New York’s ACRE Incubator is Churning Out Cleantech Startups, and Helping Build a New Engine for the City’s Economy
Micah Kotch, operations director of New York City’s only cleantech incubator, has developed a bit of a complex. The incubator, called NYC ACRE (Accelerator for a Clean & Renewable Economy), is housed within New York University’s better-known technology incubator on Varick Street. Since ACRE started up in July 2009, Kotch has watched a procession of media—from the Wall Street Journal to MSNBC—come to spotlight the tech side of the incubator, while virtually ignoring the ten or so companies on the cleantech side. Why? Because mobile apps and other emerging technologies are sexy, whereas “cleantech is viewed more as infrastructure,” Kotch says.
Maybe so, but cleantech is one part of New York’s infrastructure that the city has pegged as vital for its economic growth. In 2007, the New York City Investment Fund—a private group that promotes the diversification of New York’s economy—released a report urging local governments to support cleantech. That encouraged NYU’s Polytechnic University to apply for a grant from New York State Energy Research and Development Authority (NYSERDA).
The University won a four-year NYSERDA grant of $1.5 million, and ACRE was born.
Since then, the New York City Economic Development Corporation (NYCEDC) has signed on as a partner, and Mayor Michael Bloomberg has publicly declared his support for the incubator’s mission. Cities “need to be bold” when it comes to figuring out new ways to reduce their impact on the environment, the mayor said during a press conference last fall at ACRE.
Kotch is fully on board with the mayor’s mission, and even though ACRE is barely two years old, it has chalked up some impressive metrics to prove NYC can be a player in cleantech. ACRE companies have raised $8 million so far, created 125 jobs, and sped six products to market, Kotch says. “These are metrics we can point to and say, ‘Yes, Mayor Bloomberg, we’re doing it,’” Kotch says.
For some cleantech entrepreneurs, ACRE has meant the difference between staying in New York and leaving for cheaper environs. Brian King, chief operating officer of Ecological—a services company that specializes in sustainability consulting—says he was looking out of state for office space when he heard Bloomberg talking about ACRE on the radio. Ecological applied to the incubator and was chosen to be one of its anchor tenants.
“We’ve benefitted in a number of ways from being here,” King says. “This space was co-funded by NYSERDA, which is part of our business plan. We provide services to companies that get subsidies from NYSERDA.” And the economic benefits can’t be overstated. “I wasn’t even looking for office space in New York City because we couldn’t afford to pay $80 to $90 a square foot. Here it’s $8 a square foot,” he says. “We were able to take that capital and invest in our people, rather than put money into a landlord’s pocket.”
On May 1, Ecological will join the rapidly growing ranks of ACRE graduates by moving into a downtown office. The company can afford to stay in NYC, thanks to the $3 million in funding it has raised, and to the client list its founders have cultivated during their time in the incubator.
Another ACRE graduate, Wind Products, found the incubator an ideal place to overhaul its business model. The company was founded in 2007 as a wind turbine manufacturer. The management team designed software to identify optimal locations for its turbines—and quickly realized there was more of a market for the software than for the turbines. “We had to become more of a software company,” says CEO Russell Tencer. During their time at ACRE, “We were introduced to potential investors and employees on a daily basis,” he says. “It helped us get from zero to 60 quickly.” The company, now located in Brooklyn, started selling its software in February and expects to be cash-flow positive shortly, Tencer says.
Some cleantech entrepreneurs appreciate ACRE’s flexibility. ThinkEco joined the incubator in late 2009 as a “virtual tenant.” The company was developing a “modlet”—a wireless device that people could plug into any outlet and then use to monitor and control their electricity consumption. ThinkEco couldn’t make the device at ACRE, because the incubator is a sprawling, open space, where entrepreneurs sit back-to-back in cubicles. “The layout wasn’t conducive to us soldering and hammering all day,” says Mei Shibata, chief business officer at ThinkEco.
So ThinkEco stayed headquartered offsite, and its founders used the ACRE’s meeting rooms, consulted its advisors, and attended its networking events. Shibata says the incubator also brought her company closer to NYSERDA, which has since awarded ThinkEco three grants totaling more than $1 million. The company is now selling its modlet to companies and is working on a strategy for marketing it directly to consumers.
In many ways, New York is the ideal place to nurture cleantech startups, Kotch says. NYC is the second windiest city after Boston, he points out, with the city’s best wind resources centered about 20 miles from the Statue of Liberty. (Contrary to popular belief, Chicago does not top the list of windy cities.) It’s also home to one of the country’s largest public utilities, Con Edison, which has provided advice and other support to ACRE’s entrepreneurs.
But cleantech startups haven’t garnered as much support from venture capitalists as Internet and apps developers have. “The Internet presents no barriers to distribution,” Kotch says. “You can have two guys in a room writing code, and that makes the capital to scale is very low and the margins very high.” Cleantech, on the other hand, presents significant up-front commercialization costs, Kotch says, especially when utility companies present barriers to distribution.
Still, the venture community is starting to get excited about NYC’s emerging cleantech sector, Kotch says. Supporters include SJF Ventures and Braemar Energy Ventures, both of which are represented on ACRE’s advisory committee.
ACRE’s next challenge is to draw up a plan for sustaining the incubator itself, Kotch says. Its funding will last through 2013, but Kotch is confident that the city will keep the incubator alive. “In this city there are 12 [industry clusters] that employ 100,000 people. Cleantech is not one of those sectors,” he says. “Our cathedral vision is that we will build one of those clusters here.”