Green-Sports Startups, Part 3: Phononic, Disrupting the Refrigerator Market via Luxury Suites

Well-known global corporations, from BASF to Nike to Tesla, have waded into the Green-Sports waters. While it makes sense for them to do so from PR and mission points of view, Green-Sports, for now, represents a small aspect of these companies’ businesses.

Then again, there are startups for which Green-Sports is a significant part of their business. Last year, GreenSportsBlog launched an occasional series, Green Sports Startups that focuses on small (for now) companies that see the greening of sports as existential to their businesses’ prospects for success. Our first such newbie was Nube9, a Seattle-based company committed to making recyclable sports uniforms in the U.S.A. from American fabrics. We followed that with a profile of Underdogs United, a startup looking to help sports teams already talking the green talk to walk the green walk by selling them renewable energy credits generated by crucial greening projects in the developing world.

Today we feature Phononic, a technology startup that sees sports arenas and stadia as a key target market in its audacious ambition to disrupt the set-in-its-ways refrigeration market, leading to a meaningful reduction of carbon emissions.

 

After talking with Tony Atti, the energetic, Pied Piper-like founder and CEO of Durham, North Carolina-based Phononic, for maybe two-three minutes, I was ready to stop the interview.

Instead, I wanted to get out there and sell his market disrupting, carbon emissions-reducing refrigerators. And I’d never sold a refrigerator before!

But before I started selling, I thought I should write the story of how Atti got into the refrigerator-disruption business — “we want to be the ‘Tesla of Refrigeration” — and how big a deal Phononic’s advance can be for the sports world and far, far beyond.

 

Phononic: Bringing Solid State Semiconductor Innovation to Refrigeration

“I grew up in Buffalo, New York — Go Bills! — and ended up getting a PhD in chemistry at the University of Southern California,” recalled Atti. “Then, quite by accident, I fell into working at a boutique venture capital fund in New York City back in the early 2000s.”

 

Tony Atti

Tony Atti, founder and CEO of Phononic (Photo credit: Tony Atti)

 

The firm’s bread and butter were startups incubated at universities, with a focus on sustainability and energy technology companies. They also took the unusual approach of placing their top executives in operational roles at some of the companies in which they had invested. So Atti went down to the Research Triangle area near Raleigh, North Carolina to work with one of the firm’s companies.

More Atti: “I did an 18-month stint in North Carolina; when that ended I pursued other opportunities, including in Silicon Valley. It was in Northern California that I met the co-founder of Phononic in 2009. At that point, it was just an idea, and a very long shot at that.”

So, what was Phononic’s long-shot, unique selling proposition?

“Phononic is an exemplar of what tech-based venture capital is all about: disruption through solid state semiconductor innovation. This kind of innovation transformed the computer, data, solar power, and lighting businesses — and much, much more,” shared Atti. “Phononic exists to demonstrate that it’s possible to bring solid state semiconductor innovation — that is to say microchips — to refrigeration and other cooling. Our goal was and is simple: To disrupt the 100+ year old domination of compressor and Freon-based refrigeration.”

At the outset, the company operated virtually, with development partners from the University of Oklahoma, Cal-Tech and the University of California-Santa Cruz working with Phononic to prove the technology worked. Atti then decided to locate the company in North Carolina, setting up shop on North Carolina State University’s Centennial Campus in Raleigh from 2010-2013. By 2014, he had moved Phononic’s offices to nearby Durham, where the company designed and manufactured semiconductor chips to meet four critical criteria — efficiency, scale, manufacturability and cost — that would determine its ultimate viability.

 

Nobody Believes In Us!

Nobody believes in us! has served as a powerful motivational fuel for some of the great upsets in sports history. It also fueled Atti and his Phononic team during the early days.

“We flew around the world with our chips and our performance data, but no one believed in us. You have to understand that the incumbents in the refrigeration markets, like fossil fuel companies, were resistant to change beyond all reason. That just made us work harder. So, we went to the step of ‘product-izing,’ which means we built a prototype refrigerator around the chip, to show the skeptics that our technology was superior in the lab and in an actual refrigerator.”

Chips are indeed superior to Freon and compressors on a host of metrics: Reduced energy usage, far less pollution, reduced noise and weight, no vibration, better use of space and more. And, by 2016, Phononic had a finished refrigerator prototyping and began mass production, manufacturing more than 3,000 small-sized refrigerators over the past 18 months.

Initial Target Markets: Life Sciences, Healthcare and Hospitals

If you haven’t figured it out by now, Atti subscribes to the “Go Big or Go Home” philosophy of life. Taking down the compressor-Freon refrigerator market is one example. Another are the big, competitive, and challenging markets he chose to tackle first: Life sciences, healthcare and hospitals.

“With life sciences and healthcare, refrigeration absolutely cannot fail,” asserted Atti. “So, we went right for it, in the high-pressure world of neo-natal units, with a ‘We Protect the Sample’ mantra. Our refrigerators had to protect the drugs 100 percent of the time. We did that. Our surveys of hospital staff to get their takes on the user experience came back strongly positive. So, we knew we had something.”

 

Next Up: Stadium and Arena Luxury Suites

Food and beverage was the next market Phononic would try to penetrate. To do so, Atti felt that managers of luxury and club suites at sports arenas and stadia would be particularly interested in the unique value his disruptive refrigerator could provide.

As Atti tells it, “There are many advantages of a Phononic vs. a compressor-based refrigerator for suite operators. Our current models are small, ‘dorm room style’ and also larger built-in refrigerators, the perfect size for suites. The Phononic microchip-based system takes up less space than a compressor — so our storage capacity is significantly greater in the same physical footprint. Our product makes little to no noise. Our temperature controls are more accurate. Phononic refrigerators need much less maintenance than do compressor-based refrigerators, as there are no moving parts in a chip-based system. And the security system, which uses electronic keyboard technology, is superior. These are all big advantages.”

Atti didn’t have to look far for a sports venue at which to test his luxury suite idea: PNC Arena just down the road from Durham in Raleigh, home to the NHL’s Carolina Hurricanes, NC State men’s basketball, as well as concerts and other events.

Chris Diamond, Vice President of Food and Beverage for the arena, bought in early: “I was on board from day one. I’m from Niagara Falls; Tony’s an energetic Buffalo guy, so we Western New Yorkers got each other. More importantly, the Phononic system was a clear improvement for us on a number of key metrics vs. traditional refrigerators for our loge boxes— The Phononic refrigerator was quiet; our refrigerators were noisy. The Phononic refrigerator did not heat up; ours would get very hot. The new system needs next to no maintenance — all we need is a tech that can change a motherboard every once in a great while.”

 

Chris Diamond

Chris Diamond, vice president of Food and Beverage at PNC Arena in Raleigh, NC (Photo credit: Chris Diamond)

 

Soon after, two Phononic refrigerators were deployed in each of PNC Arena’s seven loge boxes — the undercounter/built-in units are not big enough for the arena’s more spacious suites yet. Diamond brought a key wine vendor to an event, not letting him in on the change: “The guy was blown away by the quiet of the new units — he couldn’t believe it! He told me ‘I want one for my house!'”

 

Phononic fridge PNC Arena

Phononic refrigerator in one of the loge boxes at PNC Arena (Photo credit: PNC Arena)

 

The seven loge boxes are clearly just the beginning of the Phononic-PNC Arena relationship.

“I told Tony that there’s enough work here for Phononic for five years and more if you can get me bigger refrigerators,” declared Diamond. “I need them for our 51 larger suites but that’s just the start. A big trend in stadium and arena food service is ‘Grab & Go’, small, mobile stands. This summer, I want to be the first arena to use Phononic to cool its ‘Grab & Go’ installations.”

 

Phononic’s Environmental Benefits Important for PNC Bank Arena

While Phononic refrigerators’ reduced maintenance costs and quiet operation are certainly important to Diamond and the PNC Arena team, so too are its environmental benefits.

Per Diamond, “Since we opened in 1999, the environment has been an important operational consideration — it needs to be, as we see 1.5 million visitors annually. Recycling has been big since day one, as has the minimizing of waste. So, the environmental advantages of Phononic got our attention.”

 

Tony Phononic

Tony Atti with a Phononic refrigerator (Photo credit: Phononic)

 

Phononic’s most disruptive environmental feature is the elimination of Freon, a major greenhouse gas contributor, from the refrigeration the process.

“Over the next 30 years, it is expected there will be as much CO pumped into the atmosphere from refrigeration and air conditioning as there will be from cars,” noted Atti. “There has been a necessary move to eliminate or reduce the amount of Freon from the refrigeration/cooling process while maintaining the compressor system, but potential replacement substances present other problems. Phononic is completely different and its operation actually uses CO₂ as opposed to generating or releasing it. And less maintenance visits means fewer transportation-related CO₂ emissions. The refrigeration industry needs disrupting and Phononic is positioned to do it.”

 

Loge Boxes at PNC Arena Are Just the Beginning

Phononic is talking to other arenas about their innovative refrigeration system. “Many arenas and stadiums are seeking environmentally sustainable solutions, not only from the ‘it’s the right thing to do’ perspective, but also to save money, to drive profitability,” said Atti. “We are selling a variety of ‘refrigerator as a service’ options for 2018 that will appeal to sports venues, including a small ice cream freezer that will move from suite to suite. Bigger versions of our ‘undercounter’ style refrigerator are in development — they will allow us to go beyond suites to servicing the arena or stadium bowl. Consumer models are in our medium-term plans as well.”

Sounds to me to like Atti’s goal of Phononic becoming the “Tesla of Refrigeration” is not at all farfetched.

And I’m ready to start selling!

 


 

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