Carnot Compression

Early Stage

Sustainable oil-free air compressors

Analytics

Raised to Date: Raised: $929,008

Aggregate Commitments $

Platform

StartEngine

Start Date

05/28/2020

Close Date

04/18/2022

Min. Goal

$10,000

Max. Goal

$1,070,000

Min. Investment

$250

Security Type

Equity - Common

Funding Type

RegCF

Series

Seed

Pre-Money Valuation

$11,300,000

Rolling Commitments $

Status
Funded
Reporting Date

04/30/2022

Days Remaining
Funded
% of Min. Goal

9,290%

% of Max. Goal

87%

Likelihood of Max
Funded
Avg. Daily Raise

$1,346

Momentum
Funded
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Location

Scotts Valley, California

Industry

Industrial Services

Tech Sector

Cleantech

Distribution Model

B2B

Margin

Low

Capital Intensity

High

Business Type

Growth

Carnot Compression, with a pre-money valuation of $11.3 million, is raising funds on StartEngine. The company has developed a patented method to reduce the heat generated by compression and has created oil-free air compressors. The technology allows for air compression in an isothermal manner, reducing the operating costs and improving efficiency. Carnot Compression was founded by Todd Thompson and Hans Shillinger in 2014 and has received numerous grants from the California Energy Commission and the National Science Foundation. The current round of crowdfunding has a minimum target of $10,000 and a maximum target of $1,070,000, and the funds will be used to bring the product to the market. Carnot Compression is led by leading experts from all over the world and is prepared to benefit a bevy of industries.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$811,760

$972,258

COGS

$618,456

$665,403

Tax

$0

$0

 

 

Net Income

$-15,625

$87,255

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$8,581

$17,004

Accounts Receivable

$140,220

$207,101

Total Assets

$495,432

$472,779

Short-Term Debt

$177,087

$312,562

Long-Term Debt

$206,120

$187,500

Total Liabilities

$383,207

$500,062

Financials as of: 05/28/2020
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Ratings KingsCrowd Startup Rating Methodology Article

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Summary

The Carnot Compression team has been selected as a “Deal to Watch” by KingsCrowd. This distinction is reserved for deals selected into the top 10%-20% of our due diligence funnel. If you have questions regarding our deal diligence and selection methodology, please reach out to hello@kingscrowd.com.

Problem

Air compressors are an indispensable workhorse in the industrial sector. They’re needed in almost every imaginable vertical, from Food & Beverage, Agriculture, and Pharmaceuticals to Oil & Gas, various types of Manufacturing, and Construction. In fact, compressed air is so critical for so many industrial processes that it’s frequently characterized as “the fourth utility”, along with electricity, water, and natural gas. An estimated 70% of manufacturing businesses depend on compressed air to power their industrial processes.

However, even as ubiquitous as air compressors are, most industrial models suffer from a lengthy list of drawbacks. Traditional air compressors are mechanically complicated, with a lot of moving parts that make them prone to breakdowns. This not only forces expensive repairs to the compressors themselves, but also leads to the even more costly problem of production downtime

Compressed air is pricey to provide, even in the absence of compressor malfunctions. The electricity costs to run compressors commonly account for 10% of a plant’s entire power bill. Also, most compressors rely upon oil to lubricate their mechanical components. This creates the hazard of oil particles escaping and forming a so-called “oil mist” that could contaminate sensitive or regulated manufactured products such as foodstuffs or pharmaceuticals.

Solution

In a 2014 press release, the newly formed Carnot Compression announced that they had achieved the technical breakthrough of isothermal compression. (The company’s namesake is Sadi Carnot, a French engineer who in 1824 proposed the Carnot Cycle, an idealized looping process of heat exchange that would theoretically achieve maximum transfer efficiency.)

The concept of isothermal compression refers to a compression system in which the air being compressed is not made any hotter by the compression technique. In theory, an isothermal system would be the most efficient form of compression. This is because any system that DID heat up the air as it’s being compressed would require more work to overcome the increased back pressure involved (since heating up a gas increases its pressure).

Although isothermal compression had long been considered a theoretically desirable form of compression, its only practical application was in some large-scale compression systems for mining that dated back to the 1800s. Prior to Carnot, no company had achieved isothermal compression at the small scale of an individual air compressor unit.

The system that Carnot Compression developed is able to compress air isothermally by first mixing the air with water, and then compressing the air back out centrifugally using a spinning drum. Thanks to water’s vastly higher heat-absorbing capacity, the heat generated by the compression process is retained by the water, not the air. That heat is then removed via a radiator, as the water recycles back into the system to be mixed with air once again.

This use of a centrifugal compression system to spin the air out of an air-water mix, while also allowing the water to retain the compression heat, is a significant technological milestone that elegantly addresses the major drawbacks of traditional industrial air compression:

  • By virtue of being an isothermal system, Carnot Compression’s technology avoids the problem of increased heat leading to elevated back pressure – so it achieves compression at much lower power costs
  • Since the company’s design only features one principal moving part (the spinning drum), it vastly reduces the likelihood of mechanical failure
  • Finally, the mechanically simple system that Carnot Compression is developing is an oil-free system that’s safe for use around foods & beverages, drugs, and any other products manufactured for human ingestion.

The Team

Carnot Compression was founded by CEO Todd Thompson, a seasoned businessman with 25 years of management experience, and COO Hans Shillinger, a professional engineer who is a named co-inventor on several of the five patents that the company has filed to date. 

The company’s additional staff includes two accomplished engineering team members (each of whom have multiple professional publications in highly technical fields such as centrifugal pumps and gas transport), and a sales director with 15 years of compressed air industry experience.

Growth Plan

Carnot Compression’s industrial air compressor units are still in the R&D phase (although they do claim to have a working prototype undergoing testing today). As such, they don’t currently have any sales revenue – although per the company’s Form C filing, they did recognize slightly over $800K in non-sales revenue from grants in 2019.

However, upon product launch, they plan to sell their compressor units in a direct-to-consumer manner, focusing at least initially on niche markets. Carnot Compression appears to be correct in its claim that compressors with comparable specifications to the units the company is now developing currently sell for $17,000 and up

However, it remains to be seen whether this team will be able to realize the premium pricing that they hope to command, given their pioneering technology’s expected benefits for customers and corresponding anticipated industry impact.

Why We Like it

Isothermal Technology (If Real) Would Be a Huge Advance in Air Compression Technology – Assuming that Carnot Compression’s isothermal system is truly operational, then they certainly have a breakthrough product on their hands. Just a handful of years ago, isothermal compression was regarded as an engineer’s “old dream” – something that theorists would periodically chase after, but that no one ever seemed to bring to life in a practical form. 

Functionally isothermal air compression, and the cost savings that it implies, would be an enormously compelling value proposition for industrial companies of all types. Judging from the fact that Carnot Compression has received sizable grants from the National Science Foundation and the California Energy Commission (partnered with the Gas Technology Institute) to develop and refine its isothermal technology, it would appear that there is at least some substance to the company’s claims!

Breakthrough Systems Could Re-Energize The Large, Stagnant Air Compression Market – Given the lack of major advances in air compression technology in recent decades, it’s no surprise that the air compressor trade is generally seen as a staid, unexciting domain. But that reputation as an unsexy field masks the fact that the industrial air compressor market is both extremely large ($14B in 2019), and growing at a respectable clip (between 3% and 4% per year). 

If the Carnot Compression’s isothermal innovation ultimately resonates with industrial businesses that are attracted to its simplicity of function, cleanliness, and low operating costs, then these new compressors could legitimately shake up the entire industry – and capture dominant market share in the process.

Deep Bench of Advisory and Board Expertise – In addition to the significant combined professional experience of the company’s two co-founders and the rest of its core team, Carnot Compression also sports an ample roster of board members and advisors with considerable experience in technology and engineering across the energy and manufacturing sectors. The company’s pool of advisory support includes at least three Professional Engineers, as well as a PhD in Engineering Science.

Rating

Different industries innovate at different rates – and the pace of innovation in the field of industrial air compression has been slower than most.

Carnot Compression aspires to end the dry spell, by marketing a product that represents a long-overdue leap forward in air compression technology.

However, it’s not a foregone conclusion that Carnot Compression – an R&D-stage company that has not yet taken a single product to market – will even succeed in perfecting its prototype systems, much less usher in a revolution in how companies deliver compressed air to their factory floors. 

But given the company’s promising technology, track record of grant support from the federal and state levels, and experienced team supported by equally well-qualified advisors and board members: Carnot Compression seems like it has a real shot at upending the unglamorous but lucrative air compression market.

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Carnot Compression on StartEngine
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Platform: StartEngine
Security Type: Equity - Common
Valuation: $11,300,000

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