Harvard dropout and brother start H2Ok for factory sustainability

Annie Lu was a student at Harvard when Covid-19 brought the world to a standstill, including her own college experience.

“I remember in March of 2020 I was actually kicked off campus and everything went virtual,” Lu, 22, told CNBC in a video interview in June. At the end of the spring semester in 2020, Lou’s sophomore year, she did not return to school.

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Since then, she hasn’t looked back.

That’s because Lou and her older brother David, 25, have since launched and are now developing their own company, H2Ok Innovations, which uses a combination of hardware and software to improve plant efficiency by reducing fluid consumption.

“I can’t talk about what would have been, but I can say that it was a very easy decision for me to make, and it was so obvious,” Annie told CNBC. “The compromise was practically nothing.”

Leaving Harvard and becoming obsessed with improving factory efficiency with your older brother might seem like a strange move.

But there is a deep family connection: Annie and David’s paternal grandfather opened a specialty chemical factory in China, and their father worked in the family chemical business. That’s what Annie and David’s uncles did. And they were proud of it. “Like any family business, everyone is involved in the family business,” Annie told CNBC.

David was born in Saskatoon, Canada and moved to the Bay Area at the age of 1, where Annie was born. Their parents are immigrants from China.

When Annie and David were young, their grandfather, who was very interested in chemistry, taught them about chemical reactions and how different pieces of industrial equipment worked. Also as children, Annie and David visited their family’s factories and learned about parts of chemical plants such as distillation towers. The idea of ​​”lean production” was also a topic of conversation in the family.

“I remember spending summers in elementary and high school visiting factories and seeing large-scale industrial equipment, understanding how it worked. We grew up in this sector,” Annie told CNBC. “I would say that’s where our inspiration grew from.”

Since the sister company officially launched in March 2021, H20k Innovations has raised $6.8 million from investors including Construct Capital, Flybridge Capital, Techstars, 1517 Fund and 2048 Ventures. The company is headquartered in Greentown Laboratories in Boston, and booking revenue. Annie and David were named 2022 Forbes 30 Under 30, and in March H20k Innovations was recognized at Unilever’s annual Supplier Summit and won the Startup of the Year award.

They founded the company just as Covid-19 disrupted supply chains around the world, drawing attention to the importance of manufacturing.

“The pandemic that exposed gaps in manufacturing and industry … was the inspiration” for launching H20k, Annie said. “It was the perfect opportunity.”

In the fall of 2020, Annie and David moved to Minneapolis to participate in the Techstars Farm to Fork program, which accepted them based on previous projects.

“Annie and I like to hack and build things together,” David told CNBC. “We work very well with each other. There are so many projects that we built into our upbringing as we grew up.”

They came to Techstars with the idea of ​​developing low-cost technology to detect contaminants in natural waterways and drinking water. But as part of the program, Annie and David had access to 120 executives in various food technology industries, and they asked those executives what their biggest headaches were.

Ultimately, they decided to focus on increasing the efficiency of fluid use in production processes.

“Fluids and fluids are at the heart of the manufacturing process in many different sectors,” said Annie, including food and beverage manufacturing, pharmaceuticals, semiconductor manufacturing and cooling of commercial buildings and factories. “It’s such a big empty space and an area where there are a lot of gaps.”

By the end of Techstars, Annie and David had formed their vision for H2Ok Innovations and started to bring it to life.

They came up with the idea of ​​using a combination of physical sensors and software to measure and optimize both the use and composition of fluids and fluids in production. Their process involves collecting that data and using their software to combine fluid data with other plant and facility data into what Annie calls a “very, very versatile” Internet of Things system.

Traditionally, data collected in the factory stays in the factory. “We’re basically unlocking data streams that haven’t been used before,” Annie said.

Increasing the efficiency of fluid use in manufacturing processes reduces waste and product loss, which means factories also run more sustainably.

In 2021, David joined Annie in Boston, worked in a space called Artisan’s Asylum for about six months, and then moved to Greentown Labs.

In fall 2021 and early 2022, Annie and David participated in the 100+ Accelerator, a virtual accelerator program run by Unilever in partnership with AB InBev, Coca Cola Co. and Colgate-Palmolive.

“The goal of the 100+ Accelerator program is to rapidly grow startups that develop solutions in the field of sustainable development, including reducing the energy used in the supply chain. Through the partnership, we work directly with entrepreneurs to refine and test their new technologies in our businesses to accelerate their solutions to have a positive impact on achieving our sustainability goals,” said Sandeep Desai, Chief Sourcing Officer, Unilever Ice Cream. CNBC in a written statement.

“These startups are working in many areas, including new packaging technologies, digital and geospatial solutions, and new ways to recycle product ingredients that would otherwise be considered waste,” Desai said.

As part of this partnership, Unilever tested H2Ok Innovations’ solution at a Ben & Jerry’s facility in Waterbury, Vermont.

“At our Waterbury Ice Cream Sourcing Unit, our partnership has resulted in an 18% reduction in downtime during cleaning, increasing productivity and reducing costs in the supply chain. We have also saved 40% water consumption in the cleaning cycle with this technology,” said Desai. Unilever is working to implement the H2Ok solution in other non-ice cream businesses in the US and Brazil, Desai said.

The siblings raised their first round of funding in the spring of 2021 and added to that in the summer of 2022. H2Ok Innovations now has 17 employees.

For investors, H2Ok’s value proposition is particularly timely as more manufacturing returns to the United States and these facilities face increasingly stringent efficiency standards.

“The U.S. is reemerging as a manufacturing powerhouse, and there is a tightening of the normal technology adoption life cycle curve for industrial companies and a drive to be both innovative and more efficient, given decades of intense global competition,” Flybridge Capital’s Jeff Basgang told CNBC. “U.S. manufacturers have a strict climate and sustainability mandate that forces them to be even more precise in their fluid and energy use.”

In addition, some investors see the inevitability of using H2Ok Innovations’ sensor technology.

“We think H2Ok’s vision to replace monolithic water measurement with a multitude of sensors is very compelling. Our thesis is that all measurements and data will be provided in real-time and used to optimize the operations of factories, data centers, etc., Alex Iskold of 2048 Ventures told CNBC. “That’s exactly what H2Ok is building.”

All of the investors who spoke to CNBC said how impressed they were with Annie and David, which is to be expected from investors who are passionate about their portfolio companies, but the glowing accolades were notable nonetheless and reflect the siblings’ confidence in building a space that their family has worked in for generations.

“They are exceptionally smart, visionary and bold — the kind of founders that investors dream of supporting,” Iskold told CNBC.

“We invested because they are incredible founders. Annie and David are relentless and incredibly smart, and that’s the culture they’ve created at H2Ok. They’re the right and rare combination of customer focus and challenge, and they’ve done a good job of creating a defensible technical solution that meets the customer’s needs,” Dinah Grayson of Construct Capital told CNBC.

“The founders are brilliant technologists and visionaries,” Flybridge Capital’s Basgang told CNBC.

Being siblings provides a level of internal trust that is valuable to both Annie and David, who have been close to each other and the rest of their family their entire lives.

This trust is invaluable because doing business with employees, partners and customers can be stressful.

“There are hard conversations to be had,” Annie said. “We can have these difficult conversations in a very, very comfortable way and hold each other accountable and push each other to do better.”

“We know how to fight, we know how to have difficult conversations. We’ve been fighting all our lives,” David said.

Both Annie and David giggled at the thought. They said it was something like a joke, but it was serious. Getting through the tough conversations is “critical to business success,” David said.

Their free skill set is also a big boon.

Annie is creative and “extraordinarily out-of-the-box,” David said. And David is great at recognizing patterns across disciplines and doing technical work, Annie said.

They also share a philosophy of how to interact with people. They recognize that they are young and that it is important to listen to others.

“I think that aspect of being authentic and entering every single conversation with customers, users, teachers and beyond with humility and empathy is very important to who we are as a team, but especially who we are as founders,” Annie said.