Will the Internet Venture Incubator Model Work in Cleantech? Greenstart Is About to Find Out

6/14/11Follow @wroush

If you’re an entrepreneur with an idea for an Internet startup, there’s a growing collection of venture incubators around the country ready to help you launch it—Y Combinator, TechStars, and 500Startups are a few of the best known ones. There’s even a new incubator for health technology companies: Rock Health, which we covered here a couple of weeks ago. But until recently, innovators in the cleantech or green energy sectors didn’t have many places to turn for the early-stage capital, mentorship, and business connections that incubators provide.

That could start to change this fall with the opening of San Francisco-based Greenstart, which claims to be the first venture incubator focused exclusively on cleantech. Founded by three serial entrepreneurs from the world of online automotive media, the incubator is searching for eight to 10 companies to join its first three-month session, which will start September 12. The terms at Greenstart are similar to those at Internet incubators: $25,000 per team to cover living expenses during the session, in return for a 3 to 10 percent equity stake in each company. The goal, says Greenstart co-founder Mitch Lowe, is not necessarily to create 10 revenue-producing companies, but to make sure that each team exits the incubator with a well-defined product that’s been validated with real-world customers.

Like any brand-new business, though, Greenstart will need to answer some questions of its own. The biggest is whether the venture incubator model is an effective way to start companies in the cleantech sector. Many of the factors that allow Internet incubators to churn out credible companies in just a handful of weeks—the low cost of software development and cloud-based Web hosting, and the speed with which online services can be tweaked in response to customer feedback, for instance—just don’t apply in the energy business.

Take Oakland, CA-based Brightsource Energy, one of the Bay Area’s hottest energy companies, as an example. It’s raising hundreds of millions of dollars from sources like Google and Chevron to build a huge solar concentrator plant in the Mojave Desert. It’s hard to see how a 12-week incubator program could have helped with an idea like that—and it’s going to take thousands of new energy ventures on the scale of Brightsource to start to switch our civilization over to zero-carbon energy sources.

Lowe acknowledges that big, capital-intensive energy production technologies that take years of prototyping and testing won’t be in Greenstart’s sweet spot. “We’re specifically looking for companies that could have revenue in 6 to 12 months,” he says. “That is going to rule a lot of things out.”

Companies that have already spent a while working on a machine or a process and merely need help working out problems such as pricing or distribution might be good candidates for the accelerator, Lowe says. But the typical Greenstart company will probably be developing a Web- or software-related product that helps consumers or businesses be more efficient about their energy use, Lowe says.

“The immediate opportunity to lower our carbon footprint is to use less energy,” says Lowe. “There is so much there, in terms of applications that can help consumers monitor their own energy use and see what other people are doing, or help save building owners money. Solar is getting very price competitive, but how do you find installers, how do you qualify for tax rebates on a state or local level? There are lots of opportunities to take friction out of the process of getting energy to your home or office.”

The energy business needs an early-stage startup accelerator because all the same problems that used to plague Internet startups are still present for cleantech entrepreneurs, Lowe says. “If you’re an entrepreneur in technology or the Internet there is this really vibrant ecosystem that exists to help you before you’re ready to raise venture capital,” he observes. “There is a lot taking place that removes some of the friction for entrepreneurs. That really hasn’t fully developed yet among … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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