The GreenFuel Letter
Over the weekend, we worked to bring you the first news about a management overhaul at GreenFuel Technologies, in which Bob Metcalfe took over as interim CEO. Our last story cited a letter Metcalfe wrote, apparently to employees and investors, laying out what had happened and where things stood. We quoted several passages and paraphrased his action plan for the future. Our story was picked up by CNET, among others, which seems to have had difficulty confirming the letter’s details. We are running the whole letter below (minus Metcalfe’s e-mail address), partly to clear up any confusion, but more because it serves as an interesting case study of how management should handle communication in difficult times, by:
—precisely explaining the problem
—taking firm action to cut costs and/or change management direction, while keeping key staff members in place
—setting out a clear plan for righting the ship
—sounding an upbeat note without bullshitting everyone
GreenFuel Update, June 25, 2007 — Entering an Interim Period
By Bob Metcalfe, GreenFuel Interim CEO
Last week GreenFuel entered an unanticipated “interim period,” during which I will continue as GreenFuel’s investor director for Polaris and now also as Interim CEO. Jennifer Fonstad, investor director for DFJ, will now also serve as Chairman of the Board. Former CEO Cary Bullock continues as director and moves to VP Business Development. Founder Isaac Berzin continues as director and CTO. Wayne Hopkins continues as VP Engineering. Founder Holly Flesh is now VP Business Operations.
Entering this interim period was made necessary last week by the sudden shutdown of our third-generation algae greenhouse in the Arizona desert. Our current plan is that the interim period will end successfully before yearend. I plan to communicate a lot along the way, beginning here today:
The Arizona greenhouse shutdown was a “success failure” of a kind that often interrupts the commercialization of emerging technologies. Our current third-generation engineering scale greenhouse grew algae faster than expected, demonstrating again that CO2 recycling and algae productivity can be achieved at scale in our high-technology greenhouses. However, this very success triggered failure, as we could not harvest the rapidly growing algae quickly enough. Their unexpected density limited light and nutrient supply, which caused them to start dying. As a result, the greenhouse had to be shut down. It is to be scaled back and restarted this week for further algae growth testing.
But that was not our only setback last week. We also learned from outside experts that our third-generation algae harvesting system, as currently designed, would cost more than twice our targets. Going to scale with such harvesting costs would still likely produce economically viable supplies of biodiesel, ethanol, and/or feed from our algae slurries, but we’ve decided that the best course is to continue driving toward lower costs, higher returns, and larger markets. The best course is to accelerate scaling of our fourth-generation greenhouse technology.
As a result of last week’s setbacks, detailed business plans presented to prospective investors over the last few months need revision. So, even though we are low on cash, the current fundraising outreach has been suspended.
Instead, GreenFuel’s board of directors has taken immediate steps to get the company back on track and has given GreenFuel’s interim executive team the following specific goals for the period ending December:
First, we must conserve cash and cut GreenFuel’s expenses immediately. Our cash reserves are insufficient to get us through the interim period and back on track. So, today, the company has undergone a reduction in force (RIF). We are very sorry to report that about 25 of the 50 fine people working at GreenFuel have been RIFed today. GreenFuel is now a reorganized and redirected core team of about 25 people.
Second, we must raise interim cash in the next 30 days. With a lot of help, I will speedily make the case to investors that last week’s setbacks can be reversed successfully. The proposed six months of interim cash will likely come from current investors in July.
Third, we must scale back the third-generation algae greenhouse in Arizona, restart it, and complete the long-planned algae growth demonstration there in August.
Fourth, we must accelerate the scale up of our fourth-generation algae greenhouse technology, now in early operation at a 550-megawatt coal power plant in “Asia.” An engineering scale greenhouse must be completed at our Arizona facility by October.
Fifth, we must develop a project plan for a commercial scale algae greenhouse and sign by November at least one letter of intent with a compelling partner. We are already in discussions with such partners, with projects ranging between $10M and $30M, but we now need to update our plans with the accelerated scaling of our fourth-generation technology.
Sixth, we must launch a systematic search to recruit by November a new CEO who is capable of scaling GreenFuel and driving its future success.
And seventh, we must close GreenFuel’s next, expansion round of equity financing by yearend.
That’s quite a lot, but I am enthusiastic. I keep asking the trillion-dollar question that led to the founding of GreenFuel: Why expensively sequester CO2 when it can be profitably recycled?
This GreenFuel Update is not a press release, nor is it a secret. Any questions, comments, or offers of assistance would best be sent by email to Bob Metcalfe, at…