‘We’re going to try to be disruptive in everything we do’
Erik Jaques meets Kevin Surace, founder, Serious Materials
Diversified building materials manufacturer Serious Materials is a bit different. Armed with an Apple-inspired business model, the Sunnyvale, California start-up is intent on shaking up a turgid building materials industry where commodetised ineffectuality reigns, and R&D – if it moves at all – moves at glacial speed.
Dour, run-of-the-mill products like windows and drywall recast as sexy, hi-tech climate change salves straight out of Silicon Valley? You’d better believe it. On a visit to Serious Materials’ Chicago manufacturing plant last year, US vice-president Joe Biden gushed over the “most energy-efficient windows in the world”.
President Obama himself went one better at a subsequent White House summit for clean tech entrepreneurs, hailing the company for “creating the technologies that will power our long-term prosperity”.
Last month, California Governor and climate change commando Arnold Schwarzenegger was cooing during a guided tour of its California HQ. Nice PR if you can get it, but then Serious Materials was always going to attract attention.
“We have a disruptive business model, a disruptive sales model, disruptive marketing, messaging, and disruptive products,” says Serious Materials founder and CEO Kevin Surace. “We’re going to try to be disruptive in everything we do.”
A fast-talking, entrepreneurial veteran of technology and software start-ups, he exudes a commanding sense of authority and precision. It’s easy to see why he’s being marked as the US green building space’s poster child. Surace is all about the “big play”. The big play means using its products to make a sizeable dent in the 52% of worldwide greenhouse gas emissions coming from the built environment; Serious Materials’ website quotes an aspirational annual contribution of saving a billion tonnes a year.
The big play means creating green collar manufacturing jobs in America, like when Serious Materials acquired the assets of Pennsylvania-based Kensington Windows – a producer of vinyl replacement windows and doors – after it had filed for bankruptcy protection, and committed to rehiring the 100-strong workforce and retraining them in producing its technology for super-insulating windows and commercial glass.
Or when it rescued Chicago’s Republic Windows and Doors in 2008 after its owner had been stealing equipment to set up a non-union factory and got caught red-handed. The company went bankrupt immediately, putting 250 workers out of employment without severance pay. In response, the workers staged the first US factory sit-in in decades, refusing to leave until Bank of America, the largest creditor, paid their severance. They got their way, but were left high and dry in the job market.
Watching events unfold on TV, Surace picked up the phone and called the union. He told the local president, Armando Robles, that he wanted to buy the plant and partner with the union to retrofit the factory to make high-quality, high R-value windows.
Robbes dropped the phone in shock. “Some people would call me crazy,” Surace recalls. “But I didn’t care”.
After negotiations, Serious Materials purchased the plant, honoured the union contract, and made a commitment to bring the entire workforce back on their previous contract terms. Fifty have been re-employed to date.
The big play means quick thinking ingenuity, like when Serious Materials was awarded a contract to make all 6,514 windows at the Empire State Building energy efficient.
The existing glass won’t be wasted. Serious Materials staff will work through the night un-glazing, cleaning, placing spacers and suspended film, sealing and injecting gas and curing the windows to take them from a shivery R-2 to a solid R-8.
And the big play means a lot of money. A recent study by the US Green Building Council and consultancy firm, Booz Allen Hamilton, predicts that green building will support 7.9M American jobs and pump $554B into the economy between 2009 and 2013.
And while the US does not have a green national building code, there is plenty of enabling going on. Globally, the green building industry totalled over $553B in 2009 according to Green Market Research, and is expected to have a 108% compound annual growth rate through to 2015.
“Because energy efficiency has some of the fastest payback for any energy technology, this a really hot time for any company to be in the energy efficiency sectors,” notes Emma Ritch, senior research analyst at the Cleantech Group.
Serious Materials can attest to that; last year, it scored $60M from its third round of funding in one of the largest US venture capital deals of the year. Serious Materials first broke on to the scene with Eco-Rock, a drywall that eschews gypsum in favour of a mixture of recycled materials that dry and cure naturally.
The process eliminates the need for energy-intensive oven drying and cuts CO2 emissions by 80%. Retailing at the same price as other premium drywall, EcoRock is also said to be termite-resistant, 50% more mould-resistant, while generating 60% less dust. Popular Science awarded it best new product in 2008, and the following year The Wall Street Journal hailed it the most innovative environmental product of the year.
Today, the company’s best selling product is its high R-value (thermal resistance) windows, which are said to yield energy savings of up to 40%. Most dual-pane residential or commercial windows are R-2. Serious Materials uses nine distinct technologies to go all the way up to R-11. Insulated walls start at R-10.
Serious Materials employs 400 staff across two divisions, and offers 50 products. Six acquisitions have been made to date, and Surace reveals that several other service portfolio-expanding deals have been concluded, with full details to be announced later this year.
There’s no doubt Serious Materials is growing at a rapid pace, and while Surace won’t disclose any turnover figures he indicates that it will be over the $50M quoted in an Inc magazine cover feature from last year.
“History says you can build extremely large companies in this industry,” says Surace, referencing French diversified manufacturing giant Saint Gobain as a prime example.
“Now has anyone ever built an extremely large company that was differentiated, that didn’t have commodities? No, I can’t think of any. But could one? I don’t see why not. Especially in this new day and age where the focus is energy efficiency.”
As for international expansion, he is emphatic. “Absolutely,” he says, rattling off potential prospects in the Middle East, Europe and South-east Asia. Whatever Serious Materials achieves, it will be driven by a commitment to innovation. The company has filed 32 patents, and had two issued to date.
This is the part of the business that captures Surace’s imagination, and he likes taking the lead during the product origination phase. “I am still as hands on as [Apple CEO] Steve Jobs is,” he says. “My name is on most of the patents here.”
Then there’s the willingness to embrace risk. “One thing you learn in tech is innovation equals risk,” he explains. “If you want to take no risks then it won’t be disruptive. It’ll be very simple – like changing a product from white to pink. If you want to disrupt an industry you have to have people from the CEO on down willing to risk it all on the cost of developing and bringing to market the next product.”
Surace began his career at companies like IBM, Seiko Epson, and National Semiconductor. His first start up was Hestia, a maker of chip technology where he multi-tasked running sales and marketing, while also filling in on finance activities and R&D.
He went on to form Air Communications, before taking on the role of vice president of network services at handheld communications business General Magic. In 1999, he formed Perfect Commerce, which evolved from a shopping website into an auction-based system for corporate procurement.
Serious Materials started to take shape when a friend and co-founder of General Magic asked Surace if he wanted to take over QuietCar, a company creating polymers to muffle road noise in cars. Surace agreed, initially treating the company as a hobby. Soon after the website was launched, customers asked if the product could be applied to walls.
Intrigued, he began a breathless process of research and discovery, culminating in Serious Materials.
Paul Holland, of VC firm Foundation Capital, another of Serious Materials’ investors believes the company represents a defining moment in the building material industry.
“To have those really seminal moments in the development of an industry, you have to have really aggressive and strong visionary leadership. Serious Materials has that,” he suggests.
“Kevin thinks big. And thinking big he gets everyone around him to think big too.”
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