Welcome to the Jazz Shapers Podcast from Mishcon de Reya. What you are about to hear was originally broadcast on Jazz FM however the music has been cut due to rights issues.
Elliot Moss
Welcome to Jazz Shapers with me Elliot Moss, bringing the shapers of the business world together with the musicians shaping jazz, soul and blues. My guest today for this final Jazz Shapers of the season is Joe McDonald, co-founder and CEO of tem, a clean energy company changing the way renewable energy is bought, sold and powered. After being turned down by Google – I can’t believe they did that Joe – for not being considered Google material, we’ll find out what that might mean shortly, Joe started his entrepreneurial journey in 2013 as co-founder of energy start-up Limejump, developing virtual power plants that allowed small renewable energy assets to access the market opportunities of larger gas and electricity suppliers. But with VCs unwilling to invest the capital that Limejump needed in order to grow, Joe steered the companies exit to Shell in 2019. Having long known businesses were paying much more for their energy than the true cost of producing it and seeing how prone they were to price hikes, Joe co-founded tem in 2021. The platform directly matches businesses with renewable energy generators in real time. How clever is that; he’ll explain why and how, bypassing the inefficient wholesale market and providing 100% traceable renewable energy.
Joe McDonald is my Business Shaper today as billed earlier, co- founder of tem, a clever company bringing you renewable energy at the right price, at the best price with the clever thing called artificial intelligence serving up all these amazing data points so that me, the customer running a business can go, I want that one. Is that right?
Joe McDonald
That’s about it, right.
Elliot Moss
Is it?
Joe McDonald
Yeah, it’s, it can be as simply put as that um…
Elliot Moss
And I am a simple fellow Joe, I need to, I take solace in that.
Joe McDonald
Yeah, no it’s, it’s ultimately we looking to build a kind of modern transaction infrastructure for electricity to super kind of modern energy market which happens to be now thankfully kind of decentralised renewable generation so our, our job really is to take the 20, 30, 40% in additional costs that are charged to say a business trying to buy energy from the true cost that’s actually being generated at. Due to all of that inefficiency, the wholesale market, the very legacies of a 30 year old machine with all its intermediaries and all its inefficiencies and using the kind of artificial intelligence and sort of modern technology stacks, we can cut out all of that middle man, all of those intermediaries and actually just allow businesses to transact much more directly with the actual generation sources themselves.
Elliot Moss
Unpicking that, you know and I want to come to all sorts of other stuff but because it’s fascinating to me. This intermediation of the marketplace is, is happening before our very eyes and it’s been happening for 30 years whether it’s buying books or whether it’s your finances and you know, going direct to market with price comparison sites and all that other stuff. Although technically I suppose there’s an intermediary there as well you would argue.
Joe McDonald
Yeah.
Elliot Moss
Um but that sense of it getting simpler, how are you able to strip out all the different parts of that chain of people and how have you been allowed to do that as it were?
Joe McDonald
So I think the, the really kind of fundamental thing to understand with electricity is it’s data reconciliation. It’s like if you move cash from your bank account to your mate’s bank account no one is now physically going in and picking up that cash and moving it right, it’s all about data reconciliation and the traditional energy markets have been built around oil and gas, like physical commodities that do need to get moved around the world um, physically and you need a lot of intermediaries and you need a lot of humans.
Elliot Moss
Ships,
Joe McDonald
Ships, you need traders…
Elliot Moss
Pipes.
Joe McDonald
Exactly all of that sort of stuff.
Elliot Moss
Yeah.
Joe McDonald
But that’s sort of been retro-fitted for electricity just because it kind of made sense, it’s another commodity to be traded. Our view is, wait this now provides an opportunity because actually if you are talking about data reconciliation and not actually caring about the physical flow of the electrons, then there is an opportunity for distance mediation and we saw this a lot in the Fintec space as well over the last 10 years which we took quite a lot of inspiration for when setting up tem. So that’s the key opportunities if you can do things where it’s about data reconciliation then you can use our rhythms and automation to remove the humans and all the jobs that kind of used to be a pass the parcel role between human to human um, over days and weeks can now be done in sort of seconds and minutes.
Elliot Moss
Without getting too geeky, but just to be clear, with renewable energy obviously it’s not physically moved so is it, is it your data reconciliation is a bit like having as you said, the bank account, it sits somewhere when you then draw down on it, wherever it was it’s now being sucked up into wherever you need it?
Joe McDonald
Yeah it’s like it is payment reconciliation really. Is the actual electrons all flow into like a big lake you know and it’s very difficult to actually discern what is one electron to another right. If one of our businesses…
Elliot Moss
They don’t look any different.
Joe McDonald
Exactly, no discrimination here like, they all effectively the same. It is one of the problems right, it is why we’ve ended up having to use renewable certificates, and all of these other mechanisms to try and validate origin but with us we just simple are able to show for every pound that business has spent, where’s that money gone? To which bank account of which generator in the country has that gone to and that’s the way you actually reconcile what energy you have bought and what energy you have sold. And it is the job that the wholesale market effectively has done since the 1980s. In fact it was created for the need of a few private companies to have more liquidity in the market, it just absolutely is not fit for purpose now for this modern 20,000 plus renewable generator space that we have in the UK.
Elliot Moss
You were going to be a lawyer and then you turned a hard left. Why were you going to be a lawyer and how did you end up turning the hard left towards this space?
Joe McDonald
Yeah so I, I studied law and got through that qualification process and it really was a moment of actually walking into a law firm in London and having a tour by the partner and being like, what am I doing here? It really was that kind of moment.
Elliot Moss
Why did you think, what am I doing here? What was going on for you?
Joe McDonald
I think it was as I was listening to what my job was going to be um and it felt so non meritocratic and I was like, hold on a sec actually I don’t want to serve that client, I want to be the client like I want to be the one owning, building, doing things, what am I doing here um but it was a reflection for me because I think I was there in the first place because um you know, growing up in Bath. A lovely, amazing environment, amazing family, my dad and mum worked incredibly hard but I think my dad was made redundant three times. I remember that was probably when I was about 5, 7 and 12 and so I was old enough to feel the kind of stress and I remember it was probably when I was about 14 I asked my mum, I was like, what’s a good job that will like always be there and needed um and paid good money and they kind of, I think they probably threw out doctor, lawyer and I realised I was not good at like science but I was good at talking so maybe that worked. Um and I think that honestly set my trajectory for a while. I mean the irony being actually now with AI that even lawyers aren’t safe so.
Elliot Moss
Apparently so. This is what I am being told quite often.
Joe McDonald
Yeah.
Elliot Moss
But no you are abso..., of course you are right. Any, anything, anything that involves kind of brain power can be in theory transferred to a piece of kit.
Joe McDonald
Yeah it’s quite…
Elliot Moss
Or at least part of it.
Joe McDonald
It’s both amazing and also quite scary as well.
Elliot Moss
Absolutely. But, but the, and then moving away from that how did your, your head get turned towards technology and how did you end up almost going to Google if they had been smart enough to hire you?
Joe McDonald
Yeah so um I, to be honest it was just kind of serendipity. So I was interviewing, I’d just actually secured a placement for KPMG, later in the year which my mum was really happy about telling her friends right, she was like I can explain KPMG this is really good and then I was interviewing at Google and they mentioned, in fact their EMEA sales director, I can’t remember his name at the time, was like, I don’t think you’re really Google material right. I don’t, from what you are telling me you want I think you are actually more of a start-up guy. Best advice. And he introduced me to someone that was helping Eric, co-founder at Limejump looking for someone who was not energy, had law, law experience, who was like looking to join a company and so he introduced me. I sat down with Eric for about 2 hours. I at that point honestly didn’t know when you flick a light switch on like how it all works but he was ex-British Gas, he’d seen the industry. He was like, I am thinking of building and I was like, wow this sounds awesome so I remember calling up my mum being like, you know that KPMG job, I’m actually going to get paid a quarter of that, in fact I didn’t have any salary to start with and I am going to go and join a small tech company doing energy. She was like, oh no.
Elliot Moss
So just, and it’s, what an amazing guy to have identified that actually you didn’t quite fit but…
Joe McDonald
Yeah.
Elliot Moss
…what do you think he, he was describing as Goo, what was Google material that you weren’t?
Joe McDonald
So he was saying the actual structure was a bit more flat and especially in the role I was coming into um in more of a kind of business development role. He was like, look for your skills and your opportunity and kind of your ambition level I think you are going to probably end up finding it a little bit too flat here you know. So a flat culture is great but actually I think he could see I was really hungry and I really wanted to own something and he was like, you are not going to own something here for years. Similar I think that was a feeling I got with the legal system, I was like I am not going to actually own a client or a partner or my own trajectory for years and years and years and I think he spotted that and pushed me into the hands of you know, a guy that was looking to start a company. At the time I genuinely thought, awesome I’m joining a start-up, I’m going to get smoothies, I’ve seen this on tv, this is awesome. I didn’t realise it would be the hardest 7 years of my life and it was really brutal and like an uphill battle from day one, but yeah, ultimately that, that moment opened up the door to now frankly my last sort of 10-12 years of life and work experience, it’s just amazing.
Elliot Moss
We thank people everywhere for spotting the talent in front of us and helping them, what to do with it. Much more from my guest Joe McDonald coming up in a couple of minutes. Right now let’s hear a taster from the Mishcon Innovation Series, which you can find on all the major podcast platforms. Lydia Kellett invites business founders to share their practical advice and industry insights for those of you thinking about starting your very own thing. In this clip we hear from Paul Beastall, CEO of HutanBio, a technology company aiming to decouple long distance transportation from fossil fuels with HBx their zero-carbon bio fuel.
You can enjoy all our former Business Shapers; there are 500 of them on the Jazz Shapers podcast and you can hear this very programme again if you pop Jazz Shapers into your favourite podcast platform. My guest today is Joe McDonald, co-founder and CEO of tem, a clean energy company changing the way renewable energy is bought, sold and powered. You’ve probably said that quite a few times in the last few years. You mentioned this fellow who sort of pushed you one way and 7 years later hardest thing you’d ever done. Were you jointly responsible for saying, you know what this isn’t going to get any more funding, we need to sell?
Joe McDonald
No actually it was kind of the opposite. There’s an interesting sort of lesson for me in that first start-up, naivety was a superpower for sure as in if I had known how hard it was going to be I don’t actually know if I would have done it and actually we are finding the second time around you almost over analyse because you don’t have the same naivety of like knowing how hard and how sort of the 10,001 chance. What was interesting is coming towards to sale I actually wrote Eric an eight page letter saying, please don’t. I was still so tied to this concept and this mission that I really felt we hadn’t completed and there’s an element with a renewable energy trading company selling it to an oil company you know and um…
Elliot Moss
Soul and devil comes to mind.
Joe McDonald
Yeah.
Elliot Moss
Sort of but probably that’s slightly, that’s probably slightly binary as well.
Joe McDonald
Yeah and completely binary because guess what, like a lot of those companies, Shell, BP, they bought a lot of these V1 kind of almost climate tech companies and a lot of the founders they are now doing all the V2 including myself, we wouldn’t be here without that acquisition right and that success so they’ve actually helped potentially shape the future competition to them long term because as you were saying at the beginning, venture capital wasn’t really looking at the energy market in 2013-2019. They just weren’t looking at all um, yeah coming back to the point Eric, I think he saw the writing was on the wall. He had seen, we had made a few mistakes I think that you would probably make in your first start-up in terms of the scalability and making the right bets, the right time but he could see that frankly there was a bit of a storm coming on the horizon with energy crisis which did in fact come and come real hard and he could see the venture capital to take us to that next stage of growth just wasn’t going to be there for the strategic investment from the likes of the oil companies was really high. They saw the threat of virtual power plants and trading companies and renewable energy companies and they spotted that and were willing to actually sort of pay quite a lot of money out from multiple start-ups around the same time.
Elliot Moss
And that naivety and as you said you know, that was 7 of the hardest of the years of your life, naivety on the one side, then you remember this the lived experience to use the phrase, lived experience of that thing and then you go again. So what’s that about Joe, I don’t understand. The crazy guy looking at me, he’s like, but, but you just told me it was exhausting and hard and yet you are compelled?
Joe McDonald
Yeah, it, it’s funny right because for me I don’t think I have been like the typical selling lemonade from an early age kind of entrepreneur. I wasn’t always starting businesses and getting into that addictive cycle. I really had to find myself in this position. The real reason for starting tem came in a couple of let’s say intervals um, over about 12 months. So the first one was I did feel this burning, I need to take all the lessons of the last 7 years and go again because if I don’t and I say and I try and promote growth mind-set and product first and, but actually if I am not willing to do that myself and take all of those learnings and know that I can perhaps 10x and go again then that seems like I’d be a real disappointment in my own self and my own self-belief. The second one was I kind of realised that I was one of the few people who had actually seen the end-to-end electron transaction and I could kind of see there is like a window of time that is almost like a moment in history where energy has been bought and sold in a way that has been disempowering to users of the system since pretty much 1890 since like Standard Oil and there’s enough of a tail wind and enough of a disruption going on right now that there’s an opportunity to potentially de-thrown those traditional power brokers and I realised there is probably only a few people who are getting to see how it all works and so there was an element of like responsibility. I was like if I don’t do this, I’ll look back genuinely regretting that I had a moment in time to potentially change the way that history looks at energy, electricity systems, empowerment and it is just going to be the same old winners and losers in the next 30 years. Then finally I got hit with a very personal story which was right in the middle of the energy crisis one of my close friends, she also had quit law and she had started a catering company, she was really passionate about cooking 7 years, she came to me one day, I think it was a Tuesday, she was crying and she was like, I’ve got to shut down the company and she had come to me because it was electricity and she was like my energy bills have gone up by 400% for the next 12 months and like I can’t afford, can’t afford the rent, I’m going to have to shut it down like what’s going on? And it was difficult for me to explain that. On the Thursday I sat down with my other close friend who is an energy trader, he’d just been paid £700,000 bonus for the half one of the year and that’s when I was like, somethings got to change here, like this is, this is not good for the planet, it’s not good for the users of the system, it is disempowering, disengagement, it allows for all sorts of problems, cultural to be created and actually what it is, it’s just broken and it’s broken because of a power distribution. So yeah, all of those things came together to realise I’ve got to go again.
Elliot Moss
He didn’t really think about it did he? I mean that’s the problem here Joe, you’ve really got to be more thoughtful and bring these strands together. Amazing, I mean that is an amazing confluence of things. Joe McDonald is my Business Shaper, very eloquently talking about the reasons why he set up this business called tem. You’ve given me all the, they’re more than rational, there’s kind of the personal story at the end with your friend and then the friend in the energy trading making the bonus and all that but it takes a lot I imagine after you’ve had an event in your first time round and then to really want to go again. Did you in your waters, did you in your insides go, I’m going to do this or did you have to kind of haul yourself. You said, I felt a responsibility but was it like, yeah I’ve just got to do it or was it like, you’ve got to do it?
Joe McDonald
Yeah so I guess.
Elliot Moss
The truth.
Joe McDonald
This is the, the, the side of me probably that was going to make a good lawyer, is quite analytical and tried to think it through so I knew I was going to do it but I was very cautious about what kind of validation points did I need to have before risking it all you know, because there is an element where I gave up like 7 years of my life in my 20s, you know, I was working…
Elliot Moss
A lot.
Joe McDonald
…16 hours a day.
Elliot Moss
Yeah.
Joe McDonald
Seven days a week, I burnt friendships, I burnt relationships you know, I was just so committed and part of I think almost like, there’s almost like a self-defensive part of your body like almost like an adrenaline thing that was like trying to hold me back from potentially even thinking about doing that again so I just went through a few validation points so, lots of walks with the dog really thinking about like if I am going to do this what is the problem like, if I am going to do this how do I really think about the cusp we need and businesses and where that’s coming from.
Elliot Moss
On your own? This decision?
Joe McDonald
On my own just walking round.
Elliot Moss
Really and you prefer, is that the way you work?
Joe McDonald
Yeah if you had, if you were walking round Tufnell Park on those streets and you saw a random guy with a dog just talking into their phone.
Elliot Moss
That was you.
Joe McDonald
Every evening for about 5 to 10 minutes that was me um.
Elliot Moss
But literally is there anyone you would trust with that decision making process or anyone that you felt inputted to it?
Joe McDonald
Not at the time you know, I, my, just as I started my relationship of sort of 7 years ended as well and there was probably some element of that, I don’t think we were both going to continue that journey especially if I was going to go again so I was kind of quite isolated anyway I think but um, yeah I really needed to convince myself that I was going to risk it all, you know, risk all the money I had left in the bank account again like really go in.
Elliot Moss
So your own money went into this as well?
Joe McDonald
Yeah, yeah absolutely um that I could validate it and I could justify it. Part of that meant going out and finding three other co-founders. I was not willing to do this by myself. I really wanted to enjoy the journey this time like because knowing the outcome goodness knows where, what it’s going to be but make sure I really came in with some more diversity of thought, some support, some genuine founders. Luckily I had worked with all three of them previously so we kind of knew each other, we’d been through the fire together and that was really important, that was another validation point than you know, a small little steps investment um interest, needed that customer conversations. I think if I hadn’t spoken to four or five customers before I even started and then I heard them and I heard their pain and I was like this just needs to happen. That was probably actually the motivating factor to kind of go right let’s register the company, let’s get the white board out and let’s start going. And actually what’s amazing is two of those customers ended up investing into us and then our customers from day one all the way through to three and a half years later, which is genuinely awesome.
Elliot Moss
This is not seat of your pants kind of stuff and that’s what’s interesting about Joe McDonald, my Business Shaper today. He has been doing big things but he’s really thinking them through. Final chat coming up with him and we’ve got some music from the one and only Mr Herbie Hancock, that’s in just a moment, don’t go anywhere.
Joe McDonald is my Business Shaper, he’s the co-founder of tem, a now heavily invested business, over 10 million quid if my sources are correct. A lot of money coming in including your own money. You talk about disruption a lot and yet the way you articulate your thought process is incredibly logical and you break it down. Can anyone do that Joe? People talk about entrepreneurs and they say, oh there’s a certain type and yet you are a very analytical person, you were going to be a lawyer, you’re structured in your thinking, you’re not some crazy I’m just going to do this and yet what, the outcome of what you are doing might just up end everything that’s going on which is a big thing. So where, could anyone do that?
Joe McDonald
I was thinking about this myself, is that I can’t ignore that I was quite privileged in my background right, I had a, I talk about um, people talk about inherited wealth but I also think about inherited just like capital and stability from parents right so I had a good upbringing, a good education, there’s a lot of things that actually drive me to be like I need to take advantage of the opportunity I have so I can’t say everyone gets the same fair playing field but the one thing that I really want to take away from is you hear the stories about the entrepreneurs that make it seem so impossible and so unlikely and they are some sort of super genius and actually think if you really love trying to solve problems and you get pointed in the right direction and you are willing to take logical risk, I actually think a lot people could start businesses and the amazing thing is we are now seeing that, we are seeing that with AI, what it actually allows is a one person with a lot less effort and capital to think about a problem, articulate it, solve with some sort of innovation and that’s what I am genuinely really excited about is the accessibility of entrepreneurship becoming like really important um and hopefully an amazing set of new business is coming off the back of that. Now in energy I think it’s difficult to innovate an energy without being in it for a period of time because it is just very complicated so um, some businesses I think you know, the Paypal mafia came into the finance space with no experience, were able to tear it up because they were willing to be like, we don’t know how it’s done therefore we are just going to do it a different way so you can’t be too indoctrinated into the industry but I think in energy its complicated enough that if you understand it but if you are willing to go there must be a better way and I am going to ignore how it’s done and go back to first principles and rebuild, actually I think that logical mind-set I have gives me quite an unfair advantage in this space.
Elliot Moss
And logically just before I ask you your song choice, how long are you going to be in this game for? Have you got a number in your head of 5 years, is it 10 years, is this a you know, for you Joe McDonald personally?
Joe McDonald
This is for me is a forever thing now right so our mission is to take about 900 billion in transaction fees taken out as profit by big energy worldwide and take that to zero and put that into the hands of our users, of our transaction system which is businesses at the moment like small businesses and more money going into pockets of renewable generators. I think as of today we are 0.0064% of our way there. But that’s already nearly 20 million in savings that have gone back to businesses.
Elliot Moss
And do you reckon you can get it to me the individual in a house at some point?
Joe McDonald
I would love to. Without going into too much detail actually there is an example of perhaps over regulation in terms of price caps and market entry provisions and even things like data access rights that make that harder to do but for us there is no reason that the entire system can’t shift towards a tem way of doing things rather than the current wholesale market way of doing things.
Elliot Moss
A small thought just at the end there. Let’s just change everything.
Joe McDonald
Don’t worry I’ll add that on the next go to market strategy and say it came from you.
Elliot Moss
Yeah okay this bloke Elliot Moss who said just give it to everybody, what do you reckon? Well… there’s a small, small ambitious objective in there somewhere. Fabulous to talk to you Joe, really enjoyed it.
Joe McDonald
It’s been a pleasure thank you.
Elliot Moss
You’ve been absolutely brilliant. Just before I let you disappear back to save people money, more money, what’s your song choice and why have you chosen it?
Joe McDonald
Yeah so for me um Portico Quartet I used to listen to a lot um now my dad used to call Jazz pointless noodling which I never agreed. My mum brought me up on you know, Miles Davis and Cocteau Twins etcetera um so I ended up having a very eclectic music taste but Portico Quartet always during my university years um I went to three or four gigs and Knee Deep In The North Sea was the song that has always really resonated with me quite emotionally um, the last time I went to see Portico Quartet um unfortunately the last time I went with my closest friend who passed away the year after university so I will always forever associate this song with him, this is kind of bitter sweet but something I still listen to at least once a month.
Elliot Moss
Knee Deep In The North Sea from Portico Quartet, the song choice of my Business Shaper today, Joe McDonald. “I wanted to be the client owning and building”, his observation as he first walked into a law firm when he realised he didn’t want to be a lawyer. “Naivety was a superpower”, he said and how many people have said that, what you don’t know is really useful especially when you start doing one of these things called founding your own business or being part of a growing business. And the element of responsibility weighed heavy upon him, that sense that when he set up tem he knew he needed to do it, he felt compelled to do it and that’s why he is where he is. Really great stuff. That’s it from Jazz Shapers and me, have a fabulous summer and I’ll see you in a few months’ time.
We hope you enjoyed that edition of Jazz Shapers. You’ll find hundreds more guests available for you to listen to in our archive, to find out more just search Jazz Shapers in iTunes or your favourite podcast platform or head over to mishcon.com/jazzshapers.