Via EE Times Asia:
11 December 2008
Small is beautiful for green-tech newbies
Green TechLes Fritzemeier heads up a tiny solar-energy start-up that most people have never heard of, Wakonda Technologies. But rather than worry about being steamrolled by the sliding economy, he feels like he's in a great spot.
"In a lot of respects, the best time to start a company is in the middle of a recession, assuming you've got money," he said. "Our target is to go to market when most people expect the economy to turn around."
Without a doubt, the recession and lower oil prices are hurting many companies in clean tech, a situation likely to slow what has been a frenzied pace of innovation.
But investors and entrepreneurs say that so far, smaller green-tech firms appear to weathering the storm the best, allowing them to continue developing new energy technologies.
To a large degree, that's simply because younger firms, in general, demand less capital to operate. Those green ventures most vulnerable are the ones that need late-stage funding--the tens or hundreds of millions of dollars to build a biofuel plant or solar-manufacturing line, they said.
Across the board, though, investors and entrepreneurs report that the valuations of green-tech start-ups—once considered in bubble territory—are going down, and there is a growing emphasis on having cash.
"What's out there is a level of nervousness in every business," said Mitch Tyson, CEO of Advanced Electron Beams, which makes equipment to make industrial processes more energy- and water-efficient. "People still don't have a good sense of where the bottom is."
Seeking new sources
As a result, green-tech entrepreneurs—after being lavished with money and attention for the last three years--need to get creative with how they fund their ideas.
Consider Qteros, a young firm with a potential breakthrough process for making ethanol from agricultural waste, such as corn stover. One of its initial investors, ethanol maker VeraSun Energy, declared bankruptcy, shutting it out of any follow-on round.
Other sources of money, including BP and George Soros' fund, filled the void. But the added work—compounded by cautious lenders—strung the process out from six months to nine.
"This Wall Street meltdown is having effects on early-stage green-tech companies getting the money they need to grow," said Jonathan Gorman, the manager of business development at Qteros. "There was a huge due diligence process, with outside scientists, as we looked for money, which they probably wouldn't have done before."
In another case of Wall Street colliding with green-tech garage start-ups, one newly formed firm nearly lost an investor when he lost half a million dollars on the stock market.
Late last month, SunRun, which installs and finances consumer solar-panel purchases, secured a $105 million commitment from U.S. Bank, but it wasn't as easy as it would have been a few months ago: one investor said getting a bank to sign on to a tax equity fund was like getting on "the last helicopter leaving Saigon."
Fritzemeier of Wakonda Technologies seems have gotten the timing right too: he was fortunate enough to raise money in July, before the financial markets' meltdown.
He's optimistic about the future because demand for technology that reduces the cost of solar electricity will remain strong, even in a down economy. The company is trying to develop disruptive solar-cell technology by combining low-cost, thin-film manufacturing techniques with very efficient cells.
Like most people in clean tech, he's eager to see the shape of the Obama administration's energy and green-job initiatives.
"The continued emphasis on renewable energy and economic development from the incoming (Bush) administration may put additional support in place to accelerate our efforts," Fritzemeier said.
Flight to quality
Certainly, being in the right industry helps a small company's chances. While biofuels are closely tied to falling commodity and gasoline prices, products that save energy can appeal to cost-cutting businesses or utilities looking to make the electricity grid more efficient.
"We feel better that we're in the efficiency business selling to businesses," said Robert LeFort, the CEO of Ember, a wireless-networking firm that has shifted its focus to smart-grid products. "That's better than putting something on the shelf at Wal-Mart, and hoping the consumer picks it up. It's the lesser of two evils."
As more bad economic news comes out seemingly every day, many predict that the best companies—with paying customers —are the ones that have the best chance of thriving. A number of successful companies, including Google and Cisco Systems, were founded during an economic downturn.
Nicholas Parker, executive chairman of the Cleantech Group research firm, said the difficulty in getting financing in the coming year will thin the ranks of clean-tech start-ups and, from an investment point of view, result in a "flight to quality."
Advanced Electron Beams' Tyson is out, trying to raise another $20 million to $25 million Series C round, and he's gotten a commitment from existing investors and a good reception from others. The interest could well stem from the fact that the company already has customers using its product.
"I say to potential investors, 'We have a product in the field now and look at the customer base—the market risk is low,'" he said. "Knock on wood. So far, my experience, has been typical of normal times."
- Martin LaMonica is a senior writer for CNET's Green Tech blog.
Previously, business owners Lorraine and John Alban worked with REC Solar to install three solar electric systems at one of their other businesses, Alban Vineyards. Alban Vineyards installed a 36 kW system for the winery production facility, an 11.6 kW system for the agricultural water pump, and one for the Alban’s home.
According to Lorraine Alban, President of J&L Wines, “My husband, John Alban, and I believe solar is a wonderful energy source for countless reasons. Our experience using REC for the installations on our home, winery, and water well have all been very positive. When you factor in that we really like working with local businesses, REC is just about perfect for us.”
J&L Wines is quite unique as a wine distributor. They independently operate their own warehouse and all deliveries are made from their fleet of refrigerated trucks. Thus they are able to ensure the wines they sell are in their hands from when they leave the winery to when they reach the restaurant or retailer. The warehouse that is home to both J&L Wines and Wine Country Pack & Ship is conveniently located on Ramada Drive, at the Highway 101 and Highway 46 West intersection in Paso Robles. For more information please visit www.recsolar.com www.jandlwines.com or www.winecountrypackandship.com
About REC Solar, Inc.
REC Solar is an industry-leading solar power provider specializing in grid-tied residential and commercial installations. With a local presence in all major solar markets in the USA and millions of watts installed, REC Solar is committed to lowering the cost of solar power through efficient processes, innovative products, and outstanding customer service. REC Solar is among the nation’s largest solar integrators and currently has over a dozen offices throughout 6 states (AZ, CA, CO, HI, OR and NJ). For additional information on REC Solar visit www.recsolar.com or call 1-888-OK-SOLAR (888-657-6527).
About J&L Wines, Inc.
J&L Wines Inc. of Paso Robles started in 1981 as J. Eberle Wines. The company’s name and mission evolved with the emergence of the wines from the central coast. Under the ownership and guidance of Lorraine Alban, its mission has been to select wineries representing the best of their region. Employing eight regional sales people, J & L Wines is proud of its excellent reputation for professionalism and prompt, dependable, personal service. The company endeavors to work closely with suppliers to develop sales programs that produce results. This has helped many of the J&L Wines’ brands become very well established in the region. The sales personnel focus on making appropriate placements which serve to enhance and build the wineries they represent. For more information please visit www.jandlwines.com or call 805 239-1377.
About Wine Country Pack & Ship
Wine Country Pack & Ship (WCP&S) excels in delivering premium fulfillment services to wineries with consumer-direct shipping needs. The company is a joint venture between Lorraine Alban and Maureen Herrera. Services encompass wine clubs, release shipments, tasting room orders, e-commerce orders and more. WCP&S simplifies the fulfillment process for our customers and helps build their brand in the consumer-direct market. For more information please visit www.winecountrypackandship.com or call (805) 227-7117.
Contact:
Isabelle Christensen
REC Solar, Inc.
(650) 815-6778
ichristensen@recsolar.com
Lorraine Alban
J&L Wines, Inc.
(805) 239-1377
Lorraine@jandlwines.com
Maureen Herrera
Wine Country Pack & Ship
(805) 227-7117
Maureen@winecountrypackandship.com