Of all the ideas I heard at the Cleantech Forum 2015, one concept is sticking with me: The very name of the conference belies a transition taking place among “cleantech” companies to position themselves within more appropriate competitive sets as their technologies mature from testing to scaled deployment.
Companies formerly promoted as cleantech are finding new ways to get funding by repositioning the core value of their product or service. In 2003, for example, a company could attract money for being a solar company, period. Things are different in 2015.
I’ve captured below my conversation about this topic with Bryan Birsic, co-founder and CEO of Wunder, a financial tech company that happens to serve the solar market. That descriptor will make sense as you read through the Q&A with Bryan below, edited for brevity:
Q: During a panel discussion at the Forum, you said that Wunder has achieved financial and operational benefits because you positioned the company as a financial technology company with solar customers. Why not position yourself as a solar or cleantech company with investors?
A: Investors remember the cleantech wave of 2005 to 2009 – this hype cycle was like the IT investment cycle – there was a first wave of market progression in which the cost per value of hardware went down. For IT, this wave was roughly 1995 to 1999 when investors were placing a bet on technology, not the marketplace. Those types of investments are very capital intensive – going from lab to commercial scale. It could involve building a $50-100 million manufacturing facility, and that’s before you figured out if it could scale. This tends to be a winner-takes-all market in which cost advantages go to the top player.
I’m attracting investment for applications built on top of what is now cheap hardware – solar panels – thanks to thousands of lab experiments out of Massachusetts Institute of Technology and other labs.
The next wave of cleantech investment will be everything that’s not hardware. For solar, its software focused on things like customer acquisition, procurement and financing. Tech investors understand the dynamics of an IT investment – that’s stuff they’ve been doing well since 2005 – essentially financing nothing more than labor in a capital-efficient environment.
Q: So how did you position yourself?
A: I realized quickly ‘another comp!’ [competitive set] would benefit us more than the cleantech label. ‘Fintech’ [financial technology] provided the pattern recognition we needed, much like successful companies like Lending Club and Deck Capital.
Q: But don’t they still have uncertainty or doubt around the solar part of your business?
A: Let’s say the solar market is not as exciting as I am quite convinced it will be; the underlying platform we’re building can be used for energy efficiency or a variety of other markets. The underlying value and IP would have applications elsewhere. Still, investors do need to get comfortable with the market size and future prospects. With East Coast investors, the trick is finding one who takes the time to get comfortable with the solar market, which is often new to them. West Coast investors know solar – of course – and that’s a very different challenge given the scar tissue from previous solar investments in Silicon Valley.
Q: How do you square being a financial tech company and a solar company at once?
A: We have internal and external ways of understanding our company. If externally we feel the need to sometimes downplay the idealism and play up financials with investors, we still recharge the idealistic juices with stakeholders that value our mission – namely employees and potential hires. That said, investors are getting more comfortable with idealistic investing, as evidenced by B-corps and other social investing structures gaining popularity. I truly believe that investors benefit by our idealism – the shared mission creates advantages in hiring and marketing that investors increasingly see creates objective advantages in backing a company of that stripe.
Even amongst investors in our fund products I adjust the way I talk about impact investing. At the end of the day, I want to appeal to the Greenpeace activist and the financial income investor.
Q: Where does that leave the term ‘cleantech’?
A: Cleantech lost value as a term because we put too much under the umbrella – such fundamentally different technologies as energy efficiency, biofuels and solar. As markets matured, these technologies are being bucketed differently. Today cleantech lacks descriptive value and that’s not helpful with an investor.
The application you bring is more important than the market you serve.
Cleantech was once attractive to investors because there is a certain amount of pattern recognition with vocabulary like that, especially when you’re working in areas that have very little hard information and are all based on five to 10-year technology projections. But we’re in the post-hyper Gartner “trough” now.
I believe both the IT and the cleantech hype cycle were absolutely critical in developing those markets. We can make investments today based on mature deployment.
Q: Did this approach work for you?
A: We were the first solar company accepted by Techstars, and I believe one of the reasons is positioning our company as the financial tech market. We also closed a seed round, led by general tech investors Launch Capital and Techstars ventures, as a result. Finally, this positioning provides us very helpful expertise from other financial technology companies like Lending Club and AngelList.
Despite any positioning challenges with various stakeholders, we’re committed to being authentic to our company’s mission. Every company is a software company, in some respects, and we’re bringing software to the space we feel most passionately about. Every market will be seeing meaningful technology penetration or see the incumbents undercut by software companies.
Joey Marquart is a senior vice president, Technology in San Francisco.
