Better Together: How Two Kids from Clifton, NJ Turned a History of Friendship into an Energy-Procurement JuggernautJune 24, 2020
3Qs with Dustin Scarpa and Paul Shagawat, Co-Founders and Managing Partners, Transparent Energy
Q: How did you two meet, and what made you want to go into business together?
Paul: Dustin and I grew up half-a-mile from each other in Clifton, NJ, about 15 miles outside of Manhattan. I’m a year older than Dustin, but we’ve basically been friends since tee-ball. We went to elementary school, middle school, and high school together – then Rutgers, and we went into business together very quickly after.
A few things you should know about us growing up. First, we had great, supportive families, and we played a ton of sports together, from Little League to football. Growing up in a town like Clifton, you make a lot of friends that last a lifetime through sports. Those relationships, and the close ones we have with our parents, made us who we are today and are still a big part of our lives.
We didn’t come from wealthy families, so we learned early on to work with passion and purpose. And we had great role models. My Dad was a computer-science expert, and he imparted on me a strong sense that technology could be a positive disruptive force on any industry. Dustin’s Dad was a defense-contract negotiator for BAE Aerospace, and Dustin inherited that deal-making gene from him. Mr. Scarpa was also a businessman with ventures on the Jersey Shore. Dustin and I learned a lot about what it takes to run a business and how to be entrepreneurial from his Dad, which has really paid off for us in the energy business.
Dustin: We’ve been great friends pretty much since we were little kids, and we grew up with a tight group of friends and formed really deep bonds through sports. My Dad has been a huge influence on us, and Paul’s Dad, too. And our Mom’s – both amazing women – are outgoing, loving people who taught us not to be afraid to speak our minds. We’ve just gotten so much support from our families, and I can’t say enough about how important that has been to us. We really built Transparent Energy with the help and relationships of friends and family, and that’s just a big part of who we are.
Paul brought up our entrepreneurial spirit. My brother Ryan and I used to listen to my Dad negotiate over the phone in the kitchen sometimes, and it really influenced both of us. My brother went on to a career in corporate and real estate law, and I went into the energy-brokerage business. The funny thing is Paul and I were both excellent students throughout our youth, but I would often get dinged for being a bit argumentative – I would always try to negotiate something or drive a better deal. It was in my blood!
Q: You both went to Rutgers University. Can you tell us about that chapter in your lives and how it led to you starting your own energy-procurement business?
Paul: I graduated from high school a year before Dustin and actually went to Penn State for a year. But I missed my inner circle. Dustin went to Rutgers, loved it, and convinced me to transfer.
Rutgers was definitely a big part of our success. It’s a very good Business and Communications school and really allowed Dustin and me to pursue our academic passions. Dustin excelled in Marketing Management with a minor in Economics, and I had a chance to dive deep into Economics and Finance. This goes back to what we were talking about with our fathers, but you can see how this ended up playing out in our business: Dustin is an excellent sales negotiator, and I’m more of a holistic ‘Ops and Efficiency guy.’ In reality, we have both worn every hat in our business – you have to when you are starting out building a small company into a multi-million-dollar leader – but we essentially have great complementary skills that we trace back to our parents and then on through college.
Dustin: I agree that Rutgers was a big cornerstone in our professional and personal development. We met so many people there, people who would become employees of ours, future customers, and channel partners. I can’t say enough about the opportunity Rutgers provided us, and I’m proud that Paul and I made the most of it.
When Paul graduated, he took a full-time position at a financial management firm, and I landed a paid internship with the second-largest energy supplier in North America my senior year. I had earned college credits my last year in high school attending Montclair State University, so I had some freedom as a senior at Rutgers, and as I performed my internship I really started to explore the energy space. Electricity deregulation was still pretty new – or at least the idea that someone could be an “energy broker” was a developing concept. I began approaching Campus businesses and manufacturers to guide them into better electricity contracts, making quite a bit of money for a 21-year-old. I recognized there was a big need and that this could turn into a great business.
I started asking Paul to join me on sales calls after his workday, and then before you know it, he was running deals for me with suppliers. Early days, this was all done with phone calls and emails. It was a super-inefficient process, but it delivered good results and was profitable. As we did more deals, we were like, “Hold on a second, there is a lot of potential to evolve this process!”
Paul: Dustin really discovered that energy procurement posed an excellent business opportunity, and even though I had what many 21-year-olds would consider a dream job in finance, I really wanted to go into business with my best friend and build something great together. So, we went after it! Through his own hard work, Dustin had already built a nice portfolio of 20 or 25 small and medium-sized business customers and developed some great relationships with suppliers.
We knew there was a real opportunity in front of us, but that we’d need to scale in order to capitalize on it. A few things happened next. We tapped back into our Clifton roots, particularly our old high school football team – lots of our friends were also graduating from college or just working their first jobs out of college, so the timing was right and they were excited about the vision we had for energy sales. We also got busy broadening our supplier base, so that we could bring more liquidity, more competition into our procurement process. And finally, we brought in a software engineer to develop our online auction platform.
Of course, we were doing all this while we were still selling. We’d be going to every Rutgers football game, getting 15 new business cards at every tailgate and meeting more and more alumni. We were hungry, and even though we were young, we were good at delivering on our promises and making our clients happy.
Blast from the Past: Dustin and Paul in the original Transparent Energy (formerly known as Premiere Energy Auctions) offices, Fairfield, NJ, circa 2012.
Dustin: I think our age actually helped us a bit. We brought something new to the traditional energy brokerage business – technology disruption. Yes, we were young, but with our auction platform we had a key differentiator that enabled us to go into any deal with confidence that we had a better way to buy energy that would advantage our customers and save them money. The logic behind the sale just made sense, and customers really responded well to the auction process. Our network of channel partners – experienced businessmen with existing clients they’ve serviced for decades – began to see that we treated their referrals professionally and consistently delivered savings to customers. Once they saw that, the floodgates really started to open.
One channel partner in particular had a stellar reputation in New York City. His firm had 75+- years-experience as an electrical contractor. With his help and connections, we broke through the NYC REIT market and really accelerated our growth trajectory. That period culminated in our biggest win, landing the energy contract for Rockefeller Center. We ended up saving them $2.5 million on a three-year contract. I can’t tell you how big a deal that was for two local guys who grew up in the shadows of New York City delivering massive savings to such an iconic New York property!
Q: 2019 was a record year for Transparent Energy while also marking the company’s first decade in business. In 2020, you are off to an even bigger start, right through the teeth of the COVID-19 pandemic. What’s going on?
Paul: I think what we are seeing is a big return on the ongoing investment we have made in the business. Dustin and I really wanted to create something special at Transparent Energy. We didn’t want to just be good, we really wanted to be the best. That meant building a business that could last and would become synonymous nationally with delivering value to energy-buying customers.
So, we’ve invested. First, we’ve continued to hire the best, building out a great team – honestly, the best in the business. We’ve also continually invested in our technology, our best-in-class online auction platform – more than $2.2 million to date. And we keep making our process sharper and sharper, learning by doing. We’ve put in our “10,000 hours” so to speak, and the results are speaking for themselves.
Dustin: Our whole approach of delivering transparency, maxing out competition, and creating efficiency through technology and process has positioned us to service customers like they’ve never experienced before with their broker. We’ve continued to excel through the COVID-19 pandemic, because our online auction platform enables businesses to buy their energy remotely, just as they are using other online tools like Zoom and Slack. We just did a deal for a major name-brand property owner and had more than 45 people around the country tuned in and participating in the auction remotely over our cloud. It was fantastic and rewarding.
So here we are today, with many of the biggest financial institutions (in fact, the financial institution synonymous with wholesale energy information buys its retail energy contracts through our platform, which we take as a huge compliment), national PE firms, and the biggest names in real estate and manufacturing using our platform and process to procure their electricity and natural gas agreements.
It has taken a lot of hard work, but our combination of great people, great process, and incredible technology always delivers for our clients. We’re currently helping our customers transact more than $10 million per week in energy contracts. We’ve been growing at a record pace, and because of our experience and skill we are able to handle even the most complex energy deals. This gives our channel partners and clients the confidence to bring their largest energy-consuming facilities to us.
And with our industry-best 99% close rate – meaning that when we take a customer to auction, the auction results in a completed energy contract 99% of the time – clients and suppliers know that when it comes to transacting energy, they can bank on Transparent Energy.