This article makes the case for creating cleantech clusters in order to do for cleantech what the silicon valley for example did for IT. Clusters such as Silicon Valley, Boston or Tel Aviv not only enable the technology professionals who live and work in them to “cross-pollinate” their ideas, but they can also pick the brains of attorneys, transfer officers, government officials and especially the business experts – namely VC’s – who can help their companies grow. Unfortunately, cleantech and renewable energy researchers and developers do not currently operate in concentrated clusters like other knowledge intensive industries. The article goes on to describe some of the problems and scenarios that can arise due to this lack of cleantech clusters analogous to IT. It concludes by suggesting that we begin by adding business and economics courses to the curriculum of science degrees modeled after Stanford University’s Tom Byers programs.
by David Anthony, Managing Partner, 21Ventures David blogs at http://davidanthonyvc.com/ ~ Connect with David on Linkedin.
This impression leaves me feeling a certain degree of concern primarily for the cleantech sector. If you are an electrical engineer designing cutting edge semiconductors in Palo Alto, I’m not worried about your business prospects; you’ll be fine. If you are a microbiologist developing lifesaving pharmaceuticals in Boston, I’m not worried about you, either. And if you are a cognitive scientist applying air force simulator training to user experience on the Internet with offices are in Tel Aviv, I’m confident that you, too, are in your element.
Here’s who I am worried about: the fluid dynamics physicists in Texas developing better turbines for wind energy; the botanists in Nevada developing agricultural technology for arid regions; the civil engineers in Ireland figuring out a grid system for electric cars; Chinese desalination specialists bringing water tech to the next level; photovoltaic scientists working to solve storage issues in Spain, and the biochemists developing more efficient bio gas in Germany. Why am I worried?
Because despite the fact that the scientists mentioned above are all engaged in creating cleaner, more efficient energy and working diligently to solve the environmental challenges we face and helping to make the earth well again, they are functioning without the benefit of what economists and sociologists call a “cluster” – a concentrated space where professionals in similar fields support one another through their common occupation and like minded pursuit of common goals and objectives. Without these so-called clusters or centers of excellence, these scientists face nearly insurmountable challenges in making the leap from science to business. In each case, business education, personal connections and experience in dealing with the venture capital and angel investor community are sorely lacking.
Here are some facts: Silicon Valley is an IT, biotech and telecom cluster and has been for more than 50 years. Boston has been an IT, biotech and telecom cluster for just as long. Israel, whose startup ecosystem contains clusters of these industries as well as military and security technology, has been a cluster for more than 20 years.
This means that not only do the professionals in these fields “cross-pollinate” their ideas, but they can also pick the brains of attorneys, transfer officers, government officials and especially the business experts – namely VC’s – who can help their companies grow. These men and women of science and technology recognize that ventures cannot succeed just because you have a brilliant idea. Success in the model we are considering requires access to capital, well conceived marketing plans, and the ability to sell a finished product. In short, scientists need connections to experts outside the cloistered hallways of academia.
According to Tim Harford, Financial Times economist:
“The more knowledge intensive an industry is, the more that industry is concentrated in a small area… Looking at the locations of over four thousand commercial innovations developed all over the United States, economists have found that more than half came from just three areas: clusters of innovation in California, New York, New Jersey and Massachusetts”. (The Logic of Life, pg. 160)
Unfortunately, cleantech and renewable energy researchers and developers do not currently operate in concentrated clusters like other knowledge intensive industries. This means that the first five employees in your average clean-tech company are all scientists with impressive IQ’s, world-changing ideas yet very little understanding of the technology ecosystem. These cleantech companies operate in a vacuum of solitude without the availability of local business support and localized idea sharing.
To make matters worse, professionals in the cleantech space such as aerodynamics experts involved in making electric cars for example, are employed by giant corporations such as NASA and Chrysler. What do they know about the frenetic pace and culture of start-ups? Since cleantech R&D is already a long, arduous, and expensive process, any further obstacles to success such as a lack of basic business expertise is proving catastrophic for these talented, young start-ups.
Another challenge these cleantech founders face is a lack of education. Currently, universities in cluster areas such as MIT in Boston and the Technion in Haifa offer business courses as part of their electrical engineering programs. Indeed, it is common in these institutions for engineers to have MBA’s. Yet time and again I meet with cleantech companies, both as a venture capitalist and as an educator, where I am the first and only entrepreneurial educator these scientists have encountered!
What fate lies in store for those entrepreneurs lacking basic business acumen who are otherwise the most educated people on the planet? Expensive mistakes. The list of expensive mistakes includes competitors edging out their company’s technology and investors losing money and interest in their solution. Internet companies in the late 90′s faced a similar quandary: professionals in every field thought they could launch billion dollar web companies just by being experts in psychology, or medicine or communications. It took the 2000 crash to make them realize that without competent, well-trained business experts, companies faced an uphill battle in their struggle to survive.
These problems are not going to be solved overnight, and the cleantech industry is not going to spontaneously form into a cluster. However, instituting better business education within the cleantech curriculum is an attainable goal.
Here’s what I suggest as a first step: we need to institute programs similar to Stanford University’s Tom Byers. He has managed to do for hi-tech – making technologists comfortable in the business ecosystem – what we must work quickly to do for renewable energy. Adding business and economics courses to the curriculum of science degrees would significantly improve the cleantech start-up founder’s chances of leaping from idea to IPO with less time and much less pain. There’s enough work to do bridging the education gap within the cleantech world for me to quit my job as a VC and teach fulltime.
But if cleantech entrepreneurship continues to be neglected around the world, our industry is never going to grow at the rate it should and at the rate we need it to grow in order to solve our environmental problems. The field of renewable energy needs to rally and educate our scientists about an ecosystem that is itself specialized, even within hi-tech.
Perhaps getting a PhD in electrochemistry or biotechnology should require courses in economics and international law so the people manufacturing the batteries for the future’s cars or developing new kinds of water filters will not find themselves “out of their element” when they meet investors and lawyers.
If we can dream of running the world on sunlight, why can we not conceive of a cluster of business savvy scientists working together to help reach our common goals?
