For the last few months my inbox has been filled with chatter about the stimulus bill and how those of us in sustainable business circles can take advantage of it. At last week’s Clean Tech Forum, entire panels were dedicated to discussing the implications of the stimulus bill for clean tech investors and entrepreneurs. Everyone wants to know if the stimulus bill will provide funding for clean tech projects, and if so, how they can get their hands on it.
This line of thinking only makes sense. Free-flowing money represents a light at the end of the tunnel in bleak economic times. For aspiring entrepreneurs, the possibility of receiving start-up funding from the government seems like a no-brainer: why wouldn’t I do everything in my power to gear my projects toward those that make me eligible for free money? Here’s why:
1. The funding wave is a one shot deal. If your business model isn’t viable without the stimulus money, it ain’t viable with the stimulus money. Unless the clean tech sector will be receiving agriculture and oil grade subsidies for years to come, money that is available to you now will not be available to you in the future. Without long term support to prop up an unsustainable business model, your company will experience fast growth, a fast burn rate, and a fast death.
2. Political will is too flakey to count on. Even if we expect future economic stimulus from the Obama administration for the clean tech sector, these funds can dry up with the snap of a finger or the flip of a party. Do you want to be in a business that is only sustainable when politicians make it so? As Michael L. Goguen of Sequoia Capital put it, “It’s easy to get deluded into thinking your business is viable because you get a big subsidy. If the Administration changes, you’re screwed.”
3. VCs still want to fund to viable businesses regardless of stimulus funding funding.
The Venture Capitalists who were talking about the stimulus bill at the Clean Tech Forum all agreed that it did not really change their vision of what made a company fund-able. Chuck McDermott of Rockport Capital Partners was dubious about whether the government bodies who will be managing the funds even have a sufficient understanding of innovation and market forces to take advantage of the truly disruptive technologies that can get us out of this mess. Jeff Leonard of the Global Environment Fund mentioned that VCs needed to circle back and “return to an era where price matters, where burn rates matter,” but said he was not overly focused on projects that would qualify for stimulus funding. Finally, as Vinod Khosla put it in the Financial Times a few months back, The environmentalists ” ‘tend to get romantic about specific solutions that aren’t practical from a business point of view.’ He advocates solar, wind and biofuel technologies and argues that money should go only to technologies that can stand on their own feet within five to seven years.” Stimulus funding will not make or break a viable company with a scalable model.
Of course, temporary start-up costs can be allayed with the support of generous Uncle Sam, and would-be entrepreneurs with solid business models in-hand should certainly get funds wherever they can find them. But, you time is better spent on making your business model airtight then on researching sources of stimulus money.
Readers: what do you think? Are you changing your businesses to meet demands that will be present as a result of the stimulus bill?