Goodbye Suburbs, Hello City Centers…

The signs of great movement back to the city center from suburbia can be found in most major cities of America.  New apartments, condos, townhouses seem to be sprouting up in the previously abandoned or dilapidated sites all across the US.  A recent issue of Fortune magazine talked about how majority of the new housing construction today is happening in the heart of the cities rather than the suburbs. I see evidence of this in our great city of Houston every time I drive to downtown.  The appeal of living in the city seems to be catching on with the younger generation  – who are willing to give up a big house and yard for the convenience of living close to work.  From an environmental perspective, if these trends were to continue, American urban areas have the potential to become far more sustainable rather than continuing 20th century trend of sprawling further and further away from the city with an ever-increasing footprint.

I think this is great and hope the trend continues.  But, I worry that public transportation or lack thereof may become the roadblock to making our cities more desirable and sustainable.  As more people move in closer and the population density rises, it will put an increasing burden on the cities’ infrastructures.  Most of these demands could be met by investments from the increasing tax base as the population increases, but the development of adequate public transportation may not be as easy.

It is true that having lifestyle amenities near the center allows residents to get around more by foot or bicycles.  This could reduce some reliance on automobiles for transportation needs versus the norm today.  But, can one really foresee a city with population density approaching that of major European and Asian metropolis without a reliable public transportation system?  Given the long lead-time and high investment needed to build an extensive and reliable public transportation system, are our city planners up to the task on this issue?  There does not seem to be a significant effort to build extensive people moving systems compared to how fast the condos and townhouses are being built and sold.  If the city streets become as clogged as our freeways are during rush hours and residents start spending a lot of the time sitting in their vehicles, I wonder how long the love affair with downtown areas will last.  Perhaps it is time for our city managers to get more aggressive in building public transportation before the perils of automobile traffic follow residents into the city centers from the suburbs, and we lose this opportunity to have more livable and sustainable urban areas in the US.

15 Tips For Clean/Green Tech Accelerator Success

I’ve been helping behind the scenes on a new cleantech incubator recently launched in Vancouver, Canada called the Foresight Cleantech Accelerator. And in the process, I’ve been getting the opportunity to learn what other accelerators and incubators are doing well, and not so well, around the world.

The first incubator launched in the U.S. in 1959, but since then the terms accelerator and incubator have become somewhat synonymous. Both are generally used interchangeably to describe organizations, typically with multitenant facilities, which exist to help foster new innovation—though some characterize accelerators as higher velocity and sometimes contributing cash, as in Y Combinator. Like Foresight in Vancouver, many provide educational programming (in Foresight’s case, a structured curriculum called the Venture Acceleration Program), as well as office space, mentoring, expert clinics and networking with strategic customers and investors. Some even offer capital directly. Still others offer pooled support services such as marketing and accounting.

Incubators are a global phenomenon. In efforts to foster job creation and local economies, they’ve blossomed around the planet. There are some 7,000 such programs around the world, according to a 2011 study by the University of Michigan. And—no surprise—some perform better than others.

Why?

Best incubator practices
What are some of the secrets of success of the best incubators? University of Michigan researchers collected and analyzed data to determine relationships between how an incubation program operates and how its client companies perform, as measured by a number of outcomes. (It even came up with a web-based tool to help incubation professionals measure their efforts against best practices—facility managers take note!)

Highest performing incubators were found to exhibit the following characteristics:

1) No one practice, policy, or service is guaranteed to produce incubation program success. Instead, it’s the synergy among multiple practices, policies, and services that produces optimal outcomes. There is no single “magic bullet” service an incubator could or should offer.

2) Top-performing incubation programs often share common management practices. High-achieving programs have a written mission statement, select clients based on cultural fit, select clients based on potential for success, review client needs at entry, showcase clients to the community and potential funders, and have a robust payment plan for rents and service fees. Incubation programs with lax or no exit policies typically had less-than-optimal performance.

3) Advisory board composition matters. Having an incubator graduate firm and a technology transfer specialist on an incubator’s advisory board correlates with many measures of success. Additionally, accounting, intellectual property (patent assistance), and general legal expertise on the incubator board often result in better-performing programs. Government and economic development agency representatives also play key roles in enhancing client firm performance, as their presence ensures that the incubator is embedded in the community, which is necessary for its success. Local government and economic development officials also help educate critical funding sources about the incubation program. Incubation advisory boards should include diverse expertise.

4) Neither the size of an incubator facility nor the age of a program is a strong predictor of client firm success. Many incubator funders and practitioners perceive that the size and age of an incubator are key success factors. But it is the incubator’s programming and management that matter most. For example, staff-to-client ratios are strongly correlated to client firm performance.

5) High-achieving incubators collect client outcome data more often and for longer periods of time than their peers. Overall, two-thirds of top-performing incubators (66.7%) collect outcome data. More than half collect this information for two or more years, while slightly over 30% collect data for five or more years. Collected data include client and graduate firm revenues and employment, firm graduation and survival rates and information on the success of specific program activities and services.

6) Most high-achieving incubators are not-for-profits. Incubation programs focused on earning profits were not strongly correlated to client success. The most important goals of top-performing incubation programs are creating jobs and fostering the entrepreneurial climate in the community, followed by diversifying the local economy, building or accelerating new industries and businesses, and attracting or retaining businesses to the host region.

7) Public sector support matters. Only three of the top- performing incubation programs studied operated without public sector support from local government agencies, economic development groups, colleges or universities, or other incubator sponsors. On average, nearly 60% of top incubator’s budgets are accounted for by client rent and service fees.

8) Incubation programs with larger budgets (both revenues and expenditures) typically outperform incubators with budget constraints. Programs with more resources have more capacity to deliver client services and are more stable. However, the sources of incubation program revenues and the ways the incubator uses these resources also are important. Incubators receiving a larger portion of revenues from rent and service fees perform better than other programs.

9) The growth or size of a host region’s economy are poor predictors of incubation program outcomes. Incubator management practices are better predictors of incubator performance than the size or growth of the region’s employment or GDP.

10) A region’s capacity to support entrepreneurship has limited effect on incubation program outcomes. Compared with incubator quality variables, regional capacity variables have less predictive power. Among regional capacity measures studied, only urbanization, work force skills, availability of locally controlled capital and higher educational attainment have moderate influence on incubator client outcomes.

Cleantech incubator-specific advice
In support of the Foresight Cleantech Accelerator I’ve been working with, I’ve recently spoken with a handful of others around the world involved with cleantech clusters, incubators and accelerators. Below are some top challenges I heard, and potential ways to mitigate them.

11) Sanity-check the services you offer. Incubator management should review the array of services provided through the incubation program and assess the effectiveness of those services periodically.

Services found by the University of Michigan (in the study previously referenced above) to be statistically significantly related to client firm performance include:

  • Providing entrepreneurial training (from business basics to comprehensive training in managing a new enterprise)
  • Offering increased access to investment capital
  • Securing strong supportive relationships with local area higher education institution(s)
  • Providing production assistance (from R&D and prototyping through to engineering production systems)
  • Developing strong mentor programs (e.g., shadow boards, loaned executives, periodic engagement with incubator managers, participation in program activities)
  • Shared administrative services and office equipment, and assistance with client presentation and business etiquette skills

But in cleantech, not all of these services may be necessary. Incubators shouldn’t feel bound to traditional concepts of what has been appropriate at other tech accelerators—even successful ones like Y Combinator. The requirements of clean and green tech companies can be different. In fact, the pivot earlier this year of high profile San Francisco green tech accelerator Greenstart to simply focus on design was apparently in direct response to client needs.

12) Don’t assume business training is business training. Some graduates of a certain energy software accelerator in Texas complain about the value of its programs, characterizing them as oil and gas executives trying to teach energy and water entrepreneurs about energy efficiency. Ensure you have relevant, credible domain experts teaching your companies.

13) Cultivate bench strength in your domain experts. Clean/green incubators lament that it’s hard for them to keep top coaches and entrepreneurs-in-residence (EIRs). The good ones apparently keep leaving to join the most promising companies they’re working with, or investment funds. Accelerators need to be constantly recruiting and developing new coaches and EIRs, interviewees cautioned.

14) Raise lots of money. An incubator needs financial support, and clients can’t be expected to contribute 100% of an organization’s requirements. Raise funds early and often. In terms of a best practice, the Research Triangle Region Cleantech Cluster (RTCC) has done a great job securing local commercial support, convincing 10 large companies with a significant local presence to each contribute $25k/year with a 3 year commitment (for a total of $75k each up front) for an advisory board seat. Supporting companies include ABB, Duke Energy, Field2Base, Power Analytics, PowerSecure International, RTI International, SAS, Schneider Electric, Sensus and Siemens.

15) Beware of incubator founders leaving, sometimes collapsing the operation. Founders of accelerators get lured away more often than one might think, one interviewee said, pointing to NREL’s CleanLaunch program. Launched with fanfare in 2011, its website is now down as of this writing after the founder left. Mitigate by ensuring the board has a succession plan for the organization’s leader, who, being human, isn’t beyond being lured to the next possible disruptive start-up him or herself.

This post was originally published here and is republished by permission.

Boeing 787 – A Cool Ride!

Last weekend, my family and I rode on a Boeing 787 Dreamliner from Houston to Chicago.  Although it was a short flight and we probably were not able to fully appreciate this plane due to the short duration of our flight, I found the 787 to be a really cool plane on many different levels.  It is because of the “cool” factors of the plane that Boeing’s 787 capacity is sold out until 2019 despite all the well publicized early issues with the plane, especially the Li-ion battery issue that kept the plane grounded for several months.

From a passenger perspective, one immediately notices the larger windows and cool blue lighting when entering the plane.  Further, if you happen to have a window seat, you will notice that there are no shades, instead the windows can be adjusted from totally clear to nearly opaque or anywhere in-between by pressing a switch.  The climate in the plane has been improved with higher cabin pressure, better filtration and more humidity to make one feel better at the end of a long flight.  The plane seems much less noisy than other passenger jets – making the passenger cabin quieter, thus more soothing.

From an airline perspective, the Dreamliner meets the long-haul service need at 20% higher fuel efficiency than the current fleet.  The long-range capability of the plane allows direct service on more than 90% of commercial routes worldwide.   Boeing 787 achieving this, while enhancing customer experience, was something to take notice.  From a global perspective, given the expected growth in aviation and jet fuel consumption becoming a significant factor in overall greenhouse gas emissions, it is worth saving every liter of fuel to keep the planet cool.

Boeing designed this plane from scratch and has applied the latest technology in every aspect of the plane design – heavy use of composites in the plane structure, state-of-the-art avionics, efficient and quieter engines, no bulb lighting, HEPA filters for recycled air – the list goes on and on.   While Boeing had a lot of issues in integrating all the systems of the plane from a far-flung network of suppliers, the result is a plane that is setting the standard for the future.  A quick look at how Airbus Industries reacted to 787 shows why.

When 787 plans were finalized and Boeing started taking early orders for the plane, Airbus’ initial reaction was to revamp its A330/340 to compete against this new threat.   I also recall reading negative comments from Airbus officials about extensive use of composites in an airframe of this size and how the new technologies Boeing was pushing were untested.  But the revamped design of A330/340 was not well received by the airline officials when Airbus tried to get them to sign on with their version of a response to 787.  Eventually a totally new A350 was announced by Airbus to compete with the Dreamliner.  While A350 is not an exact copy of Dreamliner, a comparison of the specifications of the two planes would lead one to believe that Airbus had no choice but to offer the same amenities and service parameters as the 787 to stay relevant in the long-haul point-to-point service market.  To achieve the fuel efficiency targets, Airbus resorted to using similar materials of construction as the Dreamliner, including more than 50% composites.  Once the new design of the A350 was announced, Airbus started picking up orders for the plane to make it commercially viable.

So, if you want to experience what the future aviation is going to feel like, get on a Dreamliner flight when you have a chance.

My Cleantech Journey: From California to Texas and Beyond

I have been told that blogs somehow have more importance and greater connection when written in first person. I often tire of writing “analysis pieces” that seem cold, dry, and impersonal even though they are incredibly important. I somehow have been bottling up the need to write my personal perspective on where cleantech is today and why my opinions and actions in it are as well. It pretty much comes down to this…

I dedicated my entire career since business school to helping bring technologies to market and towards the birth and growth of the clean technology. I have been incredibly fortunate to have learned from the best at MIT in how to bring ideas from lab to market and got to work alongside some of the best technologies and companies while there in learning this trade. I then got to practice this in Silicon Valley with some of the best venture capitalists, best research universities and national labs, and was motivated by my experience being stuck in NYC on 9/11 to make my priority clean technology. I was fortunate to band together with like minds to form durable organizations, policy, and funding mechanisms that popularized and accelerated the growth of cleantech. I have led an enchanted life in being one of the early innovators and actors in this sector. But it was not enough.

I have long stated that technology innovation alone was not going to solve our shift to a clean energy infrastructure. My Silicon Valley compatriots, especially the ones that could risk their limited partner’s money into an arena they had no experience investing into, thought that if they built a cleantech company, it would be adopted as widely, quickly, and capital efficiently as their semi, software, and semi investments. Unfortunately this was a naïve assumption and I quickly harkened back to my Texas roots upon realizing this. The fact was that Texas is the energy expert and energy capital and that if the energy capabilities in Texas weren’t leveraged – project capital, project development, infrastructure deployment, industrial scalability, energy trading, and energy risk management – then we would not have sufficient expertise or capital to make this transition. So, I went back to Texas to see if I could bridge this divide. My tagline became “If Texas becomes a renewable energy state, then there’s hope for the planet.” So if we can show traditional energy companies and investors how to make money in new energy, they would move more of their money and expertise there.

I was well on my way to doing this when I took a side trip to Colorado with the invitation of Kleiner Perkins to be their Entrepreneur in Residence at the National Renewable Energy Laboratory. What I found at KPCB were the excesses of the Silicon Valley that I was trying to shift away from. It was a portfolio that had limited prospects for success and an attitude that “Texas doesn’t matter” – that (before the economic downturn) there would be so much follow-on capital that the masters of Silicon Valley alone could re-make the energy marketplace. At NREL on the other hand, there was tremendous resistance to want to commercialize technologies. I found there that indeed there were a tremendous set of incremental innovations that could lower the cost of renewables, but these should be broadly licensed to industry (an quickly and freely) in order to bring down their costs. There was a limited set of “disruptive” innovations that were potential game-changers in the energy marketplace, but needed 5-15 years each to mature to a point of being competitive. There were no venture capital firms at that time, including my employer at the time, that were organized and capitalized to invest into the long haul for these applications.

What to do? To fill the gap, I intended to set up a firm that crossed the divide between innovation and deployment, between California and Texas, leveraging maturation centers like NREL, Pecan Street Project, and others to accelerate demonstration and deployment. Unfortunately, we hit the market window at the worst time possible and I faced a divorce in the process. Therefore, this fund never came into existence. The beauty in this is self-reflection. For those of you who have been given the opportunity to completely re-evaluate everything in life through a traumatic life event, I found clarity, beauty, focus, and realization…

My realization was this: Technology investing alone was not going to turn the corner on averting climate catastrophe. What was needed were more large scale economic demonstrations that renewables are more cost effective today than coal, gas, or nuclear energy. I was fortunately invited by a friend and one of the architects of the Pickens Renewable Energy Plan to form a new renewable energy development firm called Brightman Energy. We quickly modeled and demonstrated that a fully-depreciated coal plant in Texas could be replaced at a lower cost (and with greater long term price stability) with a well-designed, geographically dispersed renewable energy portfolio. This also led me to realize that renewables should be the baseload energy of choice in almost any geography in the US with natural gas providing the balancing or storage mechanism (at least until DSM, efficiency, and other storage solutions became cost effective with natural gas). I also realized that Texas is the deregulated market of choice to demonstrate and scale these solutions – with the most advanced nodal market, transmission infrastructure, system wide preference for generation efficiency, efficient renewable energy trading market, and its own grid, Texas had already created the ideal market for renewables and had already become the largest renewable market in the US.

So where do I go from here? With Brightman, we are building the case and project portfolio for integrated renewable deployment at a scale that can replace coal or natural gas plants (or could take advantage of the latter in order to balance increasing levels of renewables). At the same time, I continue to look at other scalable business models, financial models, and deployment models that will accelerate renewable energy and clean technology deployment – things that will take huge slugs out of our carbon emissions and hopefully avert climate catastrophe. And, yes, I still love disruptive technology – I continue to watch the ones that I think will make the greatest difference on the planet, because they will and they will replace the first generation of massive renewable deployment at an even lower cost more pervasively.

Happy Independence Day!

Happy Independence Day, America!

As United States gets ready to celebrate it’s 237th Birthday, a lot of us will travel this weekend to places near and far.  Perhaps Independence Day is also a good time to reflect on the energy independence for America, especially the energy for our transportation needs.

Imported liquid fuels, either in the form of raw crude or refined products, have provided a bulk of our transportation needs for the last nearly hundred years.  There are many changes taking place now that have the potential of changing this scenario in the next 10-15 years.  While increased domestic production of oil and gas has been much talked about and projected to be the key in making US energy independent, I would argue that other developments, that are still being scorned as waste of effort by some, will turn out to be just as important in us becoming energy independent as the increased production of fossil fuels.

Solar and wind power generation are still a drop in the bucket of our electricity generation pool.  But, both these continue to grow rapidly as the costs continue to drop, technology becomes more mature and suitable infra-structure gets built.  Solar panel costs have dropped nearly ten-fold in the last few years and wind power generation costs are now nearly in line with other commercial power generation technologies.  Progress is still being made in bringing the costs down further and new power capacity based on these renewable technologies continues to come on line.  Some independent studies now suggest that solar and wind power could provide high single digit percentage of nation’s electricity in 15-20 years.  It looks more and more plausible solar and wind power will not need the subsidies that fueled their early growth in not too distant future.

Combining the generation of renewable electricity with electrification of vehicular transportation will really put a dent on the liquid fuels demand.  While EV and PHEV sales are still tiny, they continue to grow at a rapid pace.  Last month, nearly 7000 Tesla, Chevy Volt and Nissan Leaf were sold in the US.  At this pace, 100,000 EV and PHEV sales per year in the US seem just around the corner.  Someone could argue that these sales are partially driven by federal tax credits and these vehicles will not be viable on their own.  I remember similar murmurings about Toyota Prius just a few years ago when Prius was being subsidized by tax credits.  Toyota clearly has shown us that they don’t need the federal subsidies anymore and Prius is now as ubiquitous as any other Toyota model.  Tesla is attracting customers to its Model S sedan not because of tax breaks, but because it is a really great car that is also electric.  The build-out of charging infra-structure to alleviate range anxiety continues to grow at a steady pace.  Tesla’s quick battery replacement technology announcement for occasional need will further alleviate the range issue.  As the costs of designing and building these cars continue to come down and automobile manufacturers learn to design and build more appealing EVs and PHEVs, I am confident that they will likely follow growth curves similar to that of Prius.  Thus, the electrification of US automobile fleet will become increasingly important in reducing our dependence of imported liquid fuels.

Overall, I feel great about the prospects our energy independence because of many developments that are happening across the entire energy value chain.  It is time indeed to celebrate our independence.  Happy 4th of July, everyone!