Climate Fintech with Atmos co-founder Ravi Mikkelsen

In this episode of Fintech Layer Cake, host Reggie Young is joined by Ravi Mikkelsen, co-founder and CEO of Atmos.

Ravi shares his journey from engineering in the climate and clean energy sector to founding Atmos, a company that blends climate tech with fintech to create sustainable banking solutions.

Delve into Atmos' unique dual-product strategy, which empowers consumers and banks alike to drive positive climate impact. Discover how Atmos leverages bank deposits for clean energy financing and how it navigates the complex landscape of regulatory compliance and customer acquisition.

Transcript

Reggie Young:

Ravi, welcome to the podcast. I am very excited for this episode. I've been following Atmos. We talked about this in our prep call. I've been following Atmos for a while. I was excited about doing this podcast even before our prep call, but our prep call made me a lot more excited because it became clear that you've been very thoughtful about building Atmos in a way that I think is really healthy and not always something that the founders totally think through. So the economics realities of building a fintech.

I think I remember when I first heard about Atmos, it seemed kind of like, oh, a climate-oriented neobank where maybe they have tracking accounts and savings accounts with some peripheral climate-related perks. But there's definitely more than that. We'll get into the episode. I think there's a lot of fun stuff to unpack. So I think a great place to start is maybe for listeners who aren't familiar, what is Atmos and what led you to start the company?

Ravi Mikkelsen:

Yeah, great. Thanks again, Reggie, for having me and showcasing Atmos. Ravi Mikkelsen, co-founder and CEO of Atmos. Not a banker or finance bro, sort of came into this, got interested in climate. Engineer by training, been in the climate and clean energy space for almost two and a half decades. It'll be 24 years this month. Came into finance, saw it as my Archimedes lever. It's like, okay, how do we leverage the cheapest capital on the planet, i.e., bank deposits, to finance this transition?

And so Atmos is our tool to enable all 60,000 banks and credit unions globally to take part in this transition. They struggle to make small dollar loans to underwrite new types of asset classes and to move at the speed of commerce. That's why you see fintechs dominating point-of-sale finance and most solar, electrification, any sort of building upgrade, it's that solar salesperson at your door saying, hey, you want this- or windows or carpets or pretty much anything now, they're like, hey, I can get you this financing much faster than you can get by going to your local bank or credit union or a large national one. Days, weeks, months, depending on what you're getting, the more you want, the longer it takes. And so fintechs have come in, and we're essentially providing that fintech layer so banks can do this.

But on top of that, they also want deposits, and individuals want impact with their deposits. Vote with your dollars. And the greatest vote you have in terms of dollars is actually where you store them, not where you spend them. And so we said, what if our software combined these two things? We gave people the choice about what they wanted to fund with their deposits. So we launched the neobank, and now people can have 100% climate-positive impact because we move that into banks or credit unions that are lending through us to rooftop solar, to heat pumps, to EVs and EV chargers, and other climate-positive loans.

You don't have to have a roof to put solar on it to finance solar. You can live in an apartment, and your roof may be your upstairs neighborhood’s floor. But if you have a checking account, a savings account, you move it to Atmos, now you are helping to finance it without actually losing access to your capital. You can still go buy milk. You can go out to eat. But while you're resting, your money is at work.

Reggie Young:

I love that your impact is where you save your money, not necessarily where you spend it point. I remember, I think it was 2022, there was a big investigative report on a lot of big tech companies on their biggest emissions, on their deposits, and how they store their money. And it's like, oh, that's great. If these big tech companies want to build carbon-neutral offices, but actually, the way bigger impact is what they do with all the funds they have.

Ravi Mikkelsen:

They have so much cash, and where they store it, a good percentage of that is being used to finance fossil fuel extraction and combustion. We're not big enough to take that $100 billion or whatever Google, but we'd like to take some of it. Every dollar counts.

Reggie Young:

Yep. Definitely. I kind of hinted at this at the beginning. Atmos offers checking and savings accounts, business accounts, solar loans. Most of them have a kind of climate-related aspect, like, oh, checking accounts that offer up to 5% rewards on sustainable purchases. So you get more cash back if you're charging your EV, but not if you're buying gas for a combustion vehicle, those sorts of benefits.

In our prep call, we talked a bit about how there are two product sides to Atmos. And I think it's a really interesting way of product thinking, building business. Specifically, you have the financial products that a consumer business would see if they go on Atmos' site and want to open, say, a bank account. But you also have this sort of backend with lenders. How does that second piece with lenders, how does that fit in and affect your strategy?

Ravi Mikkelsen:

Yeah, great question. And it's core to it because that's where the impact happens, right? It's this model of a distributed balance sheet. And so if our goal is to move the most amount of capital as quickly as possible, in a regulated environment, no one single entity can finance the entire transition. So globally, we need roughly $6 trillion a year for this transition to finance solar, to finance electric buses and all of that. Chase can't do it on their own, BNP Paribas, even full national governments can't really get to that scale without entirely shifting their economies.

But the entire global banking sector has hundreds of trillions of dollars of assets. If we shift 1% of that- I think the last time we checked it was somewhere around $500 trillion in the global banking sector. If we shift $1 trillion of that, well, it's not quite the same, the stock versus flow, but we can get to that scale. And so it's how do we take a little bit of everyone's balance sheet and move it in? And then they're not getting concentration risk. They're not having overexposure to any one borrower group or asset class. And we keep increasing the amount of capital coming into this space. And also that competition helps to bring down prices as well. That's sort of how we think about it.

And then we can then tie people's deposits in through deposit-sharing agreements with our sponsor bank, Five Star Bank out of New York. They're the one who provides the banking services for us. And if anyone is not in the fintech space here, we are not a bank. We are not an insured deposit institution. We are a technology company that works with the regulated space. They're the member of the FDIC. I just want to get that out there. I want to be explicitly clear.

Reggie Young:

Yeah. The lawyer in me very much appreciates that. I will say most guests do not provide that disclaimer. We definitely have some that do, but most do not. I think they all should.

Ravi Mikkelsen:

Yeah, it's just like, hey, let's not leave space for confusion about who we are, what we do, and where we operate.

Reggie Young:

Yeah, it makes sense, too. Atmos is much more of a financial platform. You talked a little bit before in our prep call about how much you've been able to help the bank speed up what they can do with a single person because of the platform aspects. I think that kind of ties into the lending conversation we were just having. What sort of opportunities does it open for a bank that works with Atmos?

Ravi Mikkelsen:

At the end of the day, it's customer acquisition because we're putting them in front of new customers. Some, it's their own customers. If we're doing a solar loan for, let's say, Five Star Bank for somewhere in New York, they may have a checking or savings account with Five Star, but there's also a good chance that they don't. And so now, all of a sudden, they may not have their mortgage with them. Our solar installers, our heat pump installers are going out there, and they're bringing our financing. Then if it's their market, if they've got the best rates in that market, that loan that we present to that customer is going to say Five Star on it or one of our other partner banks.

Now, we've got this very high-value homeowner customer that now has a loan with them, and then we can do another loan and say, oh, you did solar? Let's get you a heat pump. Let's get you an EV and an EV charger. Maybe we're also cross-selling the deposit products for them. Oh, they've got a great CD rate. Hey, why don't you do that? Then we can offer that mortgage refinance to bundle everything together.

It's this opportunity to gain more wallet share, to gain more customers broadly, but then also deepen the relationships with their existing customers in a data-driven way, in a much more customer-friendly way. It's just like, hey, you've been a customer with us for six months, so now you get mailer number 3.b, and that just gets sent out. Does not apply to them, but it's on the schedule. This is how banks and credit unions have done their upsell and their cross-sell, is just put them on a schedule and things like that. Now we can actually look at their energy usage. We can look at the appliances that they have and many other things and actually do much more tailored and customized offerings for that customer based on where they are and what they want.

Reggie Young:

I think, if I remember correctly, you mentioned there's a lot of good efficiencies in the process for banks, too. They underwrite the same amount of portfolio by working with Atmos. They need fewer headcount because you've streamlined a lot of that stuff. Am I remembering that correctly?

Ravi Mikkelsen:

Yes. Our bank customers, they have a loan officer, he comes in, they spend less than an hour a month with us. Depending on how they're setting their rates, because they set the price, not us, in their market, so they can dial up and down velocity. But with Atmos, we can do as much or more as their branch network employees can with less than one hour a month by one single employee because we have this massive network of installers, we have these distribution channels. Atmos does the underwriting, moves the people through, and we do the servicing on their behalf. So it's like we're an extension of their team, but just accelerated to the nth degree through software and process efficiencies.

Reggie Young:

Right, right. A lot less fewer headcount need and whatnot for the banks to expand their reach and impact.

Ravi Mikkelsen:

Yeah. I just want to double click on that headcount need for a moment. It's really interesting, when speaking to community banks, which is 90-plus percent are small banks, resource allocation, or just the number of people that they have, we hear them say, hey, we don't have the staff to take on a new software project. We're doing something else. Atmos is a no-code solution. So actually, we don't need to integrate to their core system if they don't want.

They don't need to spend a lot of time every month with Atmos. Once they've diligence-d the process, they've had their lawyers say, okay, the loan documents meet this, the underwriting process meets our criteria, and it's tens of minutes per month that they can adjust their rates and things like that and say, yes, Atmos has only given us loans that fit our credit box. Good to go because they can see everything with a dashboard. It's like, oh, these loans are actually in our CRA assessment area. Great. Maybe then they spend some more time and verify that that meets CRA.

And then they add it into that bucket and get more gold stars from their evaluation.

So like you said, we want to bring in as many process efficiencies as we can. And then also on the borrower side, we can bring in more state, federal, philanthropic capital as well to expand access into lower-income, lower-credit markets. We can do a lot of creative things to widen the market and help more of their customers.

Reggie Young:

Yeah. And I want to circle back to that topic in a second because I know you're doing some interesting stuff with helping deploying climate-related capital. But first, I'd love to kind of dig into how you approach the business model because I think you view it a little more complicated than like, let's earn money from interchange. And I know you mentioned that was a conversation or mentality you had going into building Atmos. I'd love to hang on that for a second. When you were starting Atmos, how did you think that the company would make money? How did you approach the viability of the company?

Ravi Mikkelsen:

Really great point. And I think this is for the future of fintech, we need to get beyond interchange models from neobank models. One, we didn't expect- all of us who started, we primarily used credit cards to make purchases, not debit cards. The demographic that we were going after, slightly older, more established in their business, late 40s, 50s, donors to climate nonprofits, etc., we expected them to be using a Chase Sapphire or an Amex type of card. And so we didn't expect to be able to get them to shift.

But we did expect to say, hey, why don't you move your savings? Your savings is sitting in a box in one institution, you can move that into another box. Have it sit. Maybe you're earning even better yields, which for 90-plus percent of our customers, they're earning more yield with us than at their previous institution. Do that, and then we can earn a little bit on those deposits, and then a little bit on the loans. And if we get a little bit here, a little bit there, soon we're talking real money, and we have a sustainable business in the sustainability space.

Reggie Young:

Yeah, no, I love that point. And I want to make sure listeners heard it, because it came up in our prep call. I think it's such a healthy way to approach thinking about, yeah, having cards as part of your stack. And I mean, this is something at Lithic I feel like the card programs we've talked to, the ones who get it don't bank on interchange alone. They recognize that it's icing on the cake, but it's not necessarily going to sustain the business.

Ravi Mikkelsen:

Yeah. And so we actually launched with a savings account only before we had the checking account built. Savings account is a lot easier to build. And it's like, hey, let's start with this. Let's get it out there. And then we started moving money in. And then while that's going, then we built the checking account on top of that and everything else, and then launched the checking account.

It's been very interesting to see, as we've grown, the split within the customer base of savings only, checking account only, sort of like your typical neobank customers, and then the primary. It's just like, okay, these are people with a good balance in both, and they've just moved everything over to us and are using their debit card, they're using their checking account for everything. And then they've got their savings on top of that. We have customers from 18 to 80-something,  88 I think.

Reggie Young:

Yeah, amazing.

Ravi Mikkelsen:

Yeah. In all 50 states plus DC and Puerto Rico for deposits, it's very, very- definitely some concentration within the Bay Area where we are, because we tell absolutely everyone we see to open an account, and some other metropolitan hubs. But yeah, very, very dispersed. It's been really awesome to see.

Reggie Young:

Yeah. What do you think accounts for that difference of why some people are coming to you for just savings versus- I mean, you kind of talked about the savings of people who may want to have their primary card be Chase, whatever, and just park their savings. But what about mainly using it for checking and then the kind of main banking switchers?

Ravi Mikkelsen:

Yeah, I think savings account only is just a very easy one. It's like, look, I've got everything set up. It's too much of a pain. I'm going to do this because I want the impact. And then the checking account only, that's primarily younger demographic. And that's like, okay, they don't have a savings built up yet. They're just moving forward that way. And then there are the primary bankers. They're all in. We offer enough services. They don't need to go into a branch. They can use our ATM network. They don't have paper checks to write. And that's pretty well split age-wise as well. We're seeing that as a society. Thankfully, we're moving more away from paper checks and things like that. And you can get most or all of your banking needs from an all digital platform.

Reggie Young:

Yep. Yep. Makes sense. Circling back to the prior comment about deploying federal funding capital, I know that you've been involved, or that Atmos has been involved in some kind of federal funding for climate solutions. You mentioned plans that the company has to help facilitate how those funds are deployed. What exactly is the thinking there? What's that component of Atmos' plan?

Ravi Mikkelsen:

Yeah. This is another thing that we knew early on and sort of has built up over time, is that while this may be very cheap capital, it's also very conservative capital, right? Regulators say, hey, we want you to make CRA loans, but also we kind of judge those as more risky loans at the same time. So in order to expand their credit box, to go into the lower FICO bands of consumer borrowers and the equivalent on commercial, it's how do we bring in concessionary or catalytic capital in some form, whether philanthropic or governmental, to protect that bank or credit union capital that's doing the permanent debt side.

And so right now, there's this incredible sort of once in our lifetime so far opportunity called the Greenhouse Gas Reduction Fund as part of the 2022 Inflation Reduction Act. So this is $27 billion essentially in infrastructure finance. And its purpose is to leverage private capital. So they're saying, hey, get out there and use this capital to bring in more private capital, to entice, to encourage, and to protect private capital coming in so that everyone can participate in this transition.

And we've won, we've got one contract so far with the Clean Energy Fund of Texas to be helping them deploy their capital along with the banks and credit unions that we bring in in Texas. And we are speaking with many other programs here in California, New York, national programs as well, so that we can get as much capital out there as quickly as possible in a sort of a safe and compliant manner and then recycle it as well. So let's do it again. These are the goals of this program and of Atmos and all those participants.

But then outside of this, there's a lot of other programs as well. There's the USDA program called REAP, Renewable Energy for Agriculture Program, I believe. Huge grants for if you're on a sort of rural agricultural land that they will pay for a renewable energy installation. There are DOE and there are SBA, and then there are state programs, utility programs that aren't being utilized enough to drive forward and expand access. And then there's also a lot of philanthropic groups as well that want to see the expanded access. So we're figuring out how we can leverage those and play in those sandboxes as well so we can continue to have more people playing the sandbox. Let's keep that analogy going.

Reggie Young:

Yeah, no, I love it. You're such a good nexus to have the expertise to kind of help facilitate that in a smart way. I love the point too about aligning, deploying capital with private capital. I took an entrepreneurship class in law school, and we read StartupNation about how Israel fostered their kind of startup community in the early days. And one of the huge takeaways from the policies were aligning public capital with private capital because you want to incentivize people, but you still need private incentives that kind of point you in the right direction for investments. You encourage them to take more risks by subsidizing a bit with government funds. But you also need that kind of private element, at least that private element can help orient sometimes.

Ravi Mikkelsen:

Yeah. And this is truly- versus there's some programs, giveaways and other things, where the return doesn't equal the investment in a lot of government programs there. But this one, where it is incentivizing private capital, where it's supporting private capital, de-risking private capital, this, I think, we can get bipartisan support and say, hey, wait, actually, we're helping a lot more people. We are putting more back into the economy because one of the largest drivers of inflation of housing instability of all of these other negative societal and economic factors come down to energy access and the ability to pay for energy.

There's a great study that Fannie and Freddie did, I believe after the great financial crisis and the housing crisis of 2008. As it got tight for people, they paid their heating bill in the winter and their cooling bill in the summer rather than their mortgage. And so the analysis is like, oh, well, if we can solve that, if we can sort of wipe that out for people, reduce that, now they're more likely to be able to afford to stay in their homes.

Reggie Young:

Interesting.

Ravi Mikkelsen:

Now they have more money to then go out and spend that in the economy. So if we want to look at the return for the investment, freeing up cash flow of people from paying for lower-performing homes, now we can get that back in the economy in other ways, and it will just be better overall. And the return on that investment by our tax dollars is much greater.

Reggie Young:

That's fascinating. I'd not heard of that study. It doesn't surprise me when I stop and think about it, but it's fascinating. So you've been building the company at the nexus of climate and fintech. I was looking forward to this episode because most guests that come on, they're building a fintech, but the way you talk about Atmos is like, we're building a climate tech company that has a fintech layer to it. So kind of coming at it from a different angle, which I love. I'd love to hear what are some of the top lessons you've learned having to build at this nexus of climate fintech? Are there any top big realizations you've had in the process?

Ravi Mikkelsen:

One, so not coming from the finance space, I am so grateful for our partners, like with Five Star and others who they're the experts in this. And I think this also goes into the shift from middleware to direct relationship between fintechs and the banking sector, is that there's just so much that we don't know as entrepreneurs coming into this regulated environment. So there's that. It's like, okay, they're the experts in this, and it's like relying upon them to say, here are the guardrails building there, go.

But also, coming from the climate space being sort of very Pollyanna-ish and having very thick rose-colored glasses on when we started and launched, it's like everybody that comes to Atmos and is going to open an account with us wants to save the world. Two weeks in, those glasses were shattered in the boulder. We caught them before they did any damage, but it's like, oh my gosh, okay, the new cycle within the fraud networks is so much faster and better. They're trying to get marketing [inaudible] startup.

Yeah, it's incredible. And so we leveraged tools, we built a ton of our own and put all these protections in place to stop that, which then adds friction and moves you away from the fintech experience. And that's another difference of Atmos versus others, is that we've biased towards being more bank-like in our compliance and security and having that friction of tell us who you are. Hey, we can't tell that you're a real person. And so good people that have sort of high-security, all-anonymized info, they throw red flags because it's like, nothing looks like you. There's this balance there. And I think we've seen with fintechs that have gone no KYC, no AML checks, that throws all sorts of problems. And you just go in for growth of your user accounts. That's a type one error where they can kill your company, right?

Reggie Young:

I think so too, but I can never keep them straight.

Ravi Mikkelsen:

We need to bias towards, okay, a little bit more friction, the good customers are going to stay. They're going to go through the process. They're going to help you improve it to make it easier but still safe. And so those have been the biggest learnings for me. My co-founder comes from banking. He always told me that this was going to happen. And our CTO has got fintech and cybersecurity experience. He was like, this is going to happen. I was like, no, no. So we were prepared, but I wasn't emotionally.

Reggie Young:

Yep. Funny. No, I love it. Yeah, a lot of folks in fintech talk about how you should be ready for fraud from day one. It is funny, you can invest in tons of marketing and have a big splashy PR about your launch, but you're also just broadcasting to all the fraudsters in the world that you're a new company who may not have your security as tight as it should be, and they should all come flocking. And so get a big uptick by making a splashy news announcement.

Ravi Mikkelsen:

Yeah. It's very interesting too to sort of see repeat customers there. After every major announcement, it's just like, a few come again. It's like, well, maybe things are different. It's like, nope, you're still blocked. Yeah, it's day one, day negative 30, thinking and building for this. And the banks that ultimately own these accounts and these customers and this risk, they need to be involved at day negative 32 and say, hey, you need to think about these things and build for these things.

Reggie Young:

I agree. It makes a lot of sense. For folks that are interested in building this kind of nexus in climate and fintech, what do you think are some of the biggest opportunities that we're going to see companies crop up to? We've talked about a lot of the opportunities, obviously, that Atmos is going after and supporting, but are there other big opportunities you think that we're going to see at the climate fintech nexus? I feel like I hear a lot about carbon credit markets and stuff like that. That's where it tends to go. But that kind of space, I feel like there's a lot of folks competing in it. And it's been kind of hashed out by a lot of existing players. I'm curious if there are any others that you think are on the horizon.

Ravi Mikkelsen:

Yeah, in there, we work with WattCarbon, which is a startup in this space, and it's moved away from, quote/unquote, carbon credits in the natural environment of like, hey, we might plant a tree or we might not chop down this tree if you give us money, to we can make the solar installation cheaper, or personal place in their furnace for a heat pump, we can make that process cheaper for them. Here's the value. Here is how much carbon-free electricity will be produced or how much carbon will be avoided by switching to this heat pump. And so, okay, here are some values of those credits. It's in this market. Oh, it's a very clean grid, so new, clean electricity may not be as valuable as in this other market, which is more dominated by fossil fuels. And so you get this true market of locational value. So now you can pick as an individual, hey, I just went on a flight, and now you can buy that.

I think moving carbon markets towards decarbonization and infrastructure finance is really interesting. There's still a lot of opportunity in the tax credit transfer marketplace in the United States, which has sort of come about after the Inflation Reduction Act. A few players in the space, but that's still sort of wide open. How do we leverage that? There's still low-income renters. That's half of the residential spaces in the low- and moderate-income households. So how do we bring them into this transition? Renters, multi-family housing, how do we finance that transition? So it's nascent, there are a few players in the space, but new models are still available there.

Then internationally thinking outside the US, like I said, $6 trillion. I think we just topped $1 trillion earlier this year. So being able to scale this up in new emerging economies, rural areas. Where we play is sort of at the consumer loan space and the small business loan space. But a lot of these economies are looking to add electricity generation in some areas for the first time. And so how do we finance those projects for both distributed and larger centralized projects so that they can skip building the fossil fuel plant the first time and just have clean, firm, whether it's geothermal or nuclear, or weather-dependent or variable renewables like wind and solar, how do we finance all those projects? There's foreign exchange risk, there's local economic and political risk. There's all these different factors that go in. And so we need more models, we need more types and sources of capital. So there's a $1 trillion opportunity in a lot of different spaces for people to jump in.

Reggie Young:

Yep. A lot of interesting, nuanced and complicated opportunities, but there's definitely a lot there. How about for Atmos, what's on your roadmap ahead in the next year or two? What are you most excited about for the company right now?

Ravi Mikkelsen:

This opportunity of the Greenhouse Gas Reduction Fund of scaling clean energy and electrification finance in the US and really doubling, tripling the number of people who are changing out an appliance in their home for electric or adding electricity generation to their home or small business, that's the most exciting. We launched small business loans for solar and batteries last month. We're about to release heat pump lending and battery-only loans. On the consumer side, the same thing. We're going to add many more asset classes on the lending side. We're going to keep building out our deposit basis, deposit products as well.

It's always this exchange, it's like, where can we be most impactful? So it's not just, hey, here's this new financial product that might be interesting. And it's like, where can we tip the scale a little bit to move faster? How do we get this transition to move faster? So maybe it might be something outside of financial products as well. There’s a lot of opportunities, and we keep pushing. Like I said, it's our Archimedes lever. And so we want to move the world, and we're just going to keep pulling on that lever, moving the fulcrum.

Reggie Young:

Yep,  I love it. Now that all of our listeners want to go sign up for Atmos and get their solar loans from Atmos, where should they go to find out more or get in touch?

Ravi Mikkelsen:

If you would like to join Atmos, you should go to joinatmos.com, J-O-I-N-A-T-M-O-S dot com. And it's Atmos, like atmosphere, not at most.

Reggie Young:

I bet that's a common thing you probably encounter.

Ravi Mikkelsen:

Yes.

Reggie Young:

Funny. Not a bank, importantly, not a bank.

Ravi Mikkelsen:

We are not a bank. We are a technology company that works with banks.

Reggie Young:

Yep. Awesome, Ravi. Well, thanks so much for coming on. This has been a blast.

Ravi Mikkelsen:

Reggie, thank you so much. This has been a lot of fun, and look forward to doing this again.

Reggie Young:

Awesome.