The promise of riches and recognition bring entrepreneurs to the Cleantech Open each year; the contest has become a bellwether for industry trends, so that even established players are paying attention.
Since 2006, some 400 alumni have competed in the Cleantech Open. Last year there were 93 competitors and this year there are 150. Its 400 alumni have raised over $280 million in private capital, 80% remain economically viable today, and more than 2,000 new clean technology jobs have been created.
Rex Northen has been its executive director since 2009. Before that, he was an entrepreneur in the UK and US. He recently spoke with Breaking Energy:
How did the Cleantech Open begin?
The Cleantech Open was formed by a group of super successful Silicon Valley entrepreneurs and corporate types who saw an opportunity with clean tech. They saw a big opportunity for grass roots entrepreneurs to make a big difference to the environment.
But they also saw that there was also a big opportunity for the grass roots entrepreneurs to fail because most do, unfortunately. Unfortunately, in the technology world, the best product doesn’t always win. In fact more often than not, the best product doesn’t always win in the market.
Was Unix a more robust operating system than the Macintosh OS or Windows? Most people would say yes. There are lots of examples like this.
Technologies that succeed are those that have the best teams to execute them, and are not always technologically superior.
Does that mean that venture capitalists miss fantastic ideas?
Venture capitalists invest in the team. They invest in the business which is going to be the best run, not in the product. You need to have both, of course, you need to have a product that will sell. But execution makes the difference, not the idea.
Most technologies fail in the marketplace because of poor execution. That’s where the Cleantech Open comes in – there’s not just a need but there’s a global mandate to help those companies get their products out in a successful way. We provide the initial impetus behind the whole thing.
That’s just the way it works because the best ideas don’t always win in the marketplace and VCs know that. When you’re duke-ing it out between two technologies the guys who can execute crisply and are aggressive in terms of marketing the thing will tend to win over the scientists. That is just the reality of it.
Our take is a little bit different. We are looking for the technologies that show the greatest promise for disruptive impact. And then we work to connect them with the team that could help execute on that. We’re looking for ways to stack the deck in their favor.
Is a competition the most effective way to filter out the best ideas?
It’s a way of getting entrepreneurs off the couch. There’s some money at the end of the rainbow. The winner of the whole thing gets a $250,000 in investment and in services.
There is an American Idol-ish piece to the whole thing and if you want to get people engaged then the competition helps.
The competition is but the wrapper. There are four major activities: mentoring, training, showcasing and access to capital. So we’re working to mentor these companies individually help take them from where they are to where they need to be and the mentors. Training gives them presentation skills and access to capital is about getting investors in the room and setting up one on one meetings.
It starts with making sure that you have identified a product market fit, i.e. you’ve chosen the right product for the right market. Can this product penetrate the market or does it need to be repositioned?
What’s your favorite success story so far?
Jim Sanfelippo of Nila entered in the very first year of the CTO and didn’t have a prototype. He didn’t get anywhere and re-entered in 2007 and won what was then the energy efficiency prize. By that stage he had a prototype of an LED array which he had tweaked for use in the movie industry which he worked in.
Lights on movie sets need replacing every 100 hours or so, they get hot and can even explode and shatter glass. It’s not very conducive to acting in a relaxed fashion. The LED array solves that problem. He won $50,000 and got his first production unit out which were used to light the James Bond film Quantum of Solace. These lights can be plugged into the wall because the power draw is so much lower. Sanfelippo claims that if you were to use these lights in all the studios in Hollywood, you could decommission two power plants.
That’s exactly the kind of thing that VCs are looking for. They want to see a technology that solves a specific pain point and a team that understands the market and see how their product meets specific needs.
The LED array combines economic benefit, functional benefit and environmental benefit. It works better than the traditional alternative, it’s economically lower cost to run, it can make someone some money and help with some of our bigger environmental challenges. It’s the kind of stuff we love.
Have you noticed any trends in competition entrants?
One of the trends is that companies are a lot more realistic. GreenVolts is a good early example of utility scale solar and KiteShips which produce large kites to help power cargo ships.
We saw a lot of these sorts of ideas to start with and they took a lot of money. Years down the line they’ve got some implementation, for example GreenVolts got a Power Purchase Agreement with PG&E.
One of the trends is that companies are a lot more realistic.
In the early days of renewable energy, companies such as SolFocus and Solyndra were very capital intensive. They have been successful, but now it tends to be companies that are producing energy efficient solutions. Alphabet Energy, a waste heat recovery company, was an energy efficiency finalist in 2009 and won $1m in seed financing.
We are now seeing technologies, such as plastic recovery from waste streams, which don’t require hundreds of millions of capital to get off the ground.
Why is there such a focus in the US on entrepreneurship as an engine for growth?
Job growth in the past couple of years has come from small companies that have grown big. Entrepreneurs are the engines of the economy large companies rise and fall a little bit but they don’t generate a lot of new “net” jobs. Small companies are the ones that do. There’s a view that entrepreneurship is going to be the solution to the world’s big challenges.
Clean tech is the economic opportunity of the coming decades. It is on the cusp of taking off.
It will take off much more slowly than the dotcom boom, mainly because capital expenditure now is much more of a break on growth.
Why is previous failure regarded as such an advantage in Silicon Valley?
Silicon Valley is a very special place; if you’re going to be an investment banker you need to be in London, Frankfurt, Tokyo or Wall St, if you’re going to do something in high-tech this is the place to be. The fail fast, move on mentality is very strong here. Failure is absolutely seen as part of it.
Failure is an intrinsic part of entrepreneurship. You can’t be an entrepreneur without facing failure. On average, it takes seven failures before you’ll get one success as an entrepreneur. Failure is very common and is an accepted part of risk. Silicon Valley uniquely recognizes that.
One of the mantras is to start working with entrepreneurs young so they can get through their first round of failures early on. Young people also tend not to know what’s not possible.
Photo Caption: A worker cleans a gearbox of German manufacturer Schaeffler at the Hanover Messe 2011 technology fair on April 3, 2011 in Hanover, central Germany. According to the organizers, exhibitors from 65 countries will present their latest products during the trade show running until April 8, 2011. France is this year’s partner country.
