Why is it Harder to be a Cleantech Entrepreneur?
PASADENA, CA – November 21, 2014
With the launch of the First Look West (FLoW) 2.0 competition, the difficult question of how to become a successful cleantech entrepreneur is being addressed. The cleantech business plan competition covering the Western Region of the United States, is run by the Resnick Sustainability Institute at Caltech and is co-sponsored by the U.S. Department of Energy (DOE), Caltech’s Resnick Sustainability Institute, and others.
“The usual model for university spin-outs relies on a ‘learn as you go’ approach to business creation,” said Neil Fromer, Executive Director of the Resnick Sustainability Institute at Caltech. “However, even for this vibrant pool of creative thinkers, the challenges in cleantech are too formidable for this approach.”
There are a few key reasons that cleantech companies are so hard to start:
- Businesses built on difficult and complex technologies require capital investments—often 10–100 times more than other start-ups to scale up. They often combine new technology with sophisticated manufacturing, are expensive and quite difficult.
- Developing a viable business model is a complicated matter when dealing with markets that may be futuristic and unknown. With new ideas, it’s not always easy to predict the ways the market will adopt and evolve them.
- Becoming an entrepreneur in any field takes patience, persistence and, often, some luck. There is little immediate gratification in the cleantech business. Unlike today’s software based businesses, a cleantech entrepreneur needs to have a long term time horizon, endurance, and tenacity.
- The disciplines that engineers, and particularly scientists, are taught—learning by understanding the rules of the universe –can often be exactly the wrong approach for starting and maintaining momentum of a nimble and market-responsive company.This can make working through the unpredictable nature of start-ups challenging.
The FLoW program has seen that the odds can be shortened by paying attention to the three core “C’s” that prevent technology innovators from becoming entrepreneurs, says Stephanie Yanchinski, Executive Director of FLoW. These are culture, connections and cash. “Managing the three C’s effectively addresses the problem fundamental to starting any business”, she stresses, “understanding and mitigating risk –risk to potential partners and investors and as important and risk to the first time entrepreneur”. Applications for the program are now open.