The Cleantech Open – A Bridge over the Valley of Death?

Ed Note: This is the second in a handful of guest posts we felt worth publishing on behalf of Chevron. Although we have mixed feelings about many aspects of the oil industry, Chevron’s sponsorship of today’s cleantech open speaks to their willingness to enter into a productive dialog with entrepreneurs building a new energy economy.

By Jim Davis, President, Chevron Energy Solution

The “Valley of Death” is a well known concept in the business startup and technology community. It’s the place where good ideas go to die. If small businesses are the lifeblood of economic growth and job creation, entrepreneurs and startup companies are the marrow. While the entrepreneurial path has never been easy, it has become even tougher in today’s economic climate.

Let me give you an example of the challenges for clean technology entrepreneurs that I see every day. In a business such as ours, which is “technology agnostic” in the sense that we aren’t tied to any one manufacturer or product, innovation and access to new technology are critical success factors.

However, there is a real tension here because customers also want proven energy efficiency and renewable power technologies. Because the performance of our projects is guaranteed, we have to be certain that every piece of technology we install will still be doing what it is supposed to in 10 or 15 years time. So when a fledgling company comes to me with a new product, I have to ask myself two questions. First, is this technology ready for market and second will this company be around in the years ahead to support its product.

Therein lies the rub for a startup company, and it’s the same for clean technology as it is in other industry sectors – how to navigate the chasm between that initial bright idea and becoming a viable, sustainable company? How do you keep the cash coming in and demonstrate your product can work while you wait for the customer base to grow?

And that gap is becoming ever more difficult to bridge. As Russell Hancock of the Joint Venture Valley Network pointed out in the 2010 Silicon Valley Index, VC money is becoming harder to come by, there is  a dearth of IPO’s,  funding for university research is drying up and talent is moving out of the U.S. to fast growing countries like India and China. So how can you find the dollars needed to move technologies beyond the lab bench into patenting, proof of concept, and on to commercialization?

Let me introduce you to the Cleantech Open, which kicked off this week with the launch of its national competition. This competition is a powerful catalyst for the entrepreneur and it has created a model that warrants wider interest. Now the world’s largest clean technology business startup competition (full disclosure here – we are a Global Partner of the Cleantech Open), the Cleantech Open has an inspiring track record of success with around 80 per cent of alumni companies still going strong. From what I can tell, the secret of its success is that it was created by entrepreneurs for entrepreneurs, so they understand three critical things; a good idea is not the same as a good business; Ideas, research, investors and commercial entities need an efficient network; and success depends on smart execution.

Each year hundreds of hopefuls enter the competition ranging from the lone inventor working in a garage to a startup company that has received less than $500,000 in initial funding. At the end of the year, having received pitch training, mentoring and business development support, the best startups progress to the finals. The Cleantech Open has set a goal of creating 100,000 clean technology jobs by 2015, which in a time when job creation is at a premium is a laudable target. However given its rate of expansion you wouldn’t discount the idea. In its fifth year, the Cleantech Open has outgrown its Silicon Valley roots to take in other innovation hubs in the U.S. including the Pacific North West, Rocky Mountain, North Central and North East regions.  It is also running a business ideas competition internationally through a partnership with the Kaufman Foundation.

Here’s what the Cleantech Open does really well:

  • Builds alumni angel networks
  • Help startups understand the fundamentals of how to market themselves
  • Provides a focal point for federal and state research dollars
  • Matches ideas with money through  ‘first-look’ investor forums
  • Links new technologies with companies that can provide proof of concept or even become customers

The importance of such networks to the startups navigating the “Valley” has been recognized by others in this space, notably Andy Hargadon, founding director of the Energy Efficiency Center and the Center for Entrepreneurship at UC Davis. His premise is that it’s not the idea that is the precious commodity, but rather the ability or resource to get it done. So if you want more innovation, focus on getting people the networks they need to drive their best ideas forward. It is his belief that in the right conditions these self-assemble into networks around promising ideas and innovators. But he also stresses that networks not only dramatically increase the likelihood that good ideas will become great, but as equally important, that bad ideas will quickly be recognized and reworked or abandoned, meaning that less times and money is wasted.

As a nonprofit, the Cleantech Open competition relies on volunteerism to help run its workshops and business clinics and act as mentors and judges. And it works because they have created a community that thrives on the exchange of ideas and thinking, challenging assumptions and pushing boundaries. And yes, there is mutual self interest at work here.  This is about access to innovative technology and the money to fund them.  For me, this is an efficient way of leveraging research and investment money, whether it be from the public or private sector. It is smart dollars at work for an economically sustainable future.

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