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Lessons From the Past Ten Years, Part Three: Team

Rob Day: June 5, 2012, 12:01 PM

It doesn't matter what kind of business model your startup is pursuing: tech development, service models, financial models, operational projects, etc. Unless you just get really lucky (which does happen, but can't be planned upon), you will need a team that executes at a very high level in order to succeed.

And yet, high-execution management teams are, from what I've found, the single rarest resource for the cleantech entrepreneurial sector. Much more rare than good business ideas. Don't read this as me saying that there are a lot of sub-par individuals out there -- but a lot of folks whose past experiences haven't (yet) prepared them for the unique challenges of their current role, and a lot of teams with significant but unaddressed gaps. Some will learn along the way and be able to execute at a high level anyway, certainly. But if launching a startup is described as "building an airplane in mid-air," these teams are also simultaneously trying to learn how to be a Top Gun pilot. It's really, really hard. Thus, investors are increasingly keyed into the team as a key success factor they want to see in place before providing capital to a startup.

So entrepreneurs -- especially first-time entrepreneurs -- would be well served to do a skills inventory of their founding team early on, to do an honest assessment of gaps that will need to be filled in sooner rather than later.

It may be helpful to think of four key skill areas that all startups share:

1. CEO
2. Head of finance
3. Head of tech / solution design
4. Head of sales / partnerships

For some early-stage startups, some of these roles can be combined, and for many startups, there are other critical roles beyond those four, but those are the four roles to think about in a broken-out way that seem common to every startup. Feel free to add additional ones as necessary.

Then ask, “Over the next two years, what critical accomplishments must we see out of each of these roles?” Write these down, so it becomes a scorecard for each role, and link each to an actionable time period. Include tight deadlines. These accomplishments should be as specific, quantifiable, and narrowly defined as possible to make it a useful scorecard for looking at the full scope of the role, not just one or two key tasks. Look to break down the role into very concrete and discrete tasks that must be successfully tackled along the way to bigger, overarching goals for the organization. So it shouldn't be "form strategic partnerships," but rather, "form co-marketing relationships with two of the following five potential corporate partners to result in $10M in incremental revenues by year 2," for example.

At Black Coral Capital, we do deep-dive (multi-hour) interviews of many of the key managers at the startup, to see if in their professional history they have demonstrated a pattern of executing on these specific types of tasks. We look for other patterns as well (what patterns can we see of their interactions with coworkers, etc.), but from a skills assessment standpoint, it’s pretty straightforward. We do lots of reference checks to confirm what we've heard. Obviously, given the time commitment, this is something we do only so often, but it's always a necessary part of our diligence before pulling the trigger on a new investment opportunity.  

We don't ask questions like, “Does this manager seem to have the right general skill set or personality for this?” or "Are they a successful serial entrepreneur?" but instead, “Has this manager concretely demonstrated an ability to execute on something at least very analogous and transferable to the current scenario?” We focus on quantifiable results as much as possible, and focus on what the manager was individually responsible for, not just "part of a team that did X." (Note: This doesn't imply that the manager must have accomplished the specific scorecard tasks in an identical context before! Every entrepreneur has to be a first-time entrepreneur at some point. But we look for analogous examples from other roles they've held in the past, which is why breaking down the tasks as discretely as possible is helpful. For younger entrepreneurs, this can be pretty difficult, but it's still possible by taking into consideration the candidate's academic career, albeit with a grain of salt.)

But even without deep-dive interviews like those we perform, you can break down your career to date and run through this exercise. For each segment of your career, ask yourself: a) what were your specific performance targets; b) how did you do versus those targets; c) what did you do particularly well, and why; d) what did you struggle with or simply not do as well, and why; e) what your boss would say about you and your performance. Be brutally honest with yourself, but really by viewing yourself (as best as you can) through the lens of what colleagues and supervisors would say. Definitely look up what previous annual reviews or other actual delivered feedback said. No need to be unduly harsh on yourself -- you're looking for what skills tend to stand out and what gaps you tend to experience, and how those affect concrete results. It's not a substitute for a deep-dive interview by a trained professional who can help you discover things you wouldn't have realized for yourself. But it's a good place to start.

Do this for your key senior team, and use it to build a skills inventory independent of the scorecards. Then match up the scorecards to this skills inventory, and grade along the concrete tasks: "green" for tasks that the manager holding the role has clearly demonstrated before, "yellow" for tasks they have some strong indications for but haven't actually done before, and "red" for clear gaps that haven't been demonstrated at all (not that the manager couldn't develop these over time, just that it hasn't happened to date).

No one ever scores perfectly green down the whole list, but it’s very useful to see where the gaps are, especially across the team. Particularly for younger, smaller entrepreneurial teams where everyone is wearing multiple hats and often trying to learn new types of roles, it's important to recognize where the biggest gaps are and think about addressing those as high-priority early hires.

And the scorecard itself becomes a useful yardstick for assessing the performance of the team along the way.

The above-described method is just one way to go about it, there are other valid ways, go with whatever works best for you. A short-hand version is to simply ask yourself, "Given the idea we're trying to tackle, why is this team as it exists today uniquely positioned to out-execute any other team on this specific idea?" Still, a full skills inventory and scorecard exercise of some kind gives a fuller picture. And that's helpful.

Nine times out of ten, when I see a management team with clear gaps in skills and experience, they don't seem to understand them. And therefore, they don't have a concrete plan for addressing them beyond "We know we need a CFO" or such. And therefore I can't invest.

It's also the toughest subject area for investors to give honest feedback on when they pass on an opportunity, because it's the most personal. So if you have a great idea and you're having trouble getting investors on board, maybe it's the idea itself that's the sticking point. But as likely as not, one way or another, it's about the team, even if the investors don't say so. Take a deep breath, and do what you can to figure it out. Believe in yourself, but be honest with yourself too, and adjust accordingly. It's not a failure to spot significant gaps in your team's skills inventory, it's a win, because now you can go about addressing those gaps.

Note: This is not a personality test exercise. Personality tests are fun, they provide instant gratification, and some of the better ones can help people better understand themselves. But the science around how to mesh different personality and work styles is slim at best; plus, some of the more simplified personality tests just ask people about what they want to be like and thus just reinforce existing perspectives. They don’t really challenge folks to home in on what they truly do well or poorly. Besides, personality isn’t really a direct determinant of success in entrepreneurship. Everyone wants to be a visionary breakthrough thinker but execution takes many forms.

One caveat to end with: While I noted that you can consider analogous prior tasks when building the skills inventory, there's one aspect of venture-backed entrepreneurship that I've found there's just no substitute for, and that's understanding how venture capital works. I (half) joke that venture capital is more of an art than a science. More specifically, VCs tend to do things and ask for things and expect things that make sense from their perspective, but that can be surprising or may even seem illogical to an entrepreneur who hasn't worked closely with them before. It can lead to some real disconnects between strong entrepreneurial teams and their investors, simply because of those different perspectives. Understandable, but still potentially deadly disconnects.

If you are seeking venture capital for the first time, definitely seek to add to your team (either as a full-fledged senior team member or as a heavily involved and accessible advisor) someone who's done a slow dance with venture capitalists in the past, preferably as an entrepreneur. If they weren't in the board meetings, it doesn't count, so ask them about that. Rely upon this perspective to not only understand why the VC is saying what they're saying, but also to give you a heads-up as to what's coming next -- and what the tradeoffs are. And how to get as much value as possible from your relationship with your investors.

Also, feel free to ask the VCs themselves about what lessons they've gained and what surprises they've had in learning their business. You want to know and find a good match with your financial partners, after all, so they should be happy to share.

VCs can be quite valuable partners for entrepreneurs, but only if the entrepreneur understands where they're coming from, how they're motivated, and what they can truly bring to the table.

Lessons From the Past Ten Years, Part Two: Urgency

Rob Day: June 3, 2012, 7:15 PM

I've seen it happen way too many times: cleantech startups that miss their revenue forecasts, but not because they're losing sales opportunities to other vendors. Instead, it's just because it takes longer to get opportunities in the pipeline to a "yes."

It's understandable how this happens. The cleantech startup will have an offering that's an economic no-brainer for the potential customer from a payback period standpoint, and the potential customer makes all the right noise about being interested. But day to day, energy spending simply isn't a priority for most of these potential customers, so their decision-making slips. And then it's compounded by the fact that the customer feels like, even if this offering has great economics, they still will need to research all the recent proliferation of other available such offerings to make sure they're not missing out on an even better opportunity. So sales expected to close this quarter slip into next quarter -- and quite often, the quarter after that.

What's missing is a sense of urgency, some compelling reason for the customer to say yes now. And I haven't seen enough cleantech startups that have sales teams that are good at creating that urgency. Because I haven't seen too many examples of cleantech startups able to create this sense of urgency and drive timely sales, I don't have a complete answer to this vital question. But here are some ideas I've seen used in our portfolio and elsewhere:


1. Instead of trying to create urgency among customers who don't have it, do a better job of finding the customers who do.

What does this mean? This means fill the top of your pipeline funnel a lot more than you are.

In many other sectors, this is the role of well-running channels. They go out there and identify and aggregate the 10% of potential customers who are already ready to say yes, and take their cut for doing so, because otherwise the vendor would need to reach out to 10X as many potential customers -- a costly proposition. But of course, for most cleantech markets, the channels are either ineffective or missing altogether. So you're just going to have to do it yourself.

Fortunately, thanks to advancements in marketing, there are a whole lot of new ways to get in front of prospective customers. So it may well be worth investing in skills, either internally or externally, in the fields of direct and internet marketing -- and effective (not just paint-by-numbers) PR, as well as to explore other ways of getting a lot of market reach, very quickly. Because you probably should have 10 times the sales pipeline you currently have, if you want to meet your sales targets. Some cleantech startups clearly spend way too much money on PR and marketing. But most don't spend enough.


2. Inspire greed. Inspire fear.

Did you ever notice how every month seems to be Ford Truck Month? It's how they get the customer to feel a sense of urgency -- high sticker price but a time-limited "special deal" to spur customers to get in by the end of the month or supposedly lose out on a bargain.

One of the companies in our portfolio has gotten customers to pay attention to certain dates by (truthfully) saying they're holding certain inventory for the customer, but if they don't say yes by a deadline, then the inventory is released to other customers. This works in their case because their solution is in high demand, and if the inventory is released to other customers, there will be a delay before the next inventory comes in.

Whether it's a special discount, or a potential missed opportunity, the point is to set a deadline that inspires either greed or fear in the customer. I do see a lot of discounts offered in the cleantech space -- but they're often not tied to a timeframe. They're just a lower price offered to try to entice a customer. But unless there's a deadline and consequences for missing the deadline, next month is just as good as this month for many buyers.


3. Change the message.

All I hear out of entrepreneurs is "payback periods." That's the standard metric used. It's all about two-year payback periods or less for C&I customers, and perhaps longer than that for residential customers.

But from what I can tell, that's not compelling to these customers. With the high upfront capex requirements of many cleantech offerings, even a two-year payback period comes across as delayed gratification, and may not stack up well versus other corporate investment opportunities right now. And it also misses out on the additional value after the payback. 

I've started to see use of "pays for itself X times over." So if it's a two-year payback and a 20-year equipment life, it pays for itself 10 times over. This seems to be more effective messaging.

But perhaps the messaging can be improved further still. I'd love to see more cleantech startups get enough knowledge of their customers that they can phrase things in terms very directly related to that buyer's economics, such as, "This will boost your profits by X%" or however the buyer is compensated on their annual bonus. Get 'em in the annual bonus, and their attention will follow.


4. Develop a better understanding of the buyer's process.

Far too often, the missed expected sales dates happen not because the buyer was unduly delayed, but because the startup didn't understand all the hoops the buyer was going to have to go through to officially say "yes" and sign a purchase order.

This seems to be particularly true for utility-facing startups, where the sales cycle will be dramatically impacted by the timing of things like rate cases with the PUC. 

Know your customers' purchasing decision processes -- and their own potential delays. And then factor that into your decision as to which ones to prioritize, when.


5. Help them get comfortable

This one is more of a brainstorm than anything that I've got proof works in the real world. Tread carefully.

But I do see that one of the major reasons for delays in purchasing decisions is because the buyer realizes they need to do research to make sure they're really looking at the best available option. And because of lousy channels and lack of other general information, this can be a pain -- and time-consuming. They can't just easily piggyback off of research others have done because it's hard to find, and there aren't good buyers' guides or comparative shopping sites, etc.

What if cleantech startups provided that info for them?

"Wait a minute," you might rightfully object, "Did you just say I should tell prospective customers about my competitors?"

Well...yes. At the right time. And in the right way.

It's worth finding any authoritative research that has been done on the market and buyers' options (and if it doesn't exist, think about even creating it, perhaps via a third party) and having it readily at your disposal. Sure, it's not what you lead with in the first conversation, perhaps. But when a customer seems to need to do their research on all their options, help them discover and assess all of their other options, in as trustworthy a way as possible. 

Because the sooner the customer feels comfortable that they've assessed all their options and you're still the right choice, the sooner they'll be able to say yes.

Providing transparent information might not only help them get there sooner, it might also help you build a relationship with them. And if you don't stack up well against the competition in a transparent comparison, perhaps you're not supposed to be selling to that customer anyway.

Just a thought.


Whether it's these or in other ways, get more aggressive about creating a sense of urgency with your prospective customers. You can't assume your channel partners are going to be competent at finding and closing deals. You can't assume customers are going to recognize and act upon good value in a timely fashion. Force the action. Or move on to the next sale quickly. 

Experience Curves: Why Doesn’t Your Senator Understand Them?

Rob Day: May 29, 2012, 8:43 PM

Do you know what an experience curve is? Does your representative in Congress know what it is?

It's a well-established and oft-proven truth of manufacturing costs that as you make more of something over time, costs come down. This is separate from manufacturing scale effects, which can also drive costs down, but, simply put: the more we make of something over time, the more we figure out how to drive the costs out. 'Incremental innovations' add up to significant cost savings over time.

BCG summarized this way back in the mid-1960s this way: Costs fall about 20 percent to 30 percent every time cumulative installations double.

This is not rocket science. It's well understood, and frankly pretty basic.

So why can't many politicians and their lamprey (like the RAND Corporation) understand this very basic business concept?

We've seen attacks on all kinds of renewable energy technology policies because the renewable energy costs are high. That is, high today. Early in their experience curves. Well...duh.

Most recently, some politicians have even gone so far as to deny the military the ability to acquire relatively small amounts of advanced biofuels. The argument made, of course, is that these biofuels cost too much.

Energy is a crucial strategic issue for our military. Much of our military strategy is dictated by energy supply, at both a national and a tactical level. Soldiers regularly carry 20-60 pounds worth of batteries into battle. From 2003-2010, more than 3,000 soldiers were wounded or killed while guarding energy supplies. The U.S. military spends more than $19B per year on energy, and that's expected to rise over time. Every three days, the U.S. military consumes 1 million barrels of petroleum (PDF).

The military has undoubtedly done lots of studies to understand just how vulnerable they are to disruptions from foreign-supplied energy, especially liquid fuel, before making this request. And they've decided it's a strategic priority, as a critical part of their mission, to help buy down the cost of advanced biofuels (as well as advanced energy storage and distributed electricity generation techs) by making some early purchases, to jump start those experience curves. They understand they're under budgetary constraints. They're not making a political request. They're making a strategic request. They're planning ahead, beyond the current budget crisis, to the next military crisis.

Politicians supposedly pride themselves on their business savvy. And, supposedly, they support our troops.

Why don't these politicians understand experience curves? And why don't these politicians understand the life-and-death nature of energy supplies for our men and women in uniform?

I would suggest to you, Gentle Reader, that these politicians understand both concepts quite well. And that this is a sign of how toothless the alternative energy lobby is in D.C. Because what's really driving this is that the partisan hacks in DC drove a bad political deal last year where there are significant cuts in defense spending to be triggered if they can't make a budget together. And they're realizing they can't make a budget together. Because they're partisan hacks and it's an election year. So therefore when they see an undefended target like advanced biofuels spending, especially since these same partisan hacks have decided to politicize energy technology as an election issue, so therefore it's perfectly fine to ignore well-established concepts like experience curves. And, I guess, to ignore the welfare of our troops.

This simply should not be a partisan political issue. It's not even a 'green' issue. It's a strategic military issue. Shame on them.

This should piss you off. They're either being ignorant or disingenuous. And it's far from the only case of this. It's just the most egregious example. Perhaps the most unpatriotic example.

Contact your senators and congressional representatives. Tell them to stop it. Both parties are at fault one way or another. If they don't put a stop to it, do what you can to make them feel the implications of their ignorance or disingenuousness come November. 

P.S.: I'm not a Democrat. And I'm not even a big biofuels supporter. I'm just sick and tired of the cleantech sector being politicians' undeserving punching bag, and suffering collateral damage due to their incompetence at governing. Make your voice heard. You're more influential than you might think. But only if you speak up and participate.

Lessons From the Past Ten Years (Part One): Trust

Rob Day: May 21, 2012, 6:40 PM

Over the past ten years of cleantech venture capital, there have been a lot of hard-earned lessons learned. I'm going to start a periodic series of recapping some of what I think we cleantech investors and entrepreneurs have learned, and discussing ways to address those lessons.

To start off, today's topic is the importance of building trust in these markets.

With a few exceptions, cleantech markets (energy, water, etc.) are very reticent to adopt new technologies. They are risk-averse customers by design (you don't want your lights going off, do you?) and by tradition, and also just because often the buyers of these technologies have a million other things going on and so they just don't have the bandwidth to discover and assess new options.

So what doesn't work is simply expecting that you can build a better mousetrap, and the world will beat a path to your door. If you are introducing yourself to the cleantech marketplace, to scale up revenues quickly, customers need to quickly trust you and your products. You've heard of the sales cycle? I think a precursor to success in cleantech markets is the Trust Cycle -- how long it takes customers to trust you as a reliable vendor who they aren't risking their career by turning to.

How do you work through the Trust Cycle as quickly as possible, and even shorten it? I've seen three different strategies:

1. Build trust by growing to significant scale, and then introducing innovation.

"No one gets fired for buying IBM" was the old saw in the enterprise IT world before that market learned to love the innovative startup. Well, the cleantech markets still haven't learned that. So in this strategy, the startups attempt to become a trusted brand BEFORE introducing innovation.

Not too many cleantech startups have taken this approach. EnerNOC, however, is in the middle of trying this. They got big by out-executing during what was essentially a "land-grab" period in demand response. They weren't the only DR aggregator, nor were they really deploying much innovation during their early days (they, like other DR aggregators, were mostly paging facility managers and getting them to manually curtail loads or even just turn on a backup power generator). But it was a hot, fast-growing market, and they outgrew their competitors. Now that they're acknowledged industry leaders in this market, they're able to use the "cash cow" of DR aggregation to fund a lot of innovative offerings to their large customer base, including energy monitoring, energy procurement, etc. 

Our portfolio firm Next Step Living could end up being another example of this approach, if things continue to go well. A couple of years ago, the firm's team started out in the residential energy efficiency services business doing what I called "blocking and tackling" services like audits, air sealing and insulation. The firm purposefully went into the market with an offering that the market already recognized, and attempted to simply out-execute. So far, it's worked: it has now grown around 10X since we made our initial investment. And while growing that core, familiar-looking (to the market, at least) business, the firm was simultaneously quietly developing much more innovative offerings in areas like finance, data analysis, etc. Now that the firm's in thousands of homes per year as a trusted energy advisor, it ends up looking like an effective channel for innovation like that. Opower could be another related example, and I believe there are other examples to be found in solar financing as well.

Another advantage for this approach is that the vendor owns the customer interface. Rather than rely upon distributors or channel partners, having a large amount of "owned" customers is unique in the cleantech market. And it leads to margin capture, as well as better direct information on customer needs and patterns -- which allows faster iteration and other benefits.

The jury is still very much out on NSL, and even EnerNOC, in terms of how effectively they'll translate their scale into innovation. And there haven't been too many other venture-backed examples of this approach, at least in cleantech, to date. But if this approach works, it'll be a good example of how to build trust by growing via out-execution on traditional offerings in an attractive market, and THEN using your market leadership position to bring innovations to market under your umbrella.

The major challenge to this approach, of course, is getting capital at an early stage. If there's no "secret sauce," why will VCs put capital into the company at all? I admit to having passed on EnerNOC as an investment opportunity early on, because I didn't see its core offering in DR aggregation as being defensible. I was right, but in the meantime, the company created a lot of value for its investors, so I made the wrong decision. But generally speaking, if entrepreneurs are going to try this "scale to innovation" approach, they'd better be able to bootstrap, or have a really great team and be able to point investors to a no-brainer fast-growth market opportunity.

2. Build trust via high-profile channel or JV partners.

This is the approach most cleantech startups have taken recently (at least, among those who didn't take a 'build it and they will come' approach). 

Corporate partnerships have been the name of the game over the past couple of years, both because corporate partners have been one of the last good sources of capital (ouch), but also because they bring with them validation. Ostensibly, if a big-name Fortune 500 company puts significant dollars at work into a startup, it's because the Fortune 500 company has assessed the startup's innovation and found it to be significant. In some other markets, the right channel partner also brings this level of validation.

The problem for cleantech entrepreneurs is that lining up such partners is much easier said than done. These strategics and influential channel partners are like the innovation-reticent customers you're trying to convince anyway, so it's a big chicken-and-egg problem. It can take a long time to achieve the partnership that was supposed to accelerate growth.

Furthermore, just getting the partnership doesn't immediately lead to success. Many cleantech startups have been excited to line up a key strategic partner, only to be underwhelmed later by the results. Large corporate partners often aren't organized to effectively work with startups. And the more startups announce "exciting corporate partnerships," the more the market views such announcements with a yawn, so there's diminishing returns to how effective such announcements can be to getting customers to trust the startup, without the corporate partner pulling a lot of weight operationally. And as we've seen clearly in the lighting industry, simply signing up distributors doesn't guarantee volume.

And of course, partners will take their share of margin. 

Finally, in some cases these partnerships can be counter-productive to the eventual value and growth of the startup, if it ends up scaring off other large corporate partners -- or eventually, acquirers. I've seen some venture firms that trumpet their ability to bring in corporate partners to their portfolio companies very early. I've often wondered how they manage this issue of partner-block, since many large corporates won't touch any startup that one of their competitors has put money into. Taking corporate investments and making corporate partnerships is not a decision to be made blithely, in other words.

3. Build trust by creating a powerful brand.

It hasn't happened too many times in the cleantech market, but certainly there have been some attempts to build strong brands, even before really having an offering, or via working with some high-profile early customers. Tesla, Fisker, Bloom Energy, Project Better Place all come to mind as examples of this approach.

The strategy is simple: If the theory is that customers need to hear about you seven times before they attribute any legitimacy to your offerings, then make that happen as quickly as possible by grabbing attention early and continually getting more attention. Especially effective is when it's a high-profile customer who's taken an early unit, both for the attention it brings, and also because it can help launch some positive feedback loops with other key opinion-makers and politicians who can help arrange other sales and other benefits (like incentives), etc.

The execution is a lot tougher -- and also capital-intensive. It requires a real core competency in PR and marketing, and a story that can be sold easily to journalists (and more importantly, their editors).

But overall, with the right teams and for the right investors, this can be a powerful way to short-circuit the Trust Cycle.

I hear entrepreneurs talk all the time about their "go to market" strategy. That's good. But I'd also like to hear more about how they're going to build customer trust as quickly as possible, too.

The Boston Cleanweb Hackathon Rocked

Rob Day: May 7, 2012, 8:50 AM

I was absolutely blown away by how creative and productive the hackers were at this weekend's cleanweb hackathon here in Boston.

As a recap: Around 15 teams of programmers and other hackers came together at Greentown Labs to spend 30 or so hours creating new cleantech-related web and mobile apps from scratch. Most came in with ideas in mind, of course, but they had to write fresh code to compete. Many worked through the night Saturday, and then, bleary-eyed and over-caffeinated, they presented their work on Sunday afternoon to a panel of entrepreneur and investor judges. They were all scored on the categories of Impact, Originality, User Experience, and Completeness.

I frankly wasn't expecting much, given such a short amount of time available to the teams. And yes, some were necessarily just a mock-up and some teams got a bit tongue-tied in their presentations. But overall, it was an amazing showing by all these teams -- one of those events where you can only have three winners and you wish prizes could be awarded to a lot more teams than that.

The competitors included:

  • A mapping program tied to available wind turbine sound data and wind level data to help smaller developers estimate the sound levels over ambient from a wind turbine at a particular site
  • A mobile app to allow green-minded travelers to easily find green-rated hotels and restaurants
  • A site where registered viewers can review political ads (and this year, energy will play a big role in that) and vote on whether a claim is a lie or the truth
  • A cool presentation of available data on fracking activity matched with water data
  • A remote diagnostic and energy optimization tool for greenhouses
  • A couple of tools for helping homeowners identify energy-saving appliances
  • A tool for helping energy auditors more easily look up the energy consumption of devices they inventory in a building

There was also a host of other entries. As you can see, there was a wide range of topics, speaking to the breadth of clean IT opportunities.

For me, what was striking was how far these teams were able to push their ideas in only a short amount of time. Yes, this is totally an apples-to-oranges comparison, but some of these teams were able to push their ideas to more customer-ready results in 30 hours than many more science-based cleantech startups are able to tangibly demonstrate in 30 months. That's not to diminish the more hardcore scientific efforts out there at all, but it does speak to how powerful the combination of cleantech and IT can be in some ways.

In any case, the winners came up with some fun stuff:

Third place went to a team from Divya Energy that is developing an online comparison shopping calculator for residential solar customers.

Second place went to a car-sharing app ("Ride With Me") that creatively included a customer loyalty program to entice repeat users.

First place went to a team from WegoWise for their very fun, very clever way of bringing better visualization and competitiveness to get homeowners to focus on energy usage. Using Green Button data, your house's stats are randomly matched up against another user's house, and then you duke it out -- with awesome 1990s-esque video game graphics. "Michael Tyson's Punch House" was also voted the crowd favorite. You can see the happy team, plus a couple of the volunteers who made the whole event happen, in the obligatory "giant check" picture below.

Speaking of which, many thanks to the great team of volunteers for making this terrific event happen, mostly from scratch. I can't name them all (but will list some of their Twitter handles below; please follow them), but want to particularly call out Matt Liebhold (currently independent) and Jason Hanna (Coincident). Based on the scrappy execution they demonstrated in pulling this off and bringing the community together like this, you could do worse than to get to know them and work with them in some way. Yes, consider this a recommendation.

Others to thank / follow: @blakestar, @greentownlabs, @tallmatt, @matthewnordan, @markvasu, @fyietc, @dkarmano, @emilylreichert, and @CleanSuchi (if I missed any of you, ping me and I'll gladly add you in).

These cleanweb hackathons are getting rolled out all over, apparently, so find one near you and check it out. Not only was it a lot of fun to watch, it inspired a lot of ideas for directions I'd like to take with my experiment, if I can enlist some more expert help. Here's to the next one in Boston!

Greentech Policy: Back to the Drawing Board

Rob Day: May 4, 2012, 12:58 PM

It's clearly political silly season yet again, and we can all expect that the rhetoric will continue to be dog-gone bad. We can also tell, unfortunately, that federal clean energy policy will be a lightning rod for a lot of that mendacious rhetoric this year. So I don't expect anything significantly good or bad to happen this year on a federal energy policy front. Just lots of shouting and lies, and maybe some small token legislative actions.

So it seems like a good time to step back and reflect on the choices the cleantech sector has made, in terms of how we position ourselves with regard to policy. Thus, I've come up with four basic questions I think everyone should be asking themselves right now. These aren't rhetorical questions -- these are intended to prompt discussion. The first two questions are kind of complementary to one another. The final two questions are, at least on the surface, in conflict with each other. Do with this what you will.



The argument we've made as a sector so far goes like this: Clean technologies (or green technologies or advanced energy or whatever the heck is the latest punchless label du jour) are going to be big in the future, so clean technologists should be considered vital for America's economic future. Thus, governments (federal and state) need to support them at this nascent stage of development.

I agree with this statement. But is the phrasing and perspective the right way to go about it?

Critical question: Why should the 99% of Americans not directly involved in clean technologies care about any of the above? Because of somewhat vague and distant arguments about future climate change and future economic leadership? Perhaps that's not really compelling for most.

But look at it this way: If we in the clean technology sector are successful, if we can bring everyday Americans solutions in their home and workplace that are economically compelling, what will that mean?

Lower energy prices. Period.

Cleantech leaders and our political allies keep talking about our own jobs, the "green jobs". But perhaps we should be focusing instead on what we can do for everyone else's jobs. 

What would it mean if manufacturers in the U.S. had a near-zero marginal cost of energy input, because we (in a very targeted way) helped them get cheap distributed generation like solar, via capex or tax incentive support? It would mean a whole lot more manufacturing jobs, because our manufacturers would be more competitive. 

What would it mean for commuters and small business owners if all these advanced biofuels manufacturers could succeed in bringing <$2/gallon gasoline substitutes to the American public? 

What would it mean if homeowners had significantly lower energy bills, via better efficiency retrofit programs and easier solar financing?

Beyond economic arguments, if we stopped being so focused on our own types of jobs, and started focusing our message on how our efforts put more money in the pockets of everyone else, it also becomes easier to bring arguments like energy independence into play. If we don't make it all about ourselves, for example, it's easier to see the domestic natgas revolution as an ally in bringing cheap domestic energy to the U.S. economy. Crystallizing our message in this less self-centered way also makes it easier to partner with others who can support the same message, even if they're not in 100% alignment with us on other things.

Lobbyists don't get paid to serve the general public, I understand. Washington, D.C. doesn't work this way. But at least in how we frame the problem and our role in solving it, we in the cleantech sector might think about focusing less on what others can do for us, and more on what we can do for our country.



I get it: VCs and other investors have mostly backed startups that are involved in the production of cleantech products. So when the industry lobbyists, backed by VCs and other investors, go to DC and ask for support, it ends up being an ask for support of production capacity and production-centric R&D. And certainly, there are cogent arguments to be made about how it's valuable to support the production capacity of strategic and nascent industries so that we don't get left behind in the race to dominate future markets.

Is that the best way to attract political allies? To win general public support?

Is that even the best way to build domestic markets and domestic production industries?

It's certainly not the best way to grow generic "green jobs," if that's your ultimate goal. Jobs involved in the production of a commodity can be more easily automated and more easily exported. Downstream distribution and installation and service jobs are much harder to export, and the economic activities themselves are inherently more labor-intensive, and yet dollar-for-dollar result in even better energy- and carbon-savings results, anyway.

It's certainly not the best way to avoid political backlash. Loan guarantees and state-level incentives given directly to cleantech manufacturers have, even if they've only rarely failed, quickly become political conflagrations, because they're easily characterized as handouts to very specific recipients. Meanwhile, ARRA block grants to promote energy efficiency retrofit demand have very quietly been a huge success, helping a lot of homeowners in communities across the country.

And as important politically, if the investors drive the political ask to be supported for their production-oriented startups, that leaves a lot of the most likely allies among the traditional industries out in the cold. Yes, we saw positive rhetoric in support of clean energy policy from the CEOs of major utilities and capital equipment manufacturers. Well, I've seen how the lobbyists for some of those very same CEOs then quietly worked behind the scenes to gut clean energy legislation -- or at very least, didn't actively help. Why? Because they didn't really see how these policies would directly help their company's bottom line. 

By focusing on production, we could very well end up sending mixed messages to Americans about how valuable we are to them. Solar is a prime example. The storyline right now is that the U.S. solar industry is in trouble, and along with the political scandals, mainstream journalists and most Americans asked would declare governments' support of the solar industry to have been a failure.

In truth, it's been anything but. For the vast majority of Americans, the collapse of solar panel prices is a wonderful thing. The drop in ASPs, and supportive demand growth policies at the state level, have prompted the rise of a wave of innovation in solar financing that means a huge number of Americans can now get solar panels on their rooftop for zero or little money down, and get net savings on their total electricity bill. That is a wonderful outcome. Yes, individual panel manufacturers (and their investors, like me) have been very hurt, and probably unfairly so, by China's pumping of cheap capital into their domestic production capacity. But meanwhile, the end solar market in the U.S. is one of the fastest-growing sectors of the economy, there's significant job growth in installation and other supportive technologies, and homeowners are getting cheaper power.

When we focus on production and how its been hurt by the booms and busts of capital cycles and political inconsistency, do we fail to make the more important point, namely, that the price declines are an inevitable result of the success of our efforts, and that this is a really, really good outcome for 99% of Americans? As a sector, we should be celebrating the collapse of solar panel prices, not lamenting it.

The cleantech sector remains small and mostly populated by entrepreneurs who don't have a lot of cash to throw around on political donations -- as long as we define ourselves so narrowly, which focusing on ourselves, and especially on our production-oriented startups, really does. Perhaps it's time to place even more emphasis on demand-creation policies, and de-emphasize asking for policies that support production.



It's a simple fact: There is indeed an energy revolution going on in this country. And it's being driven by cheap natural gas, not by renewables.

While certainly not universal, I continue to see many within the cleantech sector making political arguments based around aspirations of effectively zero carbon energy. It's the environmentalist side of the sector, as well as a reaction out of frustration that low natgas prices are lowering our price-competitiveness benchmarks.

I'm an environmentalist who started my career at an environmental NGO. I've had a lifelong passion for these issues, and I know that those who work at environmental NGOs and foundations often don't get nearly as much credit as they deserve for taking low-paid, low-profile roles in their dedication to helping society and the planet. But I also know the environmental NGO community has always been fractious, territorial, at times ineffective politically, and generally not good at compromising in order to achieve a good outcome.

The environmental community (and its foundation backers) has been the cleantech industry's best friend, among established political constituencies, and the one most relied upon to carry the water for the sector in the halls of Congress when it comes to specific legislation like cap and trade. But they haven't been a reliable ally. Nor should they be -- desert tortoises, etc. illustrate that the goals of an environmental NGO and the goals of a cleantech entrepreneur can't ALWAYS be in alignment. And that's as it should be. But when you rely upon an ally who often doesn't share your goals on specific issues, of course you won't be happy with the results.

Furthermore, this alliance and this vocal dedication to a pure clean energy future alienates other potential allies, ones who are more powerful and also aligned with profit principles like we are. The purist positioning doesn't leave room for win-win relationships with more established and well-funded sectors' lobbyists. There've been some sporadic efforts made by some cleantech trade groups to reach out to the natgas community, for example, but I continue to see many people involved in the cleantech sector attack that industry and cheer every piece of bad PR it gets, so those outreach efforts go nowhere. 

My argument isn't that cleantech entrepreneurs and investors should abandon our core principles or our aspirations to help the planet. Nor am I trying to take sides in any debate around natural gas regulations.

But I'm asking if some more horse trading, and more strategic alliances with traditional energy players, might not help advance the goals of the cleantech industry net-net, versus the more purist stance that sometimes dominates our sector's political rhetoric. Again, remember that our sector is small, dwarfed in financial resources by the traditional players, and still learning how to effectively message our positions. I've now seen several specific projects by cleantech trade associations and similar groups to raise money for big PR campaigns, and they've all fallen flat, because our sector simply doesn't have the financial resources to support such efforts on our own. Within that context, can we afford to be pure, when it comes to the daily battles of policymaking?



Perhaps asking for realistic and incremental policy shifts hasn't done anything other than to politicize the issue and stonewall progress. Asking for small changes makes the same enemies just as mad as asking for big changes, after all. And short-term policy wins that engender long-term resentment may miss the bigger picture. 

Most of the time when there has been a very significant policy shift in America, it has come about in one of two ways: either as a very rapid reaction to a very significant and disruptive event that forced immediate action, or as a result of many years of parallel exercise of all three levels of what John Gaventa calls "dimensions of power." To paraphrase:

  • First dimension: The ability to control a decision on a particular issue.
  • Second dimension: The ability to decide which issues are up for a decision.
  • Third dimension: The ability to affect the mindset and moral playing field upon which all these issues and decisions exist.


A three-dimensional strategy has clearly been deployed, for example, to eventually create "critical political mass" in favor of small government and anti-tax perspectives, attitudes and policy in the U.S. And it relies upon really emphasizing the long-term strategy of that third dimension, as driven by repeated and insistent very purist pronouncements and aspirational mission-driven think-tank-type activity. If you win on the third dimension, you'll reliably win on the first two dimensions as a matter of course.

The type of energy policy shift we need is indeed pretty significant. So according to this line of thinking, we can either hold our breath for that very significant and disruptive event (which I, for one, sure don't want to root for), or tackle this longer-term strategy.

But if so, to be effective, it needs to be done with a consistent message. And audaciously. And without shame. And without compromise.

Forget complicated cap-and-trade schemes designed to triangulate support from a sufficient number of constituencies to barely pass the Senate, with a lot of pragmatic horse trading involved. Instead, propose a very simple revenue-neutral, phased-in pollution (i.e., carbon) tax, described even more simply: "Make polluters pay, and send me the check." Something so simple in design that every cable news watcher can instantly understand it -- no more 1,400-page-long bills. Admit that it's going to fail to pass at the federal level. But make it a mission to get it passed wherever possible at the state and local level. Advocate passionately in the name of future generations and for our men and women in uniform. Enlist allies from the agricultural and tourism and re-insurance industries, and others directly affected by climate change. Pull no rhetorical punches. 

This is not a strategy designed to "look clever" or make friends or (definitely not) to succeed in the near term. But it's designed to eventually completely change the terms of the debate. Can that work here? Can the cleantech sector survive long enough for such a long game to play out?


Again, the above questions are just intended to prompt your thinking. Because it's time to rethink the sector's political positioning, in my opinion. This year, you'll see a lot of useless campaign rhetoric and a lot of rear-guard legislative battles trying to preserve one highly technical piece of policy or another. But if what we've seen so far is the best that this sector can do in terms of winning over the average American voter, and in terms of getting significant energy policy change to happen at the federal level, there's not a whole lot of room for optimism on this front. So let's take a step back and rethink all our political assumptions and strategies.

Some Thoughts on the Boston Cleanweb Hackathon

Rob Day: May 1, 2012, 2:01 PM

Home Depot is terrible at selling LED light bulbs. Amazon is even worse.

Have you had the experience yet of trying to buy LED bulbs at one of these places, realizing once you try the product at home that you hate: a) how it looks, b) how it fits; c) the light quality; or d) all of the above? And then you have to go through the trouble to take it or send it back for a refund. When you're paying $30 per bulb and making a 20-year purchase, these things kind of matter.

I don't blame Home Depot or Amazon -- they're not really designed to be the places where people discover which new products are up to PAR (sorry, bad pun). But if they're not the answer, what is? Lighting distributors? They don't care about the individual homeowner.

Seemed like a problem for the intertubes. So since, dork that I am, I was testing a lot of bulbs at home anyway, why not rate them and then put the results on a webpage? And thus, just for fun, I've started a new site called Lightzy. Check it out.

I'm doing it more to learn and share learnings than anything else, and so it's thin. There's a lot more functionality I would want to add were I making a more serious effort to something like this. But I throw it out there as an example of the kind of real world (testing) + e-commerce (selling) types of solutions that haven't yet been done well in our markets, and yet that should be getting tackled more by entrepreneurs. With all of the new cleantech products available to end customers these days, there remain few effective channels, and instead there are 100-year old-calcified channels that often actively stand in the way of adoption, rather than enable it. The internet won't always be the answer and probably won't ever be a full solution to this physical challenge, but it seems like an opportunity ripe for internet entrepreneurs to do some cool stuff.

And there are lots of other ways for internet and IT solutions to be deployed profitably and impactfully in energy, transportation, agricultural, etc., markets. We've talked about this before.

But for these solutions to be launched, first web and IT techies and entrepreneurs need to get interested in these markets. And too often to date, any discussion of "cleantech" has been so skewed toward the MechE and ChemE, etc., world that there's been a real separation of the cleantech and web/IT entrepreneurial communities. It's almost as if a major part of the solution has been pushed away.

This is fixable. So I watched with great interest from afar the first, very successful SF "cleanweb hackathon." And then attended the next such event, in NYC, and found it very impressive. Now the whole idea is taking off, and this weekend we're having Boston's first Cleanweb Hackathon. Should be a lot of fun.

If you know someone you think would want to take part, send this to them and tell them to sign up.

If this event is anything like the one I went to in NYC, I expect to find a good crowd of developers and designers, etc., with a passion for energy and environmental issues and who are seeking an outlet for them. What I hope they get out of the experience is an understanding of just how much these markets, being so far behind the times, are wide-open spaces for entrepreneurs like them to find something fun and productive to tackle. We need their entrepreneurial energy in this sector, but more importantly, we need their ideas. I'm looking forward to seeing some of them. I'm hoping some of them even turn into actual entrepreneurial efforts that we can then help get launched and funded via the Cleantech Open.

Because it's time to blow up these outdated markets. And no one is better positioned to do so than good, solid web and IT entrepreneurs, in my opinion. It'll need to be done with depth and seriousness -- not just with a website about light bulbs, after all, but something more substantive -- but the best way to kick off any serious brainstorming is to have a little fun. See you there.