Making Green Work
‘It’s all noble and wonderful to try and save the world, but how are you going to make this venture pay?” This query came from Faruq Marikar, president of Nanobiz in Scotch Plains, after having watched one particularly warmhearted, green entrepreneurial workshop go idealistically astray. Marikar challenged each presenter to define their product specialty, give revenue estimates by 2011, and show how they would outstrip the competition. Sadly, most could not.
The good news is that green entrepreneurs and investors will get another chance. Fairleigh Dickinson University, in conjunction with the National Collegiate Inventors and Innovators Alliance, is hosting a symposium and expo “Growing the Next Generation of Green Ventures,” on Friday, May 2, at 8 a.m. at the Floram campus. Cost: $85. Visit www.invention2venture.org.
The program is designed to foster green entrepreneurship by coupling inventors, entrepreneurs, and financiers, plus academic and business leaders. The workshop will include a series of panels ranging from “Business Essentials” to “Green Tech Investing,” in which Marikar will take part.
Marikar grew up in southern India, the child of a shipping magnate with a strong scientific bent. Quadrilingual by age 10, Marikar followed his grandfather’s urgings and attended the Indian Institute of Science in Bangelore, earning a bachelor’s in chemistry and Ph.D. in engineering. He then moved to London, and in the late 1970s completed postdoctoral work on better batteries for electric cars. He continued this study as a professor at Rensselaer Polytechnic Institute, in Troy, New York, and then for Gould Inc. in Chicago.
Marikar’s technical concentration broadened while working for Celanese Corporation, where he developed fuel cell membranes. He also opened a multi-million-dollar fuel cell business for that firm. Marikar currently holds 23 patents — in batteries, fuel cells, coatings, and nanomaterials. In 2002, as an expert and longtime veteran in green business development, Marikar began private consulting. Three years ago, he launched Nanobiz, which helps bring businesses abreast of the latest technologies for their use.
“Green technology demands a different business model,” says Marikar. It doesn’t answer a long-sought need, like the old technology of electric lighting. And it doesn’t create unknown needs like the new products of consumer electronics (such as MP3 players.) Rather, green tech is replacing older, dirty technology for which the need remains ever present.
“The trouble is, that these dirty old technologies are incredibly strongly subsidized by both government and the public’s lifestyle,” he says. Granted, oil companies receive $18 billion in federal subsidies while netting individual profits of more than $44 billion, but our national oil dependence remains held just as strongly in place by a public that refuses to alter its auto driving habits or to make the initial investment for long-term energy paybacks. Taking these two major obstacles into account, Marikar foresees successful green ventures following an evolutionary, rather than revolutionary track.
Green niches. “Immediately, the most successful environmentally enhancing ventures will be the ones that tweak our current systems the least,” says Marikar. Based on this minimally disruptive scale, he cites four levels of green enterprises that have or may soon find a niche. All of them, not surprisingly, deal with our energy use.
Level I is a service that manages a residence’s or company’s existing energy systems for more comfort and cost efficiency. Software programs that monitor and manage a plant’s energy usage are selling wildly.
Level II is an energy makeover, which is a bit more invasive, and demands more change. Engineering firms that audit, rework, rewire, and install new energy efficient machinery or work flow lines are in ever greater demand. Paying such an energy consulting firm $1 million to save a plant $7 million in annual energy bills, with only slight equipment change, is finally being seen as a no brainer investment.
Level III involves the many businesses that cater to the first-time buyer of an alternative energy system. This includes the companies that actually install the system, such as the work-swamped solar installers who can barely answer their phones. Lenders who facilitate the large initial set up costs, plus the marketers and deal arrangers are doing very well by doing the good work of solar. By contracting existing, independent installers, and developing individual customers, Home Depot has been able to tack another 15 percent on the bill and make millions.
Within these three levels, today’s green venture systems have currently thrived. Beyond that, the limbs grow a little thinner, the risks greater, but the profit potential is enormous.
Level IV demands the disruption of all current energy systems for something newer, often more expensive in the short term, and frequently funny looking. “As an example, we currently are selling rigid silicon structures for solar energy,” says Marikar. “But new items like flexible solar foil will make possible building integrated photovoltaic systems — possibly a standard feature in new homes.” The company that can commercially develop this simplified solar method can make a fortune; providing he can market this costly improvement.
The main obstacle to installing new alternative energy inventions versus improving existing systems is cost. Paybacks on solar energy based strictly on electricity savings alone take typically 15 years or more.
Unlike New Jersey, few states subsidize alternative energies at the same rate as oil.
Into the future. “This by no means makes the predictions glum for green energy ventures,” says Marikar. “There are many profitable avenues and and no dearth of ideas.” One of the greatest is for cheaper solar products, allowing for a minimum investment and a three-to-five year payback. Ceramic tile roofs with fuel cells and stainless steel solar films are already being marketed, yet all experts admit, the field for lower cost solar remains wide open.
Wind energy remains suitable only for larger commercial use, with typically 250 kw systems considered minimum. The development of small residential applications (five to 10 kw) will keep the inventor as busy as solar installers are now. Additionally, Marikar sees that the value of wind energy, with its inherently intermittent power, could be greatly improved with new storage systems and various batteries.
“Solar heating is one of the greatest overlooked existing technologies today,” notes Marikar. One has only to visit any city in China to witness its effectiveness. And in the Garden State climate, one can fully install a solar heating system for less than a quarter of the cost of solar electric. Very plausibly, the bottle neck here is the lack of knowledgeable solar heating installers.
Nanotechnology has already crept into many green products in a tacit, but vital way. “In most all green inventions, materials play a major role,” says Marikar. “If you can develop a new material with a molecular makeup that allows for a vast change in surface to volume ratio, you can greatly aid in energy conversion.” The thin film, produced for a dollar per square foot, that converts the sun’s heat into electric energy can become green ventures’ better mousetrap. Also, new substances such as ones that would allow a lithium rechargeable battery in an electric car, will probably soon emerge from a little further nano-molecular experimenting.
The business models. “We still picture venture capitalists as some great white knight who will rescue us with a saddle bag of funding,” says Marikar. A lot of this vision by green entrepreneurs comes from the new VC interest in their plans. Having fully gleaned the IT and computer-related fields, VCs graze heavily in greener startup pastures that are somewhat related. Yet the incubator time for many green companies, such as a solar developer, is a lot longer than the three-to-five year span most VCs prefer.
Marikar suggests angels and, more importantly, corporate funding as sources. Corporations can handle the slow development since their marketing and production structures are already in place and working on other, currently profitable projects.
The exceptional dependence of green products on policies and regulations further individualizes the alternative energy firm’s launch. The Garden State is particularly blessed. The state’s commitment to solar is top in the nation, bringing the unsubsidized payback times down from 18 years to 7. Yet only recently New Jersey did away with all solar installation rebates in favor of a 250 percent boost in Solar Renewable Energy Credits going to owners. This has changed the whole complexity of the industry, giving solar system sellers migraines, while doubling the trade of installation financiers.
The future of green ventures looks indeed sunnier than it has ever been. And the cause of saving the planet, as Marikar notes, is indeed a noble one. At the same time, the entrepreneur, as in any business, must keep his eyes fixed firm on the financial profit, and take passing note of the many obstacles.