Green technology has come a long way since your neighbor first caused a stir with his new Prius and the solar panels on his roof. What was once considered cool and cutting-edge hasn't taken off the way experts predicted—and green advocates hoped—it would.
Whether you blame it on the recession, inexpensive Chinese solar products or the excruciatingly long time frame that such intensive ventures require to scale and become profitable, the fact is, Green Tech 1.0 was a colossal disappointment.
But as Green Tech 1.0 flounders and venture capitalists watch investments in traditional, renewable energy-related ventures tank, there's a new kid on the block that's making inroads in the environmentally sustainable industry. Say hello to Green Tech (or Clean Tech, if you like) 2.0. The green industry has reemerged, taking new forms in businesses that focus less on capital-intensive projects and more on products and services that consumers can wrap their heads around and actually use.
Increasingly, the green tech space is being re-imagined and redefined by entrepreneurs in a variety of sectors, many of whom are taking a broader view of what’s green and how the fruits of their labor may have a lasting, long-term impact. Surprisingly, it’s often not the “green” factor that sells these new offerings: The magic happens when products or services that are novel, cool and beautiful just happen to also be solving some very big problems.
Get Your Green Game On
Sure, we should all be interested in conserving energy, if only for the few extra dollars it might save us on our monthly utility bills. But Yoav Lurie and Justin Segall, the co-founders of Boulder-based Simple Energy, found that when trying to fix “the broken relationship between people and their energy consumption,” should was not a word that would effectively change consumers' behavior. So they set out to add a fun, social element to their mission.
Simple Energy, a Web-based, energy-saving game platform, joined forces with big U.S. utility companies to incentivize customers to play games with their friends (there’s a Facebook interface). Participants compete to save energy by turning off lights or dialing down the thermostat, for instance, and the platform shows them how they’re doing in comparison to their friends, neighbors or other consumers in their market. Those at the top of the leader board win prizes or gift certificates from local and national companies. And, yes, they also see the impact their efforts are having on their utility bills. Lurie and Segall say users save an average of 20 percent on their monthly bills, but top performers can cut their bills in half.
Like many Green Tech 2.0 companies, Simple Energy is essentially a software company, and its data-driven SaaS platform is attractive to utility companies, which are required by regulators to educate and incentivize customers to save energy. Lurie says the company recently landed a $6 million series B round of capital from Westly Group and is about to announce an expansion deal with Canadian utilities. While the short-term goal is to get more consumers playing games and saving money, the end game is to get more than 100 coal-fired power plants off the grid entirely. Lurie and Segall are well aware that most consumers won’t care about that, but caring is secondary, they say; motivating people to act is what counts.
Data Is King
“The world has figured out that you don’t need to just build a hardware company [to be successful],” says Bilal Zuberi, a partner at venture capital firm Lux Capital. “Instead, you can build hardware that allows a data revolution to take place, then build a subscription service that people pay you for. It’s a very interesting business model.”
Lux’s portfolio includes such a company: Planet Labs is a microsatellite business that can take a high-resolution, full image of the entire earth once a day. Zuberi says the data the company collects could provide farmers, via subscription, with a bird’s-eye view of their crops, making it easier to detect such issues as fast-spreading disease or flooding zones. Also in the Lux portfolio is CyPhy Works, launched by iRobot co-founder Helen Greiner. CyPhy Works is a robotics startup whose unmanned aerial vehicles will be able to monitor oil rigs, pipelines and tankers to detect potential problems before they become major environmental disasters.
Dillon McDonald, a founding partner at Greenstart, a venture design studio for green startups, is convinced that green tech-related software “is transforming some very big industries.” For instance, one of Greenstart’s portfolio companies, Genability, works with solar developers, connected home and appliance companies, electric vehicle firms and “anyone who wants to bake energy savings into their product,” Genability founder Jason Riley says. His company’s big value proposition is a database that tracks the rate plans of 95 percent of U.S. utilities in addition to those in parts of Mexico and Canada.
Utility companies can use Genability's data for a variety of reasons. A solar company, for instance, might use the company's data to calculate for a potential customer just how much they’re currently spending on energy and how much they’re likely to save by switching to solar power.
“For a lot of the country, the economics of solar have vastly improved over the past two to three years,” Riley says. “But it’s still very circumstance-specific. There are 3,500 utilities in the U.S. that have a lot of rate plans. We’ve built a lot of sophistication around gathering that data.” While 60 percent of Genability’s clients are in the solar industry, the company also works with businesses like Whirlpool that make energy-efficient appliances and with electric vehicle makers to help them educate consumers.
Less Is More
As technology develops, consumers are becoming more and more green-savvy and seem to be particularly receptive to hopping on the bandwagon when there’s a social element involved. Witness the trendy world of collaborative consumption, which has spawned a multitude of startups. The granddaddy of them all, Airbnb, now has a market valuation of approximately $10 billion.
Whether we’re sharing cars (Getaround), scooters (Scoot) or kids’ clothing (Swap), the primary idea is the same: By sharing what we already have, we all buy and consume less, saving money and, at the same time, doing our part to save the planet by reducing the amount of power, water and fuel that goes into making and moving products. Plus, participants get the added feel-good of being in virtuous community.
“One of the big uses of energy comes from making new stuff,” Greenstart’s Dillon McDonald says. His company has invested in Yerdle, a San Francisco-based marketplace for free, used goods whose CEO, Andy Ruben, wants to take a 25 percent chunk out of the global retail supply chain. It’s an unusual goal for a guy who used to be a senior executive at Walmart.
“We’re not saying consume less,” Ruben says. “We’re saying consume better. Just because your daughter is playing soccer doesn’t mean she needs new shin guards; she just needs shin guards.”
And there's a twist that Yerdle has implemented: It doesn’t operate with traditional currency. Instead, it uses its own virtual currency, awarded to users when they first sign up (250 credits), or when they post an item that’s up for grabs. Users bid on items or, as on eBay, opt to “buy it now.” Purchasers pay a flat fee for shipping, and Yerdle generates the shipping labels for senders. To earn revenue, Ruben says, Yerdle may at some point sell credits, such as airlines sell miles, or charge commissions. “We have patient investors who believe in the mission,” Ruben says. “To have impact, you’ve got to have scale.”
Trash Into Treasure
If anyone knows about scaling a green business, it’s Tom Szaky, founder of TerraCycle in Trenton, New Jersay. Szaky launched the company in 2001, with a plant fertilizer made entirely from waste. That initial product—a concoction of worm waste packaged in reused bottles and spray tops—was a hit. TerraCycle now makes hundreds of upcycled and recycled products, sourced from a variety of waste streams, from juice pouches (upcycled into bags and backpacks) to cigarette butts (recycled into plastic shipping pallets and railroad ties).
“We’ve diverted 2.7 billion units of waste,” the company's vice president of communications, Albe Zakes, says. The company’s big goal, Zakes adds, is to “eliminate the idea of waste” by breaking down both the physical limitations and the preconceptions of what can and can’t be reused or recycled. But TerraCycle couldn’t do any of that without an army of corporate partners.
The company’s business model relies on more than 100 brands that sponsor the collection of waste to be recycled or upcycled. For instance, Newell Rubbermaid sponsors the collection of used writing instruments, which TerraCycle then turns into plastic that Newell Rubbermaid buys back and uses to make office products such as whiteboards and marker casings. Not-for-profit organizations or schools can set up collection areas and earn two cents for every unit of waste. The corporate sponsor foots the bill for that as well.
TerraCycle also manufactures its own products using waste that’s collected at approximately 150,000 sites worldwide. E-waste is transformed into plastic pots, bicycle chains become picture frames, and Doritos bags are turned into portable speakers. And, Zakes says, “We’re the only company in the world licensed by the U.S. Postal Service to use their mail sacks to make messenger bags, tote bags and iPad cases.”
Zakes estimates that TerraCycle has prevented more than 150,000 tons of waste from going into landfills. At the same time, he says, "we're reaching kids who'll be inspired to be the next generation of eco activists and eco entrepreneurs.” Lofty goals aside, consider that TerraCycle’s business model transforms a major manufacturing expense—sourcing and purchasing raw materials—into both a revenue-generating mechanism for worthy organizations, and a way for big corporations to play the green card.
The bottom line: TerraCycle’s upcycled and recycled products can be made and sold at consumer-friendly prices, making them attractive for mass retailers like Target and Home Depot, and the value-conscious consumers who shop there.
The Green in Your Wallet
Entrepreneurs in the green tech space understand that putting an environmental spin on a product or service isn’t enough—customers typically aren’t willing to sacrifice value for environmental impact. That’s why Tod Hynes, the founder of Boston-based XL Hybrids, felt the time was right to launch his company when the price of oil skyrocketed to $100 a barrel.
“I was involved with an energy startup after I graduated from MIT,” Hynes recalls. “But oil was $20 a barrel then and no one cared about energy. Now if you want a great opportunity, look at competing with oil.”
And that’s exactly what Hynes is doing. He and his team developed a hybrid electric power train that could be retrofitted onto existing fleets of gas-guzzling small trucks and vans to make them more fuel-efficient. “We started with the customers,” he says, “asking who would benefit the most and save the most money." The answer: small fleets with vehicles that log more than 20,000 miles per year on non-highway roads, since the hybrid system captures energy when drivers put on the brakes.
“We can get our customers 21 percent reduction in fuel consumption and 21 percent reduction in CO2 emissions on the EPA city drive cycle,” Hynes says. Although a conversion costs $8,000 to $9,000 per vehicle, Hynes says many customers who qualify for five-year financing find that the technology saves them enough in fuel to cover the cost of the lease. “We really pitch an economic way of reducing fuel consumption,” Hynes says.
With big customer such as FedEx and Coca-Cola, Hynes says that XL Hybrids expects triple digit growth this year. "The automotive industry is definitely challenging,” he says. “But if you have good fundamentals and a business model that can scale, it’s a tremendous opportunity.”
That’s probably a pretty good mantra for most entrepreneurs seeking to stake a claim in the new world of Green Tech 2.0.
Read more articles on startups.
Photos: Getty Images, Simple Energy, Yerdle, Christopher Crane, Airbnb, Genability, TerraCycle, XL Hybrids