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 know so we said hey we'll ju we'll jump in and create the first machine model another regulation happened in colorado basically saying with the oil and gas tanks they could not open the thief hatch they needed another solution for that so essentially we're following these regulations um and then in colorado and now it's starting to spill out all over the u.s there are some other regulations coming up where we're getting our our um system being approved by the epa and it's done through one of our clients actually um who's presenting our stuff to the epa mark how many engineers are on the team so we have six six interesting okay take me back in the backstreet here because you had a magazine that you sold as well when did you exit that company um 2002. okay and and was that your your baby 100 of it no i mean i own that with some other partners when did you found that when you issued the first issue that was um the first magazine was september of 1995. we sold in september of 2000 and then i had a two-year kind of um exit how's the magazine valued it was valued at 100 million um it was a multiple on certain things so at the time at that time the multiple was uh based on three chunks so the print magazine part the events and then the digital part the digital had a 16 times multiple because digital at that time was so new in the media space that the acquiring company paid huge multiples for it yeah so what the digital was doing six million by itself times 16 is 100 million uh digital not quite but print was print was healthy it was a subscription-based magazine so all paid um the events were very profitable and the digital was literally printing money at the time how many issues did you ship like like how many households got a copy of your magazine in 2002 so it was in um so let's see probably about 250 000 so but it was in it was in 13 languages and it was 160 countries so and it was a paid subscription magazine so it had all of these different um uh internationalization versions of it as well and what did what was the cost of subscription costs uh 50 bucks a year wow okay that's not bad you know 50 bucks times what 250 000 houses what is that 12.5 million a year in revenue there wow that's incredible do you regret selling it now looking at big media companies out today no the timing was unbelievable honestly if we had waited another year probably would have got a third of that now was that like life-changing sort of few sort of money where you don't put your money the rest of your life it was yeah but you get bored really quick you know um so and some other stuff so i i ended up um creating an agency and helped other media business owners um exit so that that i got i was well known in the m a space and the media's deal so i would help other business owners and get their portfolios going and stuff like that all right cool and you bootstrapped this company correct imagine patron money correct how much of your own can i ask how much of your underput in um not much to be honest with you i i expect to put way more but we landed our first client in 30 days and they wrote us a check so i'm like holy crap this is like the this will be the biggest return of my life yeah so you put in like under a million of your own capital would you say yeah i don't even want to tell you because it's embarrassing it's i don't think it's embarrassing i think it's impressive but you have to say what it is for us to be impressed less than six figures that's great so you were able to sell this customer and get that cash before you had the actual hardware built you sold them on a slide deck correct yeah that's great that's the way to do it very cool any plans to raise or you want to stay bootstrapped yes we're going to raise and and the main reason is because um esg is happening now and um there's a big opportunity right now and that's what's the right amount to raise um it's interesting because when i that the number we need to hit the scale numbers we want to hit isn't much couple million bucks but we have people who want to give us way more than that because they uh one of the things that i was very successful at doing with windows ntmag is buy a bunch of companies so um you know we're talking about doing a spec and putting extra money and buying them because i was very successful near the the last year prior to exit of buying great engineering companies who couldn't market their way out of a wet paper bag and they're like we hate sales and marketing and i go well i love sales and marketing let's pair up and a great engineering company and there was very creative so there's a number of acquisitions that we'll probably do as part of this what do you think the company's worth today uh buck 350. and why i mean no i i i honestly that's that is the you know 100 million dollar question i don't know interesting all right the m a guy does not know what he thinks his company is worth today that's i don't believe you mark but we'll leave it at that all right talking about sales people any sales reps on the team no the founders are doing all the selling okay that's you and you don't have enough history yet to know about churn uh how did you find these customers i guess it was from your media business right you had a distribution mode yeah i mean this is one of the things because i have a media background i launched digital roughnecks and it's amazing and created you know i became an expert in the industry by interviewing experts in the industry very good all right mark great story here let's wrap up with the famous five number one favorite book uh currently yep i would say play bigger number two is there a ceo you're following are studying no number three what's your favorite online tool for building clean connect um click funnels number three what's your uh or how many hours of sleep breaking every night eight and what's your situation married single kids married with kids how many kiddos i have one kid and i have one grandchild wow okay how are you 61. last question mark something you wish you when you were 20. um becoming an entrepreneur is tough but it ain't that tough you should go go for it guys cleanconnect.ai helping oil and gas folks comply with new esg rules and regulations he sells an ogi hardware pack plus an ai installation pack caught five grand per site annualized at 60 grand and they usually pay 10 years up front at least they commit to it contractually so 600 000 contract values there they've already got two customers live paying for 20 sites hundred thousand dollars in a recognized mrr about a 1.2 million run rate all bootstrapped which we love team of ten six engineers founders and all the sales then maybe we'll raise now a couple million bucks maybe look at a back and doing a roll up we will see what happens mark thanks for taking 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