Founders – How To Build The Right Team

Episode 17 Founders How To Build The Right Team

Ontario has been mandated to go Carbon Neutral based on 1990 levels by 2040. The primary sources of emissions are homes and buildings (57%) mainly from heating and water by natural gas, transportation (36%), and waste (7%) landfills.

We welcomed James Sbrolla, Startup Advisor, President & CEO of Cleantech Capital, and Entrepreneur-in-Residence at Altitude Accelerator to discuss the opportunities in cleantech and how government regulation can hasten innovation and maximize returns for cleantech founders.

If you like this content about going carbon net neurtral, check out our blog:

Cleantech Superheroes: Meet the Changemakers Building a Brighter Future for All of Us





Transcript

Sam HusainWell, good morning, everyone, and welcome back to Tech Uncensored. My name is Sam Husain, and we got an early edition today, just before the holidays, and it’s our last podcast for 2022. Today we’re talking about clean tech. Ontario has a mandate to reduce its carbon emissions by carbon neutral by 40. And what does that mean? I have with me today, James Sbrolla, a clean tech expert. He is an Entrepreneur-in Residence at the Altitude Accelerator. He has been in the clean tech space for over 25 years. He sits on a number of boards and is the chairman and President of Clean Tech Capital. And he’s a major shareholder of multiple publicly traded clean tech companies. James, thank you for coming on.

James Sbrolla My pleasure, Sam. Delighted to be here.

Sam HusainSo I guess I was reading an article about how Ontario is trying to get to carbon neutral in two years. Actually, it has to reduce its carbon emissions by almost 50%, and by 2040, I believe it’s I think it’s 2040 we have to go to net zero. I mean, what does that mean, James?

James Sbrolla It means there’s a tremendous business opportunity and there’s a lot of money to be made in trying to bring solutions to market that to try to solve that problem. There’s no silver bullet. People say, what’s the solution to our environmental and sort of challenges with our ecosystem? It’s like saying rice is the solution to world hunger. Or I remember seeing a business plan one time. Emu meat is going to solve world hunger. It was produced by an emu farmer in New Zealand. Everyone should eat emu. It’s the most efficient type of anyway, there is no silver bullet to solve world hunger and there’s no silver bullet to solve carbon. But I can tell you there’s a tremendous array of possibilities where we can help sort of foster improvements to the environment and at the same time make money. It’s a challenge, though, because you’ve got various stakeholders trying to tackle various parts of the overall global challenge. You’ve got federal government rules in Canada, you got provincial government rules, you’ve got municipalities that are involved in the process, and that’s just Canada. The United States is obviously there are ten x in terms of populations, or ten x in terms of carbon output.

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James Sbrolla And then and those are just two of the countries in our, sort of global ecosystem. So there’s no silver bullet. There’s no easy answer. But I can promise you there’s tremendous opportunity.

Sam Husain What I mean so one of the things I was surprised to read was, and I guess intuitively it makes sense, but that homes are a real big culprit of the carbon emissions. They make up over half of what the carbon emissions are. I would have thought it was something.

James SbrollaLike cars or well, let’s start with this, which most people don’t realize. I believe over 96% of the carbon emitted is from the ocean. Okay? Yes. So, the ocean emits an unbelievable amount of carbon. So a lot of people in the clean tech space say you’re not going to change what the ocean is emitting, so how much difference does it make? And it does make a difference. So even if you’re only impacting the 4% and you’re changing it by a couple of basis points, there’s still impact. And so, the move towards carbon neutrality is saying, okay, if we’re consuming some carbon, how can we put carbon back and sort of planting trees? That’s a good way because trees take carbon, they take in carbon dioxide and they emit oxygen. And so that’s one little piece of the equation. If you are taking things out of the ground and consuming a lot of energy to do that, it would be an infinite number of trees that you’d have to plant. So, what we try to do is assess, okay, where’s the highest, best use of our time and energy, where we can get the best return on capital, and at the same time best for the environment.

James Sbrolla And I can give you a couple of examples over the course of this conversation, but essentially, it’s like I said, a very complicated problem and there’s not one simple solution. It’s a compound thing. You said I’m over 25 years in the clean tech space. We didn’t even use the word clean tech 25 years ago. And, I hate to say it because it makes me feel old, but it’s more like almost 30 years. Actually, it is 30 years. I started in 92, so it’s literally 30 years I’ve been in this industry. In the beginning we called it the environment industry. And I got started cleaning up contaminated sites. So before you turn down a building, you got to take care of the asbestos, PCBs, and contaminated soil. So the front runners of the environment business were in the contracting world. We were cleaning up sites. And then it became all there was other airborne pollutants, we need emissions controls. And the guys that were literally removing asbestos from buildings were the first environmental services workers. And so a lot of those people developed expertise. When I was in my twenties, I took the asbestos course to learn how to remove asbestos properly.

James Sbrolla And that laid the groundwork for me to learn more about this space. And so we are still learning and growing. And I can go on at length on that, but maybe I should let you ask another question before I one.

Sam Husain Of the things I was thinking about is I remember a couple of years ago I saw these tiling roof tiles, roof shingles, in fact, it’s one of Elon Musk’s company, SolarCity. And if you look at SolarCity on their website, these roof shingles, they’re solar, they look beautiful. It just looks like a regular roof, right? But it’s solar. And I always think about trying to convert my house to solar, but the cost is so expensive, and I don’t think these roof tiles have come here or not, or whether they’re applicable to this weather. I mean, SolarCity is based out of California.

James Sbrolla Yeah, to be very frank, it’s like buying a Tesla is not solving our environmental problems in this world. And sure, you can make the argument that Tesla is good, or any electric car for that matter, is good because it’s using electricity and not fossil fuels. I’m not sold on that. And I drove a Tesla for six months, had the opportunity to experiment with one, and it was definitely not the solution for me. I loved it. It was fun to drive. There were lots of benefits and kind of interesting, great narrative, but it’s definitely not a solution for me. Solar panels. I own one property that has solar panels on the roof. I bought the property, it came with it. So, it wasn’t a decision I made to buy it. But I’m now analyzing, does it make sense? I know well the arguments for solar, and I think solar is an important part of the mix. Like I said, you can’t solve the world food crisis with rice or with Emu, but as part of the mix, I think solar is part of the long-term solution, but it’s not one I’d invest in today. I think there’s still a lot of improvements that we need in Solar for the returns to be adequate.

Sam Husain

What’s the opportunity there then, to improve it? I mean, is it to store it? Store the excess power?

James Sbrolla

So, energy storage is one of the big challenges. Conversion is one of the challenges. The efficiency of panels has gotten better, but it’s still not optimized. Look, I’ll give you a parallel, okay? My dad was in the computer industry in the 1960s. He sold the first 800 and 211 in 1969, and he got a great commission, helping pay off his mortgage. And when I was in the early 90s in the environment business, my dad said to me, this is like the computer industry in the 1960s. And it was very much true. In the 80s, my dad was still in the computer industry, and people were making decisions, do we go mainframe, or do we go PC? And my dad literally that eight to eleven. It came with punch cards. And so in our clean tech or the old environment industry, it was obvious to me, we’re going to need water. We got to clean the air, we got to clean soil. But I wouldn’t want to be in the punch card business. You know, some of the water technologies will not survive. You know, two of the great water companies came out of Canada. They had great advancements, and those two were Xenon and Trojan, incredibly successful companies because they displaced chlorine, which was used to clean water, which is not a great clean water, although we still use chlorination in a lot of places.

James Sbrolla

But my point is there’s evolution, there’s change. And if you were going to invest in the computer industry in the 80s, did you want to be in the punch card business? God no. I’m not an investor of Solar because I don’t think it’s there yet. I think we still need some evolution. I’m involved in a whole bunch of government programs, including altitude accelerator, and I sit on the college of reviewers. So, I’m a believer in investing as a group as sort of our government and government programs, investing in technology that’s evolving, where we will have competitive advantage. And you make some bets and say, okay, can we create jobs? Can we create an industry? And Solar is one of those ones where I’m a big supporter because I do think it’s part of the future. But I haven’t seen a business plan that I’d say, yeah, I’d invest in that today.

Sam Husain

Do you think the government needs to get involved in incentivizing something here?

James Sbrolla

Well, the government is involved.

Sam Husain

Are you seeing companies that are getting into the space that have some solutions?

James Sbrolla

Well, so that’s a very complicated question, and I’m not going to make political statements, say one party is better or the other, but you have changes in government. In the province of Ontario, we had tremendous support, and I’m not saying it was good or bad, but it was a tremendous support for wind power and solar during McGinty government. And they also decided, we’re phasing out coal, no more coal. I could argue, and I was a debater, and I could give you compelling arguments because I was an investor in a company that provided pollution control for the coal industry, for burning coal. So you could burn coal and it could be just as clean as natural gas. So in my opinion at that time was like, why are we phasing out coal if it can be as clean as natural gas? Scrub it, clean it, and you can use the coal. But that wasn’t the decision of the government, was no more coal, we’re out of the coal business, we’re just going to use natural gas and we’re going to build these other plants. A lot of those didn’t happen. The McKinsey government supported building solar and wind, and we at the time, my group, environmental, business consultants, we did nine projects in the wind space and we did really well at it.

James Sbrolla

And then the government changed and the conservative government now won’t invest in those types of projects or support that. And we got out of that space. And so I’m going to give you another sports analogy. You play soccer, World Cup on Sunday, you’re only allowed to touch the ball with your feet, right? You touch the ball with your hands, it’s a penalty. Well, I’m a basketball player, I can only touch the ball with my hands. But if I kick the ball, it’s, the ball goes the other team. And so what are the rules of the day, what’s the government doing today, and you want to make your investment decisions as an investor in the clean tech space based on the parameters and the time horizon that you have. So if the government were to say we’re going to do 20-year contracts for solar to try and stimulate solar, I’d say that makes it interesting to look at that again. Anyway, it really depends on the regime and the specific thing. We’ve done a lot of work, sorry, go ahead.

Sam Husain

Do you think solar is the way forward or do you think.

James Sbrolla

Solar is.

Sam Husain

Like some of these wind power things.

James Sbrolla

Are solar like rice, wind powers like potatoes. These are part of the mix. And maybe some places where you say, oh, they’ll never eat potatoes because they come out of the ground and they’ll only eat you rice and pasta. Okay. But I believe both are part of the long-term mix. This is how we’re talking about.

James Sbrolla

I know, in fact, coal, which most people don’t like the idea of coal, we’re trying to displace coal, but there probably is a place for coal as part of the part of the mix in future too, and that’s not a popular thing to say, but coal is part of the steel making process. You need coal to make steel. Well, one of the investments I have, we can get into detail if you like, is a company that’s got clean coal. So they take wood waste and convert it into coal replacement material in the steel making industry. So we’re in the coal business, but it’s clean coal, it’s not regular coal. And so it’s a mix. This is just power. We could also talk about the water space, we could talk about the recycling space, we could talk about cleaning up contaminated sites and the different technologies there. I mean, there’s all these different buckets of what people call clean tech. Each one of them, the government, has different policies and procedures. Sometimes there’s rules, but no enforcement. Well, if there’s no enforcement, nobody cares. Because there has to be a reason for companies and people for that matter, to make changes.

Sam Husain

What about geothermal?

James Sbrolla

Geothermal is again part of the mix, in my opinion. Part of the mix? Yeah. There are parts of the world that operate on geothermal. Go to Iceland, it’s incredible, you see the power plants and there has been some development in this province in Ontario. The early adopters did not get great results, but it’s improved. The efficiency of geothermal systems has gotten better. But my personal position is I think geothermal is interesting. I think it’s a good part of the mix, but I don’t know that it’s a big long term solution because we don’t know the impact of accessing geothermal. Like, how much difference is it going to make if you’re taking all this heat from underground? How much difference does that make? I don’t know. And there’s a lot of geologists and engineers that would say it’s such a small difference, but maybe it isn’t. I don’t know. When people were manufacturing steel 100 years ago, they didn’t know the impact they were having on greenhouse gas. Maybe we’re making a difference to the core of the Earth. If if we’re taking too much geothermal, if it’s, if it’s a part of the mix and it’s not the only solution, I don’t think we will have that big an impact.

James Sbrolla

But we should, over time, measure these things.

James Sbrolla

First of all, I understand in the electric vehicle market, sure, they use fossil fuels to make the vehicles, but I still think that they’re having an impact once they’re on the road because they’re not using fossil fuels. Right. So you are technically reducing your carbon footprint.

Sam Husain

Hold on a second. Where’s all the power coming from? How are you creating the electricity? Because the largest producer of electricity right now in Ontario, you know what it is, right? It’s nuclear.

James Sbrolla

Nuclear. Yeah.

James Sbrolla

I don’t have a problem with that, but that’s the reality. A lot of people are anti-nuclear, and I’m not forward against what are the parameters, what are the rules, what are we trying to accomplish, what are the set of parameters we’re trying to accomplish? And we’ll try to find the best opportunities that fits with that.

Sam Husain

Let’s go back to the solar aspect then. So, if I put these solar shingles on my house, and let’s say I put it on my garage as well, can I derive enough power to run my home on a yearly basis? Is there enough sunlight?

James Sbrolla

Well, first, if that’s your objective, you’re also going to need big battery backup. You’re going to have to store the power. Now there’s net metering. So, the way the system works is you can collect power with your solar panels, and it will, when you can consume it. If you’re not if you’re, if you’re not consuming at all, it gets put into the grid. And then when you need power, you take power from the grid. Of course, you don’t get paid as much for the power you put in as the power you take out. It is early to tell whether you and your house is because I don’t have enough information to generate enough power to run your house, but my guess is no, you can’t. Now, could you change your habits to reduce your power consumption? Could you replace a lot of things that would be using less power? Could you change your habits to use less power? If that’s your objective, it’s possible, but I think it’s unlikely. To be frank, Sam, we’re power pigs in Canada and Ontario in particular. We had Niagara Falls in the early days of electricity.

James Sbrolla

We generated a lot of power and it was cheap and it was easy to get. And so we developed habits where we use where we consume a lot of power. We have large refrigerators and houses that are probably bigger than we need. And I’m not saying we should all reduce either of just that’s what we’ve gotten accustomed to. And just like we’ve built habits to recycle, we probably over time will hopefully develop habits to consume less power and use less power and have things that are more efficient and all that sort of thing. I leave my office, there’s like 25 lights on my desk. Like the modem is on. There’s a standby power light on the thing for my there’s a clock on my TV. The computer, even when it’s off, it has a light. Like there’s like 20 lights. It’s like a scoreboard at my desk when I leave and turn everything off. Yeah, you can’t. And so I’m not saying I’m the worst guy in the world, but I’m conscious of it. And is that going to solve our environmental problems? Well, no, it’s not going to solve environmental problems, but it doesn’t help. And so is putting solar panels on your roof going to help cover the light bulbs on my desk? It’s not going to hurt. That’s not going to solve the problem either.

Sam Husain

But it might make a small difference, right? It might make a little difference.

James Sbrolla

Look, in 1981, recycling, curbside recycling started in the world. The very first place, waterloo, Ontario. The Blue Box program was an invention in Ontario. Waterloo, Ontario. First place. It did not make economic sense to send trucks around picking up the recyclables in these separate streams. But the decision was made to do it because of the education factor, because we want people to be aware and have environmental consciousness. In the Blue Box, you could argue it’s been a total failure of economics. That’s debatable, but let’s just ignore that. It’s been a success on education. It has brought an education. And whether it’s solar panels or whether it’s driving an electric car or whatever, if the education process builds that awareness and the next generation is better, stronger, faster, more efficient, and more cognizant of the realities of environment, that’s a good thing. And there’s opportunity in that.

Sam Husain

What are you seeing right now.

James Sbrolla

In.

Sam Husain

Your ecosystem, on the investment horizon? On companies that are coming into the ecosystem to build it?

James Sbrolla

So I can talk about three, if you like.

Sam Husain

Yeah, start up not only just that, but also opportunities for entrepreneurs to get into this space. Where are you seeing it?

James Sbrolla

Yeah, well, so very often at the Innovation Center, we see solutions looking for a problem. Hey, I’ve split this out. No one’s ever done this before. Well, how much does it cost? I don’t know. What do you sell for? I don’t know. And so to me, it’s try to find a problem that’s been identified that’s looking for a specific solution and then adapt your solution to it. So one of the examples so one of my portfolio companies called Biorim. One of our building your business breakfast here is we had the CEO come and speak. They get rid of smell. And biofilters were built for wastewater treatment plants. I don’t know if you remember when you were a kid driving by a wastewater treatment plant, used to snake used to smell like rotten eggs, or you drove by a slaughterhouse. Canada packers on St. Clair Avenue. It smelled terrible. You don’t smell those anymore. And the odd time if you catch a whiff of a wastewater treatment plant is because the biofilter needs to be replenished. Like, they got to change the media. And so if you smell it, it’s like there’s a business opportunity.

James Sbrolla

So BIOREM built a business around getting rid of smell, and they’re very good at it’s. Canadian company, 50 employees, 30 million in revenue. And they’re looking for other places to put in that type of solution. And it’s so that one so that’s one example. And they use a media, which is an environmentally friendly media, that once it’s captured, the material is not toxic and hazardous and alternative. Another example is the tire recycling business I’m involved in called NRT. So they take not just tires, although that’s one that hits close to home, because everyone knows when you buy tires, you have to pay people think it’s a tax. Not a tax. It’s a stewardship fee. So you buy tires, you buy a new set of tires, you got to pay $5 a tire for disposal. Well, it’s not disposal. They go to recycling, and the stewardship fee goes towards beneficial reuse. And then products are made using that post consumer tire. And that’s pretty cool. I think that was fantastic.

Sam Husain

What did they make with it?

James Sbrolla

So they make lots of things, but sort of in my garage, I have tiles, so I have a rubber floor. So you can make floor out of it. I mean, the long-term plan, if you if you can really and, here’s again, another little metaphor. You can chop up a loaf of bread and get breadcrumbs. And so recycled bread is breadcrumbs. And you can do things with breadcrumbs, but you can’t bake another loaf of bread. You can’t use it in your bacon. If you could make the breadcrumbs back into flour, that would really be ideal. Then you’ve got way more options than just breadcrumbs. And so NRT has developed technology to depolymerize or debulkanize rubber so that it’s like flour, essentially. And so you’ve got higher, better uses for it. And so there was a lot and, you know, the tiles aren’t just chopped up rubber glued together. It’s really like you’re baking a loaf of bread from scratch with fresh flour. So that’s the difference. And there’s intellectual property and patents and all that sort of thing. So the third example, because I know we don’t have a lot more time, is Char, which is basically your Brita filter.

James Sbrolla

Has activated carbon in it. So there’s different types of activated carbon. Those activated carbons can be made from waste streams. And so Char takes wastewater treatment plant digestate, basically the crap from wastewater treatment plants, and puts it through a pyrolysis process and makes an activated carbon that can be used as a filter for renewable natural gas. That’s pretty awesome. And then it’s second product. They take wood waste and put it through a pyrolysis process. Same sort of oven, different recipe. And it makes the BIOPOLE that I referenced earlier so this is higher, better use. And it’s not just higher, better use for a material, it’s higher better use for a waste. So you’re taking waste and making it into something that can be used in a practical purpose. So to me, those are the business opportunities that work best. So if you get an entrepreneur who’s looking for a problem to solve, I’ll give you one that I don’t have a solution to. And I see business plans relatively often. Glass is really hard to recycle because you’re competing with sand. Sand is the main component, silica to make glass. Well, there’s been a lot of unsuccessful companies trying to recycle glass.

James Sbrolla

It’s difficult, it’s expensive, it’s not easy to handle because it breaks. And so I’m still looking for a good glass recycling business to invest in because there really hasn’t been technology that’s been great for glass recycling. So that’s one that hasn’t really been identified.

Sam Husain

Well, that’s interesting. Yeah.

James Sbrolla

Aluminum recycling is a really robust business. Rubber recycling is robust and it’s one I’ve invested in and done well. Paper and cardboard, there’s a robust recycling environment for it. Glass has been a tough one. The other one that’s been really difficult, and we know it because we have green bins, but we don’t know the outcome. Well, it’s been a challenging outcome. Organics, they stink, they smell. The raccoons are still knocking over the bins. And when the receiver gets it, it’s in a plastic bag, which is not good for their recycling systems. There’s often cross contamination. They can’t really handle bones, but you’re throwing food scraps out. Are you separating your bones and putting them in the garbage? Probably not. 90% of people are not taking some of the things that are not compostable or digestible in an anaerobic digester out of the stream. And so the processor has a real challenge. So organics are really difficult. That’s one where I’ve been an investor in that space and it’s been really tough.

Sam Husain

That’s so interesting because I was just thinking about that when I just put out the recycling yesterday, to be honest, organics. And I’m just wondering, where does the recycling go? And I’m sure that in the recycling there are probably people put in stuff that probably doesn’t belong in there accidentally or whatever. And how is that handled as well? And where does it go? Does it go into a landfill site? Or do they sort it take out the recycling material and put the rest in landfill. What about landfill?

James Sbrolla

So, not in every case, but most of your blue box material is going to go to a Merf, which is a pure material recycling facility. So the morph will have a processing line, and they’ll use magnets to take out the metal. They’ll use an eddy current to take out the aluminum, so they get separated. And those are really good streams in most cases. In Ontario still, they’ll have a hand sort for the plastics, and then the paper and cardboard goes to another place, the plastics. There are really two big recyclers in Ontario, only one that handles film. And so, yes, the material will be recycled. There will be stuff that doesn’t end up recycled. It’s between ten and 15% of what goes into the blue box. Don’t quote me, but it’s something like that. Ten to 15%, depending on which municipality, how good the murph is, because some murphs are better than others, depending on how new the facility is, whether the equipment state of the art, how much of its hands sort sometimes the hand sort is better, sometimes the answer is not as good, depending on how skilled the labor is.

James Sbrolla

And so there’s a whole bunch of factors. But your blue box material in the GTA 100% is being recycled. There are still some municipalities in some places where the efficiency and effectiveness of the program isn’t as good as we would want it to be. I spent many years working with the blue box program. Stewardship, Ontario was my client, and we work with them to improve efficiency and effectiveness. And it’s a challenge a lot of times because the logistics you’re in the far reach of Northern Ontario. How practical is it to send five different waste streams to five different locations? And I’m not saying it didn’t happen, but you start to evaluate, how much does it cost, what are we accomplishing? Like I said, we made a decision to do recycling because of education, not because of peculiar efficiency. And so, it’s a challenging decision tree when you’re deciding what to do. But I promise you, because I know you live in Toronto, your stuff is being recycled and it is ending up in the right place.

Sam Husain

Okay, you mentioned one that you would look at companies that are doing something in the glass recycling business. What are your other top two? Or let’s pick a top three areas that you would look at as the president of Clean Tech Capital that you’d say, okay, I’m interested in these three areas.

James Sbrolla

So we have three that are either public or soon to be public activated. Carbon. I really like that’s. Taking waste and turning it into something better and chars and that no, but.

Sam Husain

You would look at companies that are in that space.

James SbrollaI would look at more of them, absolutely. Because it’s a robust. There’s huge opportunity in that space. The biofilter space, I really like. But BIOREM has got a really big market share, so probably wouldn’t invest in another company in that space. And then NRT in the recycling space, I really like. And there are other elements of recycling. Like they’re in the rubber recycling space. They’re really not in plastic, but you can blend rubber and plastic. So we’re looking at opportunities there. So plastic recycling is an area of interest and other recycling streams are an area of interest. Chart takes wood, so we’re recycling wood. NRT takes rubber. I’m involved in another business that’s a plastic recycler. And we’ve experimented putting rubber into their mix. So those areas of interest and to give you one other bucket, water treatment. We all need water. You turn on the tap every day. And so we’ve had two really good winners from Canada, trojan and Xenon, which I mentioned, both founded by sort of Canadian guys who are immigrants, one from Hungary and one for the Netherlands. I’m very much looking forward to the next advancement in water treatment technology coming from Canada because I think we are due for another one of those.

James SbrollaAnd whether it’s water treatment to drink, like treating water for drinking, or whether it’s wastewater treatment, because Trojan and xenon were really two different elements that way. But I think water treatment is a really exciting space, too.

Sam Husain Okay? So we can conclude that it’s plastics, glass and water treatment. There’s opportunities there and that’s what we can look at. We are out of time. But James, I know we could talk more about this, go on for a long time on this, and I loved it. Thank you for coming on. And I wish everyone out there a happy holidays, Christmas and New Year. And we’ll see everyone in the New Year.

James Sbrolla Sounds good.

Sam Husain Thanks

Sam Husain All of us, everyone for 2023.

James Sbrolla All the best. Okay, take care. Bye.

 

Host’s Information

Samie Husain

Former Venture Services Manager of Altitude Accelerator

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