The Energy Startup Conundrum
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The Energy Startup Conundrum
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Re: The Energy Startup Conundrum
#2It sounds like the problem Fong faces is that the industry she wants to work in is very capital-intensive. In that case, does the startup/VC/equity model make sense? Wouldn't it make more sense to be attached to a large company with big balance sheets, access to debt markets, and a good credit rating to get this large capital expenditure funded? (Without having any first-hand knowledge of these places, I'm sort of thinking of places like Google X or Bell Labs.)
Perhaps the issue is a lack of corporate/financial structures that allow people who want to work in capital-intensive industries to enjoy some of the nice aspects of working at a small startup: casual atmosphere, lack of corporate hierarchy, openness to change and innovation. I don't know whether that's something that can be wholly remedied - you can't be "move fast break stuff" when you're building something like a bridge. But I'm not convinced that the usual "startup" model is the best way here.
Re: The Energy Startup Conundrum
#3It sounds like the problem Fong faces is that the industry she wants to work in is very capital-intensive. In that case, does the startup/VC/equity model make sense? Wouldn't it make more sense to be attached to a large company with big balance sheets, access to debt markets, and a good credit rating to get this large capital expenditure funded? (Without having any first-hand knowledge of these places, I'm sort of th…
I agree with your premise, and can decorate it with some details, but also can't claim inside knowledge to the BigCo research environments you describe.
One datapoint might be the recent movements of the SURGE Accelerator down in Houston. They focus exclusively on energy startups, but after four years of being an accelerator for such companies, they've put the accelerator on hold and raised a venture fund to focus on the current portfolio companies that are having success. Part of that is obviously the market impact of $40 oil, but another factor seems to be that their companies are selling to medium or large energy companies as customers, and this simply makes their path to growth a more drawn-out affair.
As you point out in your "building a bridge" sentence, the budgets in energy may be huge, but that's a result of sheer complexity and (human) scale rather than a willingness to spend on every-other shiny new thing.
Re: The Energy Startup Conundrum
#4It sounds like the problem Fong faces is that the industry she wants to work in is very capital-intensive. In that case, does the startup/VC/equity model make sense? Wouldn't it make more sense to be attached to a large company with big balance sheets, access to debt markets, and a good credit rating to get this large capital expenditure funded? (Without having any first-hand knowledge of these places, I'm sort of th…
I'll answer your question: no, the venture model does not make sense in capital-intensive industries. The entire premise of venture investing is to beat established competitors by leveraging technology to be more capital-efficient. It wouldn't work otherwise; because using the Internet as a delivery pipeline is exactly what gives most startups their cost / strategic advantages. Infrastructure investment is expensive, and very few investors are willing to float you a billion dollars without expectation of return for 10+ years. VCs want to make lots of small bets on low-capital businesses and hope one strikes gold.
And it just so happens we have a funding model for capital-intensive industries: government grants and tax incentives. But the nature of the beast is such that we can't have a huge number of companies all trying to do the same thing. That does mean that success is ultimately a result of your ability to get what you want out of the government system, and hope there aren't too many powerful groups angling for the same thing. That's exactly the model that VC / startup is trying to get away from.
That's the thing about capital-intensive industries: generally the problems and solutions are not difficult or especially unique. The only reason there's not a hotbed of competition in those areas is because funding is the chokepoint. And you're right; it's more about quality of execution than "getting lucky". Some things you have to get right the first time, so the trial-and-error approach of VC-funded companies is probably not the right approach.
EDIT: Also, to answer your point about being attached to a "BigCo", you're absolutely right. This indeed does happen -- you just never hear about it because large companies like to keep their R&D projects secret. They don't need to publicize their achievements to establish a customer pipeline because they already have one. In fact, most advances in infrastructure technology are funded by large, established companies in a way that makes them seem evolutionary.
Re: The Energy Startup Conundrum
#5It sounds like the problem Fong faces is that the industry she wants to work in is very capital-intensive. In that case, does the startup/VC/equity model make sense? Wouldn't it make more sense to be attached to a large company with big balance sheets, access to debt markets, and a good credit rating to get this large capital expenditure funded? (Without having any first-hand knowledge of these places, I'm sort of th…
I'll answer your question: no, the venture model does not make sense in capital-intensive industries. The entire premise of venture investing is to beat established competitors by leveraging technology to be more capital-efficient. It wouldn't work otherwise; because using the Internet as a delivery pipeline is exactly what gives most startups their cost / strategic advantages. Infrastructure investment is expensive,…
I think you're generalizing what current software venture capital looks like to all of VC. Historically the types of companies discussed in the article did get funding from VCs (Fairchild Semiconductor, Intel, Genentech, etc.) Maybe VCs are caught up on the appeal of the world of bits over the world of atoms. Software companies certainly require less capital, but that doesn't mean that companies with a physical product can't be huge paydays as well. I also don't think that requiring a large amount of capital means that problems and solutions are not difficult or unique. Biotech requires lots of capital, but I don't think anyone would say biotech products are easy to create or cookie cutter to come up with.
Re: The Energy Startup Conundrum
#6If you want to help improve the economics of running a new energy company, come work with us: http://www.genability.com/careers/work_with_us.html
Re: The Energy Startup Conundrum
#7> We need energy storage in the terawatts... we are close to half a megawatt.
Does she mean megawatt-hours? Or the rate at which energy can be transferred into their tanks? Power = energy / time, and watts are a unit of power, not energy.
Re: The Energy Startup Conundrum
#8> We need energy storage in the terawatts... we are close to half a megawatt. Does she mean megawatt-hours? Or the rate at which energy can be transferred into their tanks? Power = energy / time, and watts are a unit of power, not energy.
If I had to guess she's talking in terms of each individual tank/unit set-up. So, one tank has a capacity or power rating of 500kW (capacity in the sense of the way a utility refers to size/ability of generating units). This link[1] possibly covers some of the confusing terminology here, and why it is that way.
EDIT: Scrolling to the bottom of their homepage[2] explains it, their system components are independent of each other.
[1] https://gigaom.com/2012/01/04/how-to-compare-energy-storage-...
Re: The Energy Startup Conundrum
#9Glad to see she is making progress. I tried unsuccessfully to get a project off the ground at a very large search company which had a data center in a very windy area right next to the Columbia river :-) Where the compression tanks would have heat exchangers that sat in the river and would use data center heat to pre-charge the decompression process (double win, free data center cooling and energy).
Unlike Fong I had heard Tata was going to use air motors from a French company to power cars, I just wanted them to turn generators. I discovered that the air motor was a hoax. Which put me in the same spot (designing your own motor). And that pretty much killed any hope of getting funded.
Re: The Energy Startup Conundrum
#10Nov 2012: "Peter Thiel, Bill Gates, Khosla Get Behind Energy Storage Start-Up LightSail in $37M Deal"
http://blogs.wsj.com/venturecapital/2012/11/05/peter-thiel-b...