CarbonCure solidifies rapid growth with IAAS model despite clients’ tight capital budgets
Concrete plants don't need huge capital layout for clean-tech innovation, paying CarbonCure monthly return instead
Robert Niven’s pitch to concrete producers is attractive: his Nova Scotia-based company, CarbonCure Technologies Inc., boasts the ability to make concrete stronger and less harmful to the planet.
Yet it remains a tough sell, especially in Canada.
“This is a very traditional industry,” says Niven, CarbonCure’s CEO and founder. “I think the saying is: ‘Everyone is from Missouri — The Show-Me State.’ Everyone wants to see (our technology) work in their own plant before making a sales decision. That puts the brakes on the pace of adoption.”
Despite the industry’s conservatism, CarbonCure has installed its technology in about 40 concrete plants, up from just a dozen plants a year ago. Niven says that surge in acceptance is largely due to CarbonCure’s adoption of an infrastructure-as-a-service (IAAS) sales model.
The IAAS model, which is used elsewhere in the clean-technology sector, is similar to the software-as-a-service model used in the tech sector. In the case of CarbonCure, the model involves installing its technology in concrete plants at no cost to the operator. CarbonCure, instead, gets a monthly payment, while the concrete producer reaps the benefits of the technology, free of a large one-time capital investment.
“Just about every manufacturer will tell you this: there’s no capital budget right now for new investment,” Niven says. “So this gets around that capital expenditure question.”
he result: Niven predicts CarbonCure’s technology will be installed in 110 concrete plants by Oct. 1. “That’s largely due to this model and, of course, the technology itself,” he says.
CarbonCure’s technology injects waste carbon dioxide into concrete, making it stronger. The improved concrete enables manufacturers to use less cement, thus cutting costs while allowing them to promote the use of a green product.
Shaw Brick, Atlantic Canada’s oldest concrete masonry producer, was an initial adopter of the technology and now uses it across its entire production line in Lantz, N.S. Shaw Brick general manager James Bond calls the technology “the future of the concrete industry.” (In October, Niven won a 2016 Ernest C. Manning Innovation Award for his work at CarbonCure).
CarbonCure initially focused on concrete blocks but recently pushed into ready-mix concrete, which makes up more than 80 per cent of the massive concrete market. “There’s more concrete produced than plastic, steel, oil and gas combined,” Niven says. “It’s really an enormous space.” But concrete production is a carbon-intensive process. That’s why Niven argues it’s important to retrofit the current roster of concrete plants. He estimates that CarbonCure’s technology could reduce the carbon dioxide output of the concrete industry by up to 10 per cent.
“If this were to be rolled out, this would create billions of dollars in cost savings and hundreds of millions of tons of CO2 reductions,” he says. “It’s a win-win situation, where we are able to increase the competitiveness and profitability of businesses (and also) drastically reduce the carbon footprint without having to spend a penny of capital expenditure. And that’s powerful.”
Andrew Haughian, a partner at Pangaea Ventures — a venture capital firm focused on advanced materials, and a CarbonCure investor — agrees.
He says the company’s ability to entice concrete makers with no upfront costs and immediate results has helped CarbonCure’s technology go viral. “The word is really getting out in the industry so it’s taking off exponentially,” he said from Vancouver. Haughian says the growth is especially impressive considering the stasis of the industry. “There are a lot of conservative industries — utilities, automotive, chemical manufacturing; they’re all risk averse. This is one of those.”
And other hurdles remain, most notably the challenge of paying to install technology in each new customer plant. The upfront financing costs rest with CarbonCure.
“This model creates all this explosive growth,” Niven says. But, he adds: “You get killed by your own success.”
“That’s our biggest barrier right now — access to growth capital,” he says. “We’re looking for lenders to step up.”
Niven notes that banks are “very hesitant” to back technology companies, meaning there is an opening for government to provide the third-party financing necessary to get more clean technology into industry.
“They backstop the banks or they do it themselves,” he suggests. “This is a great opportunity for government, industry and clean-tech providers to use these kinds of business models to retrofit manufacturing plants, accomplish all these (environmental) policy goals, drive profitability and competitiveness of Canadian industry, and create a domestic market for clean tech.”
Currently, most of CarbonCure’s business is in the U.S. Niven says that fact signals a long-term problem for the Canadian clean-tech sector.
“We’re a classic example — all of our business is south of the border because Canadian manufacturers tend to be a lot more risk averse to try new things,” he says.
“Why is Canada developing all these clean-technology companies? We’re doing a great job at it, but all the benefit is (going to) businesses and the environment in other countries.
“It’s a serious issue.”