Investors and Entrepreneurs Keep an Eye on Both Bottom Lines
By Karina Lutz
In an effort to better network socially responsible investors and sustainable energy businesses, the Investor’s Circle and NESEA have exchanged sponsorships of each other’s conferences. Investors' Circle is nonprofit national network of angel investors, professional venture capitalists, foundations, and NGOs.
The Investors’ Circle’s national conference, themed "Energy for a Sustainable Future," was held October 27-29, 2002 in Cambridge, Mass. At the conference, selected entrepreneurs presented their business plans to the Investors’ Circle network. Other sessions more generally educated the network about the lay of the land in sustainable energy.
The Double Bottom Line
Angel investors are individuals who invest directly in privately or publicly held emerging companies, and they usually get actively involved in the companies they fund. The philanthropic organizations involved in Investors’ Circle include those that want their endowments’ investments, as well as their grants, to work toward their missions. "The Investors’ Circle," said Chairman and CEO Woody Tasch, "is investors who want a double bottom line, bringing in what we like to call ‘external rate of return’ as well as an internal rate of return."
An introductory session at the conference by Robert W. Shaw, President of Aretê Corporation, manager of the Micro-Generation Technology Fund, covered the fundamentals. Shaw introduced the numbers-friendly crowd to the scale of kilowatt-hours, BTUs, gallons, and hundred-cubic feet of various fuels, and the average competitive prices for their generation. Going back to basics in this way revealed how much education energy entrepreneurs and investment advisors have to do to properly inform potential investors.
After demonstrating how a solar-powered fuel cell generates hydrogen from water and then generates electricity from the hydrogen in a closed loop, Shaw said, "The technology we need to do what needs to be done exists. We just have to refine, reduce the cost, and mass produce." Shaw made this pitch: "Everything is here to create a sustainable energy economy. [The companies] need the money to grow. It’s a difficult time for energy ventures as it is for most of the economy, but it’s the best time to invest because the values are great. The value proposition is fantastic."
Kenneth Locklin, the EIF Group’s Partner responsible for clean energy investment interests and new product development, moderated a panel of CEOs whose companies have recently been capitalized, including NESEA members Northern Power Systems and Evergreen Solar. Sandy Thomas, the president of H2Gen, a hydrogen generation company, said the time is ripe for a transition to a hydrogen economy. Already, he said, "it is less costly to make hydrogen from natural gas than to make gasoline from petroleum."
In other good news, renewable energy expert Scott Sklar announced, "Two hundred utilities are offering a green [electricity] product in the US. The green market is small but it is happening."
At the plenary, Amory Lovins of the Rocky Mountain Institute reminded the crowd that "the stone age didn’t end because they ran out of stones." He urged listeners to think creatively about energy efficiency measures and new energy technologies in order to consider and capture a wide range of economic benefits. He has recently calculated the benefits of distributed energy—such as site-based renewable energy and fuel cells—as ten times those of the dominant, centralized system (details can be seen at www.smallisprofitable.org).
Defensible Niches for Sustainable Businesses
Ray Anderson, Chairman and CEO of Interface, the carpet manufacturer, told the inspiring story of his conversion from an average businessman to a leader in sustainable business, as chronicled in his book, Mid-Course Correction. Echoing the goals of socially responsible investors, he spoke of the "double-bottom line" of financial returns and social/environmental returns. He has charted a course towards reducing his company’s environmental impact to zero. Along the way, "what was the right thing to do turned out to be the smart thing to do," because it has been profitable to reduce waste and close resource loops. He warned, however, that "being sustainable doesn’t insulate you from the vicissitudes of the economy." In the recent downturn, his company had 25% lower sales. But on the positive side, they increased market share because of the added value of their recycled products. "Doing well by doing good is here to stay, it’s in our DNA," Anderson concluded.
As Anderson suggested, sustainable energy businesses cannot guarantee ever-increasing sales and they must develop smart business plans. For example, during the past decades, while solar advocates longed for big companies to invest in mass production of photovoltaics, smaller companies developed and started to grow. But now that large corporations are entering the industry, the stalwart companies that have been in the trenches for years have to be nimble in order to survive. "Kyocera, Shell, BP, Sanyo, and Sharp—our competitors—are so much bigger; we need to have defensible niches," said Evergreen Solar President and CEO Mark Farber.
Clint "Jito" Coleman, President and CEO of Northern Power Systems agreed. "This is a niche business. You have to find your market and work it really hard." And investors need to be in for the long term. "We’re running a marathon, not a sprint," said Coleman.
NESEA at the Conference
As sponsors of the Investors’ Circle conference, NESEA distributed copies of our Sustainable Yellow Pages to attendees, giving investors a guide to our business, professional, and corporate members in the Northeast, and postcards inviting them to the Building Energy Conference March 12-15. As sponsors of that conference, Investors’ Circle will staff a booth at the trade show, further increasing connections between the groups. Also at the conference, Locklin will chair "Using Investment and Finance to Advance Renewables," featuring Investors’ Circle mainstay William Osborn of Commons Capital, Robert L. Pratt of the Massachusetts Technology Collaborative, and Eric A. Prouty of Adams Harkness & Hill.
NESEA’s volunteer Development Committee in 2001 recommended to our Board of Directors that NESEA pursue socially responsible investors as an audience for our educational and networking efforts. Socially responsible investors, we felt, were a natural group to include in the NESEA community, as their efforts to "do well while doing good" are aligned with our business members’ goals. It is in that spirit that we reached out to the Investors’ Circle. Now, as Randy Swisher, Executive Director of the American Wind Power Association, said at the conference, we’re "glad to be in a room where people know that changing the world is really about changing the flow of capital."
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