How Clean Connect CEO Mark Smith grew Clean Connect to $1.2M revenue and 20 customers in 2021.

hey folks my guest today is mark smith he's the president of a clean connect dot ai they use ai to help oil and gas companies produce clean energy at a profit he founded windows nt magazine with a successful exit of 100 million bucks in five years he's also the host of digital roughnecks video podcast for energy technology executives mark are you ready to take us to the top all right hey thanks nathan man you are the definition of niche digital roughnecks a video podcast for energy technology executives i love that yeah well you know 80 or more of our energy comes from fossil fuels and will uh in spite of all the focus on renewables for the next 20 years and one of the key things is you know that we pride ourselves in the u.s and and other countries do too is energy independence right so these you know these energy companies they want to produce clean energy to profit but there's a lot of regulations heavily regulations including new ones coming up and legislation that's going to kick in in 2022 and so uh and a lot of investors are out there that are esg investors you know yep so are you helping me like what's is it software or is it a service yeah so we combine uh specialized cameras which are called ogi they're mid wave thermal cameras that can see these volatile greenhouse gases essentially thermal cameras and optical cameras together with our ai software to help automate um emission compliance in addition what the big discovery was we also help them with their autonomous operations so not only we do the op the compliance part but we also save them some kind of 10x roi on an investment with us through by by people savings so mark what are they paying on average for the software per month per year um on average okay so an oil gas site per site will pay about five to six thousand a month okay five to six grand a month and how much does it cost to install the ogi hardware the cameras and sensors so that's that could be an all-in we sell the whole thing as a service um okay so it's 5k 5k month how many cameras are ogi sensors to come with so it would come with one ogi several thermal cameras and then uh an optical couple opticals what are the hard costs of that for you getting one site set up just the hardware expenses 20 oh you got it it costs you a grand just one time flat fee to get out of the hardware no no these are five to ten year deals so twenty percent twenty percent of what so you gotta understand the way oil and gas works it has a unique tax treatment okay so when you're building a new pad there's a thing called intangible drilling costs so in that case they want to accelerate capex so they'll pay us for 10 years up front everything all software five grand a month times 12 months is 60 grand a year times 10 years at 600 grand you have folks that have paid you 600 grand per site all cash up front correct okay got it and so you're saying it's 60 grand or sorry 120 grand for just the hardware install right i see that's expensive for that stuff huh yes and they're used to that because every one of the customers we have has bought a flair gf-320 camera it's a handheld ogi camera that's how they do what's called eldar inspections leak detection repair those are 120 000 capex item we because of the volume and things like that we our camera is substantially less than that but they're used to it when they hear ogi camera which is the standard they know hey this is going to be a premium service yeah and how many sites are i want to get your backstory here in a second but how many sites are you installed on today so we are on 20 on 20 across how many customers uh across um 10 11 customers so we have so the companies started in march 2020 and we have 11. new that's great congrats yeah so we're early visionary customers the first two are starting to roll it out to multiple sites all the rest they're on one you know like pilot site but usually pilots last three to six months with some of these companies because our our main client is a i would say a multi-billion dollar oil and gas company yep i mean can i take 11 customers and 20 sites can i multiply 20 times that 600 000 contract value per site you just quoted yes got it so you've done 12 million dollars in all cash up front already the pilots are not that much the the pilots are six figures um but it's a it's a a finite period of time however all the pilots if we meet the pilot objective start to go to scale i see how how many are already paying your per monthly cost your per monthly fee of five grand a month the two clients who yeah okay got it so pilots the pilots in what they're like a hundred thousand dollars sort of pilots for three months yeah i see got it so you're like you're like 10 to 15 grand a month right now on revenue and in terms of mrr um we're no we're six figures okay i don't understand the math there's two customers and two sites that it's yeah but randomly when you start to go to scale okay each one of these customers um some have 400 sites i get that yeah yeah no when they when they get to now right yeah when the customers go to scale they're adding 10 sites at a time okay i understand that i'm talking today though there's two customers and and how many sites across those two okay so just with those two customers alone or 20 sites yeah but i get your point and that they can scale there's a bunch of extra are they paying five and then the other mark are they paying five grand a month for all 20 of those sites correct up front for the 10 years i see got it so then you're doing it you're doing recognized mri where you deferred over 10 years you're generally right 100 a month in revenue yes that's great i mean that's fast forward that's zero to 100 that's zero million dollar run rate in under what 18 months 12 months yes okay how did you do that did you use your media business to close those customers quick um yeah actually what happened was we uh when we started it was just an idea we did uh have a third party company build a basic level model on leak detection then literally in the first month i did a webinar with flir flir is the market leader in this category they invited their customers every one of the customers that was invited was a purchaser of one of their previous cameras flir recognized us as their ai partner and boom we picked up our first client who then paid us to do those models as well as 10 other models so now the the the big idea is we're now selling a suite of models that we call autonomous 365. yeah but distribute this back to because i want to give you credit or credits too you've got two logos that are paying you and they've already paid you for installation across 20 sites at 600 grand a site all cash up front yes so 20 sites time 600 grand all cash up front means you have 12 million dollars that has hit your bank in the past six to 12 months since launch it's as it hasn't gone quite um they go in tranches so but they're not up front but let let's put it this way we're funded completely by our customers yes no no i love that i never i'm questioning that i'm trying to get a sense of when you yeah i don't um i don't want to go too much suffice to say you're close but i i can't go too deep into the numbers like that well it's fine i'm just trying to understand all paid when you say all paid up front that would mean they all paid up front not in tranches so if you if it's true are they paying once per year at the beginning of each year okay so i've never heard of someone paying 10 years up front that's why i'm curious yeah and it's because of um there's a tax treatment with oil and gas companies is very unique to this market it's called intangible drilling costs so when they're it's a new pad they can pay up front and accelerate their investment and write it all off in that year when it's opex meaning it's now a production pad so our customer number two was a opex um we by the way found a financing company that will you know cash flow the whole thing so we can finance that but the bottom line is that customers yeah that that will not um opex doesn't pay all up front i see what you're saying yeah they want to recognize and sign the contract so that is sort of like billable arr because then they can take the tax credits up front the cash will actually leave the bank though maybe on a different schedule yes so i see so and so it works out different new pads versus existing pads or sites yeah i see very cool okay tell me more about the company so you launched it last year how many people are on the team today ten ten of you guys okay and are you the sole founder no there's four of us that's okay that's a lot of that's a lot of people to get degree on one thing what'd you do split 25 each uh more or less okay and are you guys all like buddies or how'd you how did you meet these guys um i was the i.t guy these guys were all oil and gas engineers and so there was a particular problem that was happening in colorado which is where we're founded where colorado regulations were moving to continuous monitoring and that was a game changer so we met with flear how you going to handle it you...