easier to find a taxi and I think the same is true here. There are other ways to pay for your solar system, but it is that much simpler and more convenient, to have the same contractor offer you that financing right there, at your kitchen table.
0:11:34.5 Matt Waller: Clearly, homeowners can get financed more quickly, so they like that. And then contractors like it, because I would imagine a certain percentage of times, when maybe a homeowner wants to do it and then they start to get a loan, they may change their minds in the next couple of weeks.
0:11:55.3 Brendon Merkley: That's right. There's a saying in sales that says, "Time kills deals." So if you're a contractor, you want Matt to sign and to agree and to commit right now, while I've got you at the kitchen table. We enable businesses. We are a job in an app, for 10,000, 20,000 professionals right now, who are using our company to grow and scale their own businesses.
0:12:19.5 Matt Waller: So, Brendon, I can see clearly, how your experience, your team's experience, helped you understand this was an opportunity to help consumers and contractors and really, to advance your goal of rolling out solar power more broadly. But how do you get financing for this? You're connecting the dots here, for people, but somehow you have to get capital to be able to provide these loans.
0:12:50.3 Brendon Merkley: You do. And like anything, you start small and scale it up. So early on, it's all a sales function, absolutely. We're selling to investors and capital markets and we believe we're originating a very high quality product, but early on, before you've done it, you don't have any data to point to. And so, it's a sales function, and credit to our team that was able to sell the vision of our company and the qualifications of our team and our software platform and the loan products that we're originating. And we're very grateful to early investors that believed in that vision and started buying loans and enabled us to scale and then success begets success. So we've been able to find more partners, more capital, and I think, when things really, really get rolling is where you begin to develop enough data and enough operating record, that you're able to now prove objectively and quantitatively, what you've been saying, promoting about your product. And so, now that we're there with, I think, 10 different public debt securitizations now, the conversation is just much easier now.
0:14:00.9 Matt Waller: So if a consumer has the option of a home equity loan, versus GoodLeap, how competitive are you, for interest rates?
0:14:11.2 Brendon Merkley: That's a great question. So interest rates are very relevant, but I think the thing to keep in mind when we think about our product offering, is that we are really competing with the utility bill payment. We are always focused on how do we provide an offering that competes favorably with your home utility payment. Today, we have rates that are very attractive, around 1.99, 2.99, 3.99 percent, depending on the product that you choose, and that the contractor wants to explore with the homeowner. But beyond the rate and the term, there's lots of different innovations around flexible payment structures and different deferred payment things, that I think provide a more competitive offering, relative to the more standard traditional financing offers.
0:14:54.2 Matt Waller: So GoodLeap is in the San Francisco and Sacramento areas currently. But recently, you leased space in Bentonville. So you decided to move out here. How did that happen? That's interesting to me. I don't really know exactly which month you started doing that, making that move, but I'd like to know a little bit about why you came out here?
0:15:18.9 Brendon Merkley: Sure. It was a pleasant surprise. Most of us had no exposure to Northwest Arkansas, so I didn't know much about it. And our founder and CEO, Hayes Barnard, was close to some local business leaders here in the area, who very graciously hosted us out here last summer, to look around the region and explore things. And I think we all fell in love with the region and the people, and the opportunity that we saw here, to partner with some of those local business leaders and community members, to expand our company. And so, over the course of last winter, we finalized some of those plans and officially moved into our new space in Bentonville, just in February of this year.
0:16:01.7 Matt Waller: So Brendon, one thing that's clear from your work history, is that you have worked with companies that scale. You've been helping companies scale up. And for those listening that may not kinda know what that means exactly, when a new company is formed, there's usually a prototype of a service or a product that's created, based on lots of inputs from customers or problems that are in the market. And the entrepreneur comes along and tries to solve the problem, and eventually gets product market fit. And that means that the demand starts pulling, and usually, during that time frame, the business model morphs a bit too. So the product or service is morphing, and the business model is morphing, pivoting. But at some point, when all of it starts really working, you have to scale. You start growing fast, and you have to hire people, you have to get financing sometimes. But you have to implement new technologies, new business processes, etcetera, etcetera. But you have a lot of experience in scaling. Has that been good for you? And why are you a good fit for scaling businesses?
0:17:28.0 Brendon Merkley: I don't know why I'm a good fit, but I certainly enjoy it. And yes, at different times in my life, I've led teams of two, three people, and also been founding members of teams when they were very small. At Vivint Solar, my partner and I were two, three people, and in 18 months, we had 1500 employees, so it scaled very quickly. When I joined SolarCity, I believe we had employees roughly 3000, and in three years I was there, we scaled to 17,000 employees. Scaling is fun, and I liken growing businesses to pouring wet cement. Wet cement that maybe takes a couple years to dry and harden. And it's I think, a magical period in a new business, where you get to lay foundations and pour cement, hopefully, with an eye towards success and towards scale, such that you build things that will support larger scale and will provide for efficient process. Once businesses achieve a certain size, as you mentioned, there's so much inertia in organizations and institutions, and products, and customers, that things get harder to change. That's why there's so much literature about how big companies innovate and what not.
0:18:38.1 Brendon Merkley: And once that cement dries, it's quite hard to shift course. It's really satisfying to me, just as a builder, to play with the wet cement early on, and figure out what the company needs, to support three, five, 10 years from now, and try to lay that foundation as correctly as possible in the early days.
0:19:00.1 Matt Waller: Well Brendon, congratulations on your tremendous successes in your career, and with GoodLeap. And we are thrilled to have you here in Northwest Arkansas.
0:19:13.0 Brendon Merkley: We're very glad to be here. Thank you, Matt.
0:19:17.8 Matt Waller: Thanks for listening to today's episode of the Be EPIC podcast, from the Walton College. You can find us on Google, SoundCloud, iTunes, or look for us wherever you find your podcasts. Be sure to subscribe and rate us. You can find current and past episodes by searching, Be EPIC podcast, one word, that's B-E-E-P-I-C podcast. And now, be epic.