Cleantech Entrepreneurship: Surviving a Long, Cold Long Winter

by Richard Zhu 
We had a very interesting cleantech case in HBS Launching Tech Ventures course this week – Aquion Energy: a novel energy storage firm using lean start-up techniques despite its long product development cycle. So different from consumer internet business, Cleantech companies don’t have much chance to pivot; they don’t have many opportunities to test their product with users; product development is so science and engineering driven that it is very time and capital-demanding. Compared to the cases we had on internet, especially social networks, starting-up in cleantech is like a long cold winter: you really need to figure out how to survive this brutal weather before embracing beautiful spring and summer. (Yeah, that’s what HBS can teach you by locating at Boston!)
Couples of thoughts on how to survive:
Polar bear or tree frog: who is born to survive the winter?
We talked a lot about founder-product fit in the past cases. The right experience, skill, and knowledge are universally critical for founders to get the start-ups right. Here in cleantech, another scale needs to be further considered: time duration. Given the limited possibility to make it in 2 or 3 years, entrepreneurs need to be really prepared for a longer journey. Who has the superior gene to win out the winter? In this case I saw the founder of Aquion Energy. Being a University Professor definitely gave him a great advantage: Working on technologies in the school’s lab, spun out a company when ready, asked for lower academia load to allow more time on the company… Even though we can not change who we are, but in case you get good starting positions like that, at least you know you are ahead of others.
Energy conservation: lean start-up.
Aquion Energy did great on lowering their burn rate: using second hand research equipments, adopting cheap production line even after receiving millions of dollars of funding. Reasons being simple and persuasive: protect founders and early investors’ equity from dilution.
Take free resources, and avoid unnecessary trap!
There really are ‘free’ money for cleantech: DOE want to stimulate this technology, go and take it! I got a friend doing solar air-conditioning without a single cent of VC money but progressing fast: he is really using the government grants well, together with the research facilities while he is working in school’s lab. There are always rules on how the research could become the property of government or school, but in a lot of cases, these are not obligatory. Understanding these resources and rules may give the start-up lots of tail wind.
Pick the food available while chasing the big!
In a lot of cases, we see a huge final reward for clean technologies: general lighting for LED, portable nuclear electricity generator, distributed power/heat/cooling system for solar, plug-in pure Electronic Vehicle and utility-level storage in this case. The challenge would be how many years can a start-up run without generating a sustainable profit? LED has been around for half an century before coming to $10 range. So it’s always good to chase big, but don’t ignore the chances to pick decent rewards along the journey.
Find a advantageous location.
Evergreen Solar is a solar technology company that aims to significantly reduce the production cost of solar panels. Their pilot plant was set up at Devens of Massachusetts.  This year, they are shutting it down, since the labor price in this area made their advantage in cost reduction less attractive. (Welcome to New England, recall the textile industry!) By building a factory in China, the economics would work better. Without any doubt, the large amount of solar manufacturers in China would crave licensing their technologies when ready.
Thinking about by-passing rough weather?
Cleantech is not always dark and cold. You still can win with innovative business models: think about OPOWER! I was so amazed about how well-organized consumer engagement can do. They can improve energy efficiency without installing a smart meter!
So glad to have cleantech stuff in the course. Looking forward to more!