Green Light Distrikt is about entrepreneurship focused on the cleantech sector. GLD U provides cleantech courses . Edited by Chris Williams with frequent guest posts from friends, experts and industry insiders from clusters across the globe. Our goal is to provide a place where cleantech entrepreneurs in various clusters across the globe can learn from one another. Green Light Distrikt is creating the "Hitchikers Guide to Clentech" to provide a resource for cleantech entrepreneurs. Read more
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January 12th, 2013
A Simple Idea for Greentown EnergyBar Events in 2013 – Let’s Find Customers That Have Huge Budgets and Can Pay Us Lots of Money
I’m back in Boston and loving it. Boston is smaller than NYC for sure, but this helps the city. The collaboration that I’ve seen in Boston is easier, more fruitful, and happens very frequently. The same buzz words are thrown around in both places, which is very annoying, but I don’t hold it against anyone. Here are my thoughts on how to get past buzz words and start generating revenue.
Please excuse any and all typos, I’m brainstorming here, and if I waited for everything to be perfect, I’d never write anything
I’m looking forward to get back into hosting events, when Green Light District started we hosted ~12 CEOs to discuss real problems and opportunities that they were seeing. We went from the Green Roundtable on Chauncy Street (which doesn’t exist anymore) to Venture Cafe for the first Energy Bar, and then Energy Bar was moved into Greentown Labs right around when I went to Europe. Jason and the Greentown teamed turned EnergyBar into an event that is 10x better that I ever made, so I’m glad to rejoin the group and push things to the next level.
I want to push things to the next level with two themes in mind. One, stop the use of buzzwords. “customer devleopment” what exactly do you mean by that? “Value proposition” how about….how do you make more money than you spend. “Penetrate the market”, let’s call that making sales. Let’s stop trying to show how we went to super expensive collegues, we all know all the buzzwords, let’s stop talking in code and get sh%t done. Second rule, cut the genrealizations and let’s start talking with real customers that will pay us money. I’ll discuss a little more what I mean about real customers below.
You see, I get very annoyed going to the same events over and over again, hearing the same investors say the same things. Here’s what I’m always thinking “are you my customer?”, or, “are you the customer of anyone in this room?”. It’s safe that say that most of the time, investors aren’t customers. What does this mean? For most companies they’re not the bottleneck to growth. That’s not entirely true in all instances, but it is from a sales perspective. Unless I’m selling something to an investor, or I have reason to believe that they came from an operating role in a specific industry (that I already know is my customer, or I’m guessing might be my customer if I’m still working on figuring out who my customers are) and they still have close connections with said industry, their advice isn’t very valuable. The above two examples don’t happen much, due to the background of most investors.
Let’s get back to talking about speaking to real customers, and how this translates into events.
First, we should remember that cleanteach can generally be split up into three phase of a business which can apply across many different technologies and verticals (crap, buzzword! by verticals, I mean different industries).
Here they are.
- R+D of new technologies
- Commercializations of new technologies
- Deployment of existing technologies (no technology risk)
Now, let’s discuss in specific terms what these concepts means, what the business tend to need in each phase, examples of companies, and for the sake of this post, how events could be structured to help them.
1. R+D of new technologies
- Typically involves research at a university or within a large corporation
- Can be basic research, or advanced into a specific subject that might yield a technology specific breakthrough
- They need talent in the form of researchers, money, and a lot of time, because no one knows when the next breakthrough will happen.
- Hard for 2 hour event so help this crew.
Commercialization of new technologies
- These are companies that have a technology that has been proven to be effective in lab or in a pilot site, and now they are looking to sell the product or technology to more customers.
- Most commonly these are B2B companies, but they can also be B2c.
- Also, they don’t need to be creating a technology, they could be repackaging existing technologies and positioning them for a different market and/or application.
- Example of B2B companies would be:
- 1) New Way to Make Fresh Water
- 2) New LED Technology
- 3) A new type of solar PV and solar thermal module
- 4) A new way to control steam radiators.
- 5) Squirrel guards for solar PV installations
- 6) New ways for supermarkets to compost their organic waste
- 7) New ways for restaurants to harvest their grease
- New ways for cities to deal with trash collection
- You get the idea, what is most important for these companies is GETTING SALES. If the problem that they are solving is large enough, and their customers have large enough budget, they will pay for R+D through purchasing the product/service with a downpayments. This happened with BigBelly Solar (#8) and Feed Resource Recovery (#6). SALES are critical because they provide 1) cash and 2) credibility at the same time. As opposed to investment, which only provides cash, i.e. is not as valuable.
- Thus, how can we create events where CUSTOMERS can be found?
- What are the best customers?
- Here’s a group of customers I would love to talk with, so I’m guessing other will feel the same: They’re a business. They have an existing, large budget, they have a regular schedule for allocating said budget (so you can actually plan around it). They have huge problems that they’re looking to solve, and a specific person that spends said budget.
- How then could we structure an event to help this? An event for this could be structure easily. Get 3 to 4 panelists, each in control of a budget of at least $1,000,000 that deals with an energy/cleantech related issue. The business itself should be worth more about $20,000,000 and have been around for more then 10 years. We don’t want to be selling to other new business (sometime’s called “startups”). Make sure that the person is currently looking for solutions.
- Setting expectations in the event. Once the speakers have been found, the key will be setting the expectations of both the speakers and the attendees. The speakers need to be primed to come prepared to talk in specifics about their business, where they spend their money, and what they would be willing to pay for. As a moderator, this would mainly be my job. They key is to push them to say something specific to “I would pay $100,000 to fix this problem.” Because we’re trying to develop new technologies, it would be best to find customers that have tried to do research, but have not been able to find anything. The expectations also need to be set for the attendees. We’re not asking the attendees to sit and listen for fun, we want them to figure out how to sell to the panelists.
- Another point about this exercise, is that we can create an event series for different industries, because each type of industry will have similar yet different problems. For example, super-markets, fast food restaurants, universities, etc.
- Deployment of existing technologies means that there is no technology risk at all, in that all of the risks are known and can be reasonably quantified. The challenge in this environment is also sales and project finance.
- The most common examples of deployment of existing technologies is energy effieicny upgrades, solar pv installations, wind installations.
- The challenge to this businesses are complex but come down to 1) finding customers 2) streamlining operations profitably and 3) finding project finance investors. With each of those subject there are obviously more issues around how long sales cycles are after a customer purchases, good vs bad investors, etc.
- The other issue around finding customers mainly goes into the problem of 1) is the customer aware that they have a problem and 2) do they percieve it as a large problem. If neither are true, sales become difficult. In some case, the answer might be yes to both, but they are unaware of any solutions and don’t know where to start looking for solutions. This challenge becomes a match making dilema.
- On the project finance side, the challenge is also that of 1) finding the right project, both in size and investment criteria and 2) finding investors that are willing to invest small sums of money. Small meanings, less than hundreds of millions of dollars. For typically project finance, let’s say a $2 billion dollar building with a develop that has 40 years of experience, the process and risks are known.
- The problem with funding project finance for projects that might valued at $500,000 is that the developer might only be 6 years old, the technology has only be “risk-less” for 3 years. This compounded the impact of having a small project because it means there is less capital for due diligence.
- The impact of small projects and a new industry compounds the problem for another two reasons. First, a pipeline may or may not existing. A $500,000 project is fine with a large investor, if there are 1,000 more of them that fit the same profile. If they are materially different, due diligence must be done.
- The other issue that has a strong impact on small projects is transaction costs. $50,000 in legal fees is not much for a 10MW solar farm, it’s a lot for a 200kW project. The investment is being run driven through tax credits, the mechanism that is driving renewable energy deployment. The reason that this is a problem is that the trasnaction costs (the legal and acounting costs) are high. Cash, cash equity, debt, tax equity all need to be raised, legal structures need to be created with specific operating arrangements for partnership flips, lease pass throughs, O+M contracts established, the whole nine years.
- The challenge for new companies looking to delpoy technologies, finding legendary project investors. These are project investors that get it. They have passive income (they can use the passive losses generated by the tax credits) but they also understand the renewable energy market place. Again, this is a match making excercise.
- How could this be helped with an event? Similar to running an event for deploying new technology, the challenge we’re facing here is largely matching making. How do we find customers that are actively looking to invest a lot of cash in renewable energy and energy efficiency project?
- Setting expectations. The key to have a useful event, once we’ve found panelists, is to have them go into the specifics of their research process and tell them what they’re 1) afraid of and 2) what is the criteria of projects that will go through.
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