Last month, I had the opportunity to travel to Minneapolis to attend the University of Minnesota Technology Commercialization Office Business Advisory Group, meet with one of CET’s great partners, Clean Energy Economy Minnesota, and participate in an event on clean energy startup business models at the University of Minnesota’s Carlson School of Management. The event, Making Sustainability Pay, featured a panel of startups in the cleantech ecosystem, along with me.
I provided some remarks on Clean Energy Trust’s approach to investing, what we look for in businesses, and some of the sector trends we see. At the end of the event, we distilled a few key areas entrepreneurs should consider as they are just starting out on their journey and contemplating the launch of a cleantech business, which I’m sharing with you below.
Is there a real need for this new product or service? What is the actual pain point that you are solving for? “Climate change” and “waste” are examples of societal problems, not pain points.
Crucially, extensive discovery research should not wait until you have perfected your new technology – it needs to happen beforehand. Many entrepreneurs – even smart ones who have MBAs – waste their time designing and perfecting a product without first checking to see if there’s a customer for this product.
To do that, engage with potential customers and provide tangible information on what and how your product would provide value – make it easy for them to give you feedback. One thing you’ll want to understand is not just whether someone thinks your idea is good or bad, but how they would actually go about acquiring the product if they liked it – what does the purchasing process for them? How many of your product would they buy, and how long would that take? Where could this process get derailed? And what are the practical substitutes for your product?
Finally, ask yourself (and ask others) whether this is a business enabled by innovative technology, or an innovative technology marketed as a business (hint – it should be the first one).
University centers for technology commercialization and entrepreneurship have extensive resources to help you on your path – be sure to leverage those resources if you’re affiliated with a university. Many student business plan competitions also exist for student entrepreneurs, like CET’s Cleantech University Prize competition.
Track down well-regarded accelerators and incubators as well – many can add a lot of value. However, if the program is asking for something in return, make sure you understand what the ask is before you commit.
Many entrepreneurs think they are required to raise funding from venture capital firms as soon as they have established their business, but there different paths and many different types of investors, from university affiliated funds, to angel investors, to state-run programs, to traditional venture firms. You should engage potential investors early, and understand what their expectations are. Many investors also want to see that you can do a lot with a little, so showing that you’ve made substantive progress with funds you received from a business plan competition or accelerator can be valuable.
Also, raising money is more time consuming and takes much longer than entrepreneurs expect – even if they are good at it. Don’t procrastinate when it comes to talking to investors. After all, no one is going to agree to invest in your business the first time you talk to them, and you’re likely to get excellent feedback from investors – whether or not they are interested in the deal themselves.
The Journey Ahead
Pursuing a cleantech venture can be a long and exciting journey – the famous proverb, “a journey of a thousand miles begins with a single step” definitely applies here. It is definitely important to get started; however, by conducting customer discovery, leveraging available resources, and learning from your interactions with investors, you can make sure the steps you are taking are in the right direction. After all, no one likes to find out they were headed down the wrong path!