Thread’s Co-Development Strategy: How They Turned XL Energy into Their First Major Customer Without Taking Their Money
When Josh Riedy brought Thread’s utility infrastructure solution to XL Energy, he took an unconventional approach: instead of asking for money, he asked for problems to solve.
In a recent Category Visionaries episode, Josh revealed how this strategy helped Thread build a product with perfect market fit and land one of the industry’s most influential customers. The key? A willingness to earn the business without immediate compensation.
The Co-Development Framework
“We had to earn the business. XL Energy did not retain any intellectual property, but they also didn’t give us money to do it,” Josh explains. This arrangement created a unique dynamic where Thread could develop their solution alongside real users while maintaining full ownership of their technology.
The framework had three core components:
- Problem identification with stakeholders
- Solution development with user feedback
- Proof of value before payment
“We identified the problem. We identified a path to a solution, and we didn’t get paid until we proved it,” Josh notes. This approach required significant upfront investment from Thread but ensured their solution would genuinely solve critical industry challenges.
Why XL Energy?
The choice of XL Energy as a development partner wasn’t random. “XL CEO at the time sat on the Bloomberg stage in 2018 and that was the first utility to declare carbon free by 2050,” Josh shares. This forward-thinking mindset made them an ideal partner for developing innovative solutions.
Moreover, XL Energy’s geographic footprint provided invaluable testing grounds. “One very large customer that spans five states, ranging from the canadian border to the mexican border,” Josh explains. This diversity allowed Thread to validate their solution across different operating environments.
The Network Effect Strategy
Thread’s co-development approach leveraged the utility industry’s unique characteristics. “Utilities are a very unique market. It is a fast follower, close knit, heavy influence market,” Josh notes. Success with XL Energy would open doors throughout the industry.
This strategy proved particularly effective because utilities face common challenges. What began as solving specific problems for XL Energy evolved into solutions applicable across the industry. “We are the Thread that spans an entire organization, or an entire utility… across all their assets,” Josh explains.
Results and Validation
The co-development strategy led to dramatic improvements in utility operations. Tasks that previously required “a three person crew repelling down turbines that are 80 meters in height” became “a one person job in roughly 20 minutes.” These concrete results validated Thread’s approach and made selling to other utilities easier.
For B2B tech founders, Thread’s co-development strategy offers a compelling alternative to traditional customer acquisition. By prioritizing problem-solving over immediate revenue, they built a solution with proven market fit and secured a powerful reference customer. The key is finding the right partner willing to invest time and resources in exchange for early access to innovative solutions.