Sandy Ewing is trying to convince investors to bet on a company that spent $7 million on a test facility, went bankrupt, reformulated, and now wants to commercialize a new technology that has eluded startups for decades.
Does he feel an occasional pang of fear?
“Yeah, definitely. I’m trying to find a capital-intensive business in an industry that just got burned,” says Ewing, CEO of Tellus Technology, which says it has perfected a process to extract valuable compounds including carbon black from used tires.
Some of that fear may be going away soon. Tellus won last month’s Cleantech Forum Entrepreneur Showcase, sponsored by the Cleantech Group and Autodesk. The company took home the grand prize: $150,000 worth of software from Autodesk, which Tellus will use to build computer renderings of its plant that it can show to investors.
That’s especially important right now. After $2 million in Series-A funding from angels and family offices, Tellus recently launched its Series B, looking for $22 million from venture capitalists and strategic investors to build its first commercial plant in Tennessee.
“Anyone that can successfully capitalize after what’s happened to venture capital really has a competitive advantage,” Ewing said. “You’re like the road warrior.”
There were many successful warriors among the 16 companies that competed. The startups spanned cleantech industries including electric motorcycles, water, software, and efficiency. Each gave a presentation describing its products, market opportunities and strategic advantages.
Judges included venture capitalist Mike Dorsey, managing partner of The Westly Group, and Jordan Kanis, vice president of the cleantech team at Silicon Valley Bank, which specializes in venture debt.
“These guys weren’t fresh off the boat. They were pretty savvy,” Kanis says of the startup presenters.
In addition to Tellus, another company that won considerable attention was HEVT, which has innovated an electric motor that is cheaper to build and up to 60 percent more efficient to operate than traditional units. HEVT plans to start small, building motors for electric bicycles, before moving up to larger applications such as heating and cooling.
“One of the cool things about this tech is elegant construction,” says Heidi Lubin, CEO of HEVT. “We just require steel and copper, so we can scale production anywhere in the world.”
Another cool thing: HEVT has secured its technology with ten patents, a big factor in the minds of judges.
“We like to see strong intellectual property” in a firm, Kanis says. “We like to see patent filings as much as possible, that they’ve cleared some barriers to entry themselves or created some barriers to entry for others.”
Another company that impressed the judges is Instant BioScan, which has created a new technology for microbial testing in drinking and commercial water, a $6.1 billion industry. As opposed to current systems, which take two to seven days to deliver results at $15 to $50 per sample, Instant BioScan says its technology produces results instantly, at a fraction of the cost.
“They’re just starting commercialization and need some capital to facilitate that ramp,” says Kanis. “They should be able to get funded quite readily.”
Dorsey agreed, especially since Deard Manzer, Instant Bioscan’s CEO, “had relationships in the industry he was targeting.”
Ventana Cleantech won judges’ attention for its new technology that the company says can remove plastics from the waste stream, converting them back into petroleum cheaper than oil producers can deliver virgin product.
“It’s very intriguing,” Kanis said. “It seems to have a lot of great potential, and I would think they would be able to get funding as well.”
Such praise comes at a good time for Ventana.
“We shall be ramping up shortly to begin our raise cycle,” Amit Tandon, founder and CEO of Ventana Cleantech, told CleantechIQ in an email. “There was good interest at the SF Cleantech Forum and we shall pursue such leads at that time.”
There are preliminary indications that the competition may have jumpstarted such fundraising. HEVT is closing its Series A round of funding, and “we’re in the process” of talking to potential funders from the event, Lubin says.
Things also look good at Tellus Technology. The company’s primary extract from recycled tires, carbon black, has quadrupled in price over the last few years and is likely to remain high for the foreseeable future, Ewing says. The company has begun talking to major retailers, both as potential funders and as partners in the corporations’ sustainability efforts.
Meanwhile, the competition has attracted more interest for Tellus.
“For sure, we’ve gotten investor inquiries and strategic corporate inquiries” since the Cleantech Forum, says Ewing.
Even at the Cleantech Forum, there was skepticism from some investors about Tellus. After all, how many companies have gone broke promising to build a revolutionary way to convert tires to their native compounds cheaply and without excessive pollution? The company’s win may indicate that Tellus has finally overcome such concerns.
“I sensed a lot of caution out of the crafty veterans there saying, ‘We’ve seen it 10 or 15 times already, what makes you different?’” Kanis says. “But sometimes they’re a victim of their own grizzledness. [Tellus] seems to be in capable hands. Now I think it’s a matter of them getting out there and selling it.”
A list of all companies that presented during the Entrepreneur Showcase can be found below: