Last November the CleanTech Open rounded up some of the most forward thinking entrepreneurs, politicians, researchers and investors for its annual Global Forum to offer their expertise to an audience of aspiring and accomplished clean tech innovators and supporters. The jovial former chief evangelist af Apple, co-founder of VC firm Garage Technology Ventures, author, and current advisor to Google, Guy Kawasaki, topped the list as the event’s keynote speaker. In his typical big-font, big-impact presentations, he shared some of the biggest lessons he’s learned in building one of our generations leading companies with the clean tech community.
The Cleantech IQ staff took a look at how some of his words of wisdom apply to the current cleantech market.
“Experts” are clueless. Experts will tell you what you can or should do. They are usually wrong. He went on to point out that Apple went the opposite of expert advice.
Kawasaki’s first point highlights the value of a fresh perspective and a break the mold attitude. It touches on the need for continual shifting in how clean technologies are deployed, financed and created as policies and appetites change. Mosaic comes to mind as a prime example. The company has opened up the solar market to not only the average-joe investor, who wants a low risk, low rate return, but also smaller banks and financiers that want a similar structured investment.
The startup broke through old policies and requirements that prevented this from succeeding previously. The result so far? $5.6 million of investments in solar projects throughout the U.S.
Customers can’t tell you what they want or need. They can only tell you what they already know. Customers can help you evolve a revolution, but not create a revolution. The next big curve or innovation must come from the business.
The Nest Thermostat comes to mind here. Homeowners didn’t know they needed one before there was one. The thermostat is a boring and overlooked part of the home and while it is the portal for energy use and control, it was (and still is for the majority of homeowners) hard to imagine being a noteworthy device. Now, with Nest sold alongside headphones and iPhone cases at the Apple store, shrinking your home energy footprint is not only an option, but a step towards creating a futuristic smart home.
Disrupting the risk adverse utility sector, OPower, is another prime example of a company innovating ahead of the sector’s comfort curve. At the core, Opower’s cloud-based platform enables customers to manage, personalize and analyze their energy use. But looking beyond their product, the company has zeroed in on overcoming the adoption hurdle by conducting behavioral studies on how people use and interact with their energy provider.
By applying behavioral insights and offering solutions that fit their preferences, such as their Home Energy Report, the company is using customers to evolve a revolution as Kawasaki talks about.
Innovation happens on the next curve. Kawasaki illustrated this with the evolution of the ice industry: 1.0 Ice was harvested and transported by horse drawn carriages. The next curve was 2.0 Ice that created ice in a factory regardless of outside temperatures. 3.0 Ice is the home refrigerator curve. Each curve is important.
In many ways cleantech is on a different curve that in years past. We’re seeing clean technology encompass a wider range of sectors as the world moves towards sustainability and resource management as a necessity instead of an option. Chrysalix Energy Venture co-founder and CEO Wal Van Lierop captured Kawasaki’s sentiment when at a recent event he talked about how the cleantech market of today is different from the early days.
“That is what currently the resurrection of cleantech is all about,” said Van Lierop. “It’s about penetrating clean technologies into the core business of large corporations. The result is staggering when it comes to the total addressable market. The total addressable market of what we call cleantech in the early years was about $500 billion. But now that cleantech is penetrating into the core business of large organizations, the total addressable market is at least $3 trillion to $4 trillion.”
“What we’re talking about with cleantech 2.0 is sustainable innovation for large industries in transition,” Van Lierop says. “It’s about technologies that can simultaneously reduce cost, can reduce energy intensity and can improve the environmental footprint.”
Think big, challenge big. Kawasaki said that the biggest challenges beget the best work. When IBM launched a personal computer, Apple welcomed the competition head on with a full page advertisement in The Wall Street Journal that read, “Welcome, IBM. Seriously”. Kawasaki said that this competition eventually led to the development of the iPod.
While the total investment in the sector hasn’t rebounded year over year since Q1 2012 when it began to decline, the market does continue to see big initial and follow-on investments in game changing companies and those with big market potential. In 2013, there was a quarter-on-quarter increase in investments, which could be thought to signal renewed interest.
Andrew Chung, a partner with Khosla Ventures touched on his firm’s investment appetite at the Cleantech Innovation Summit saying, “We are still very focused on black-swan type technologies that have the ability to transform infrastructure. We’re willing to take significant technology risk and if it means that it’s a manufacturing-based business, so be it,” he said. “We’ll find a way to fund it.”
Khosla isn’t alone in its interest in “think big” technologies. VantagePoint Capital Partners, recently named the top financial investor of 2013 by the Cleantech Group, has a portfolio with capital light startups Tendril and Trilliant in addition to more capital intensive technologies including Liquid Robotics, maker of a solar-powered marine vehicle; Genomatica, which makes green chemicals from garbage; and glo, a nanowire LED lighting company.
KPCB, Baremar Energy Ventures, Bright Capital, Rockport Capital, DFJ, Foundation Capital, IFC, Aster Capital, TPG, and RobecoSAM are also still committed to putting money in hardware companies including Nest, micro-inverter provider Enphase, energy storage company PowerGenix, and green building manufacturer Project Frog.
Corporate strategics also haven’t shied away these types of investments, even if the jury is still out whether they make the right picks: 40 percent of the startups that received corporate funding between the third quarter of 2011 and the second quarter of 2013 had distressed exits, according to the Cleantech Group. For this period GE, ConocoPhillips and Mistui & Co topped out the most active investor list – all with portfolio companies that have a manufacturing component.
A players hire A+ players. The world’s best engineers hire world’s best marketers. Always take pride that the people you hire are better than you.
Nancy Pfund, founder and managing partner at DBL Investors, talked about this same issue at the Women in Clean Energy Symposium at MIT. She stressed that a persistent, creative, and dynamic team can make or break success. She’d rather have a B-rated product with an A-rated team than an A-rated product with a B-rated team. A successful team will also be filled with singled-minded entrepreneurs who get people around them motivated to work.
Changing your mind is sign of intelligence. Popular beliefs have tacked in the opposite direction. In 2007 Apple was a closed system. In 2008, Steve Jobs changed his mind about this, and opened iPhone for apps.
Kawasaki’s point here brings to mind the company pivot. The previously electric car manufacturer and now energy storage company, Coda, is a prime example of a seemingly successful pivot, and a major one at that. Following a few years of losses and lawsuits, in 2013 after being acquired by a group of investors led by Fortress Investment Group, the company transitioned from designing and manufacturing EVs to selling a lithium-ion-battery-based energy storage technology to industrial and commercial customers. The company currently has systems installed in California and New York, including the Mark Hopkins Hotel in San Francisco and a solar powered EV charging station in Benicia, Calif.
Two other pivots of the last year come to mind. The first is Solum, well now Granular, an ag tech startup. In February Solum sold its soil science business unit to Monsanto, changed its name to Granular and raised $4.2 million from Andreeseen Horowitz, Google Ventures and Khosla Ventures to develop its business software for the $3 trillion agricultural vertical. The next example is Greenstart, which last March shuttered its 90-day accelerator program that has already graduated 13 companies in favor of a studio-investor hybrid model. Its new structure will be an evergreen fund where investments are held and investors can buy a stake in the operating company.
Value is not the same thing as price and marketing equals unique value. Nobody buys an Apple computer because it is cheaper. It’s not the absolute price that sells products, but rather it’s the value. Marketing has to communicate that it’s unique and valuable.
Considering the recent boom in smart building and energy efficiency investments and the value investors see in the sector, it’s a good place to illustrate Kawasaki’s point. Many entrepreneurs and investors have said that energy efficiency isn’t being sold on the value proposition of energy savings alone. Instead the value marketed to customers should be about other benefits.
For Project Frog, traction with customers has come from selling based not on energy cost savings, but on predictability of construction time and comfort benefits, such as better lighting and ventilation. Hannah Grenade, CEO of Advantix Systems, which makes highly efficient HVAC systems also found that talking about the systems’ better performance, lower maintenance costs, and lower employee absenteeism due to indoor mold and bacteria helps to sell more products than the medium-range cost savings.
Building Robotics, which has developed a software to help users manage the temperature control of their workspaces, also talks more about the non-monetary benefits of its product. According to Paul Straub, director at VC firm Claremont Creek Ventures, the company doesn’t lead with the time saved for facility managers or avoiding wasted energy, it talks about how the platform gives people the power to adjust their surroundings and improve comfort.