THE CURRENCY | Tom Lyons, Chief Executive | March 24, 2023

The fluids traditionally used in heating and cooling are notoriously energy-inefficient, yet there has been no progress for decades in this area. With an easy-to-use product, HT Materials Science has caught the eye of high-profile global investors.

Tom Grizzetti was looking for his next investment six years ago. The search took him to the University of Salento in the historic city of Lecce in Italy, known as the Florence of the South. Grizzetti and his business partner, Irishman Ed Coleman, were looking to meet Professor Arturo de Risi and his team of materials science experts that were working on a product that the two veteran investors believed could change the world.

That revolution was not expected to happen in a dramatic or public way but out of sight in the vast heating, ventilation and air conditioning systems that keep offices and apartment blocks cool and are essential to manufacturing, data centres and all the other things that have become part of our existence.

“We were looking for additives and the effect they could have on energy efficiency,” Grizzetti explained on a video call from London after closing a $15 million Series A round for his business HT Materials Science.

It was an area the finance veteran didn’t know much about until about a decade ago when he and Coleman started to make a few small investments in the sector, prompted by an interest in refrigerants and their negative impact on the environment.

But now Grizzetti and Coleman were really excited about the potential of what de Risi and his team were working on as they delved deeper and got to know the Italian scientists. Over thirty-plus years, de Risi had his name on 11 patents in the thermal energy sector and was Professor of Engineering for Innovation at the University of Salento.

By January 2018, Grizzetti, Coleman and de Risi had founded a new business called HT Materials Science based in Dublin, Lecce and New York. Grizzetti was chief executive, with de Risi as CTO and Coleman as CFO.

The core product they developed is called Maxwell, a ground-breaking sub-micron heat transfer fluid technology that can be “dropped-in” as an additive to new or existing commercial and industrial heating and cooling systems, leading to a 15 per cent reduction in energy consumption.

Maxwell, if it can scale, could have a major impact on lowering energy costs, enhancing equipment performance and reducing carbon emissions. HT Materials Science believes its additive is so effective it can pay back the cost of using it to clients within two to three years. It has a compelling business as well as environmental case.

Grizzetti is telling me about the early days and potential of his business just after raising $15 million from some of the smartest investors in the world including Aramco Ventures, the venture arm of Saudi Aramco, and Barclays, via its Sustainable Impact Capital portfolio.

Italian asset management firm CDP Venture Capital SGR, through its corporate venture capital fund, Corporate Partners I, are also in the round, as is the Progress Tech Transfer fund, a sustainability-focused fund that specialises in working with Italian universities.

HT Materials Science has strong Irish links through a major research affiliation with Trinity College Dublin through AMBER (the Centre for Advanced Materials and BioEngineering Research funded by Science Foundation Ireland). Its executive chair is a Dubliner called Kyran McStay, a co-founder of Irish boutique advisory firm Key Capital, and a former managing director with UBS.

It took Tom Grizzetti a while to become a hands-on executive in a company again. For the previous 16 years, he had been president of his own investment firm called Gotham Industries. “I was doing some investing on behalf of myself and some friends,” Grizzetti said.

Working alongside him, seeking deals and managing investments was his friend Coleman. It was interesting and busy work but it wasn’t the graft of building a business from the ground up.

The last time Grizzetti did that was from 1995 until 2006 when he was chief operations officer and co-founder of alternative investment administrator firm International Fund Services (Ireland).

Grizzetti and his business partners built IFS (Ireland) into a $200 million revenue business. It had 1,200 employees when the business was acquired by State Street Bank in 2002, with a team of 700 in Dublin. Grizzetti stayed with the business until his earn-out finished in 2005, after taking the firm from scratch to global. While working with IFS (Ireland), Grizzetti got to know Coleman who was working with EY as audit partner to the business. He convinced Coleman to join him in the next phase of his career: investing.

They had lots of investments, but how heat transfer fluids were used in cooling and heating systems became a source of fascination. “We became really interested because of the size of the market and the effect on energy efficiency,” Grizzetti said. “We also realised it was an untouched market.”

There had been little innovation in the area of heat transfer fluids despite the surging need for cooling requirements in everything from offices to residential to manufacturing to data centres.

“A really elegant solution”

For decades, cooling and heating systems only used conventional fluids like water and glycol with low thermal conductivity, making them relatively inefficient. Grizzetti and Coleman felt the market was ready to be disrupted. They could see how de Risi and his team could improve the thermal conductivity of fluids to increase the efficiency of energy use, but they knew they needed to build a business to commercialise these ideas.

In January 2018, the inventors and investors teamed up to form a company called HT Materials Science. “We invested money and developed a newer version of heat transfer fluid which ended up becoming our product, Maxwell,” Grizzetti said. Maxwell is made out of sub-micron aluminium oxide particles and is non-corrosive and non-toxic, so it is safe too. “Maxwell is a really elegant solution,” Grizzetti said. “It is simple and not difficult to make or deploy.”

Initially, HT Materials Science was self-funded with between $1 million and $2 million. In summer 2020 it was ready to do a seed round of $2 million led by Progress Tech Transfer with the support of Enterprise Ireland and friends and family investors. “Effectively this allowed us to further develop our technology and do our first deployments in 2021,” Grizzetti said.

From the start, HT Materials Science worked with some of the best companies in the world who, like them, were eager to find new ways to reduce their energy needs. Regeneron Pharmaceuticals, Johnson & Johnson, Swire Pacific, Ericsson and Saudi Aramco deployed its product. Saudi Aramco was so interested in HT Materials Science that in August 2021 its venture arm led a €5 million investment round in the business.

“This became part of our $15 million series A round,” Grizzetti explained. HT Materials Science knew that Maxwell had huge potential. Consultants BCNP estimate that the product is compatible with 13.8 million systems in North America and Europe, an addressable market of over €50 billion a year. “The beauty of our product is that it is an additive so it is easy to retrofit as there is no additional capital expenditure required (to use it in existing systems),” Grizzetti said. “We can retrofit, say, a 500,000 sq ft office space in less than two days… in as little as 16 hours we can do it. In an active system, we can just pump in our additive while we drain fluid.” It was now time to really try and scale.

Kyran McStay became executive chairman of HT Materials Science in January 2022. He had known the firm’s co-founder Coleman for a decade, so he had been following the story, and had been asked to invest passively. “I said to Ed, this is a very interesting technology but I have decided I am only going to invest in businesses from now on where I get involved,” McStay recalled. “We stayed in touch and Ed informed me of progress. Then I got to meet Tom and to really understand the business.” McStay gradually got drawn in, until he accepted the role of chairman accepted the role of chairman.

“What attracted me first and foremost was the quality of the management team,” McStay said. “Ed and Tom have been around the block. They know how to build large organisations.”

“We have a management team capable of scaling this business very quickly, commercialising our technology, building a distribution platform and developing adjacent technologies. I loved the business challenge and found the prospect of working with the team really exciting.”

HT Materials Science’ $15 million series A round was raised in two chunks. The first part was led by Aramco Ventures and the second part by CDP, part of the Italian sovereign wealth fund, as well as Barclays through its Sustainable Impact Capital portfolio, led by Barclays’ Principal Investment team.

When the full round closed recently, this took HT Materials Science total funding to date to $20 million.

Grizzetti said the new funding would allow it to start to build a global sales team and continue to invest in R&D to bring the next version of its product to trial stage at the end of this year. “We are excited to have the backing of Aramco Ventures, Barclays, CDP and PTT. This support from major industry innovators serves as a strong endorsement for our technology and vision,” he said. “Thanks to the ease of installation, and use in both new and existing HVAC (heating, ventilation and air conditioning) systems, we believe that, at scale, Maxwell can have a material impact on energy usage and the carbon footprint of a broad range of industries and sectors.”

HT Materials Science employs 25 people but expects this to go to 35 in the next 12 months or so. In Italy, it has manufacturing capabilities to produce enough product to support sales of up to $20 million. But as Maxwell establishes itself, HT Materials Science intends to migrate to an indirect model using existing sales channels of large energy service companies, facilities managers and original equipment manufacturers to scale. Having its new investors on board will also help. “When you bring in a new investor, one thing is cash but the other is routes to market and commercial validation,” Grizzetti said. “Investors like Aramco Ventures and Barclays give us credibility and help us get to market.”

“Barclays is doing this investment on the bank’s balance sheet as part of its sustainability plan,” he added. “They own a large portfolio of real estate and they can open doors for us.”

Industrial need

Grizzetti said offices and large-scale residential developments were one area they hoped to deploy in, but the other was in industrial applications and data centres. “The industrial area is probably going to be the bigger market for us as they are high energy users who need cooling 24/7,” he said. “I’m sitting here in London so the demand for cooling is low because of the ambient temperature. I think our speciality in the long run will be more on the industrial side but we are focusing on both markets.”

Grizzetti is ambitious for HT Materials Science, and itching to grow. “If we are correct, we will have established a pretty good client base in America, Europe, Asia and GCC (Gulf Cooperation Council countries) in the next few years. We will have completed a series B round of between $25 million and $35 million,” he predicted.

“We will have multiple manufacturing facilities whether in or out of house, which will allow us to become a global business. We have an elegant and simple solution predicated on a known technology that can deliver real energy savings and make a real impact.”