Start me up

25th June, 2007 by Anonymous

Fancy yourself as a sustainable entrepreneur? Fiona Harvey plugs into their real world.

“You have to be bloody-minded. You have to be tenacious. You have to have your cynicism turned up to full. You’ll get a lot of encouragement, but a lot of discouragement too, and you have to deal with it all.”

That isn’t actually the list of entry criteria for Dragon’s Den, the TV programme in which would-be business entrepreneurs vie with one another for start-up funding. But it might as well be. It is the advice to sustainable entrepreneurs from a veteran in the field, one who bears the scars of battle – Charlie Paton, the founder of Seawater Greenhouse.

“It helps to be an outsider when you push for change – and entrepreneurs almost instantly have this advantage over big businesses.”

Paton’s technology enables hot, arid countries to grow high-value crops in greenhouses by the coast, using seawater to cool and humidify the air that ventilates the greenhouse, and sunlight to distil fresh water from this seawater, so it can be used to irrigate the plants. It is a simple idea, making desalination much cheaper than conventional systems. So far there are two seawater greenhouses in the Gulf, one in Abu Dhabi and one in Oman – and when he spoke to Green Futures, Paton had just installed a small version at the Eden Centre in Cornwall, as a way of showcasing the technology more widely.

Despite the simplicity of the idea, and its undoubted usefulness, it has taken nearly 20 years to get this far; several years to develop the technology, and many more spent struggling to find projects through which to commercialise it.

Paton’s not alone. His story will resonate widely among the fast-growing band of entrepreneurs who’re jostling for a piece of the sustainability action.

All change in the investment climate

There’s a whole raft of new business ideas and start-up companies floating on  the rising tide of venture capital that’s pouring into ‘clean technology’ development [see GF63, Funding with foresight]. This surge of investment reached a record $1.4 billion  in the first quarter of this year alone, helped by such linked and bullish trends as:

  • Increasing consumer attention to green issues;
  • New environmental regulations, ranging from emissions trading to the landfill tax and the waste electrical and electronic goods directive;
  • The boost that these regulations give to the demand for goods and services, from energy efficiency to recycling technology;
  • The current process of strengthening government procurement criteria, to shift the spending under its massive £150 billion a year budget in a more sustainable direction [see GF64, Government greens its buying]; and
  • Direct use of public funds to help get small green businesses off the ground, in the form of grants, subsidies, and market stimulation initiatives such as the Low Carbon Building Programme.

With all this going on, investors have less reason to fear that the market for green goods and services is merely a fad that might disappear overnight. On the contrary, it’s real, it’s substantial, and it’s growing.

And so is the stream of people with green business ideas.

Richard Paine, managing director of Inventorlink, a business advice company that specialises in helping inventors bring their ideas to market, now sees about four to five such would-be entrepreneurs a month. “People are much more aware of the issues. They can’t not be,” he says. Examples that have crossed his desk recently include land decontamination products, ideas for removing chewing gum from pavements and a design for a flood barrier. (“And,” he confides, “we keep being contacted by Dragon’s Den,” which is practically gagging for new green ideas.)

But it’s no use counting on dot.com-style euphoria; the would-be sustainable entrepreneur can’t expect every door to fly open at a mere wave of the s-word. At the very least, warns Paine, an inventor looking for business success must be braced for “a long journey”. Most products take a minimum of a year to progress beyond the drawing board stage, he says, and at least two to three years to make it to commercial production. Faced with design problems or financial difficulties, or the sheer impossibility of finding a market, 80% or more of the people who bring their ideas to him will drop out along the way, he estimates.

Still, that leaves nearly one in five who’ll make it. And Rachael Nutter claims an even better success rate [see box right] for the companies who make it through the business incubator scheme she runs at the Carbon Trust, the government-funded body charged with helping get British businesses on board in the battle to cut carbon emissions.

Revealingly, Nutter says that one of her key functions is preventing potential disasters when the incubator companies meet private sector funders for the first time. Although many people come up with great environmentally sustainable ideas, she explains, they find it difficult to explain their uses. “It’s about being able to articulate how a technology addresses a particular market, and understanding the market. What we do is ask them the questions that a venture capitalist would ask, about how they propose to make money from their ideas. We ask ‘Who needs this stuff? What do you need to demonstrate it and to whom? How much will it cost to make? How many will you sell?’”

Carbon Trust’s funding score• 129 companies provided with applied research and development funding since 2004.
• Total amount of such funding: £17 million.
• 45 “incubator” companies helped raise private funding.
• Total amount of this private funding: £22 million.

The ambitious entrepreneur will ultimately be looking to the private sector for the big bucks. But a whole host of inventors might not get off the ground without government support. The Carbon Trust is just one of a range of channels for this. Another is the National Endowment for Science, Technology and the Arts (NESTA). Once the source of a grant which helped Paton to progress his seawater greenhouse, NESTA now has a specific fund focused entirely on sustainable entrepreneurs, and chief executive Jonathan Kestenbaum is “very pleased with the initial pipeline of ideas”. 

Sustained by NESTA

Available funding: total of £50 million over five years.
Scale of support: up to £500,000 per project.
Typical areas: energy efficiency ideas, water treatment technologies.
Examples: Camfridge, uses magnets instead of conventional compressors, delivers approximately 40% energy saving. Wattson, domestic device showing real-time energy consumption of household appliances.

George Taylor, chief executive of New Jersey-based Ocean Power Technologies, says unequivocally that “incentives provided by governments have enabled this industry to get off the ground”. His business is harnessing waves to generate electricity, his main device is called the PowerBuoy, and his company, founded in 1994, has recently listed in both the UK and the US. Along the way he “got tremendous help from the [UK] government, they were solidly behind us”, as well as “continuous support” in the form of development funding from the US Navy.

Not-so-smart money

Seed funds, support for development, and venture capital to bring ideas and technologies to market – all these are key drivers of entrepreneurship, whether it’s green or not. But the colour of the money can also make a big difference. Paton, for instance, sounds a warning note that he learned by bitter experience. He recalls thinking his problems were solved when his application for EU funding was successful – only to find himself fighting a three-year legal battle with the European Commission after most of his promised money had been withheld.

“There is a lot of dumb money about, and people take it to get a foolishly high valuation. But if you do, you end up with a fool on your board.”

 “It really makes me wince,” he says, “how much money is being spent [by governments] but ends up being useless. Sometimes it’s because it has so many strings attached. Most people won’t talk about it, because they rely on this money. Yet they know that a lot of it is wasted.”

There are pitfalls, too, with venture capitalists – and not just the size of the stake they want in return. “Be very careful about taking dumb money,” says Michael Liebreich, chief executive of New Energy Finance. “There is a lot of dumb money about, and people take it to get a foolishly high valuation. But if you do, you end up with a fool on your board.” Even when you’ve got the funding and have developed a green idea that works, there can be other barriers to its commercialisation that you never dreamed of. Like politics, for example. Paton couldn’t find a market in some hot countries, even though his technology was perfectly suitped to the climate, because import tariffs in rich countries kept out the high-value fruit and vegetables that a seawater greenhouse could have grown.

Backing a winner

The best environmental ideas aren’t necessarily the ones that require the most investment, says John Woolard. A Silicon Valley venture capitalist who’s now CEO of solar reflector power station pioneers BrightSource Energy, he has an eye for the simple solutions that can be smart business. For instance, in a hot country, instead of using expensive solar water heating panels, you could just put a tank of water on the roof and paint it black. As he puts it, “the lowest hanging fruit may not need a lot of funding”.

“Sustainability is the context for business, not the purpose of it. Any venture must take a human-centric perspective, rather than simply revolve around being green.”

In this fast-changing world of the clean technology start-up, how important is in-depth knowledge of the industry? Obviously, relevant experience can reassure investors. Liebreich “probably wouldn’t back anyone who was on their first time in energy”.

But Thomas Bjelkeman-Pettersson takes the opposite view – that “it helps to be an outsider when you push for change”, and that start-ups and entrepreneurs can almost instantly have this advantage over big businesses and vested interests. He says of his methods: “I spend quite a lot of time immersing myself in the new area, and then try to find the particular pain point where a relatively small amount of effort can make a big difference. It is also about not being intimidated by the current structures and entrenched working methods.”

The human factor

Coming from the field of information technology, he used thinking based on the ‘open source’ model of computer software in the Akvo project, which is designed to enable people and companies to share ideas on how the world’s water infrastructure can be improved. 

Not every innovator is cut out to run a business. A change of personnel can be needed to get a company off the ground. “Sometimes we see people coming in with ideas and they want to be the chief executive of their own company,” says Carbon Trust’s Rachael Nutter, “but they’re never going to be a chief executive. We help them to find the people who are right for them.” Partly for this reason, notes Kestenbaum at NESTA, “informal networks of support are at least as important as financial backing”.

But not all ‘informal networking’ is good business sense. At Inventorlink, Paine says the first question he asks an aspiring inventor is how many people he has discussed his ideas with. “If they say they’ve told everyone down the pub, I tell them to for god’s sake shut up about it,” he says. At least until they’ve set up non-disclosure arrangements or other confidentiality agreements.

That can make for a lonely life for an entrepreneur. And it strikes a chord with Paton, who warns that the worst enemy throughout all the problems of getting from great idea to commercial reality is simple discouragement. “The most difficult thing is that you get the impression that people are doing lots of green things”, he says. “But when you get down to it, there really isn’t so much happening.”

Entrepreneurs just have to deal with that. And to remember above all, as Mark Charmer warns, that an idea is not necessarily marketable just because it is ‘sustainable’. For commercial success, a product must serve a commercial purpose first.

Charmer is director of the Movement Design Bureau, a think-tank and venture group that researches advanced approaches to movement inside and between cities. “Today, sustainability is the context in which business is done,” he says, “not the purpose of it. Any venture must take a human-centric perspective, rather than simply revolve around being green.” In his experience, “the best ideas focus first on helping people do things more cheaply, more effectively or more enjoyably”.

Sustainable Entrepreneurs


Alison Ball

co-director, FRC Group

Turnover: £3.2 million
Value to the planet: 270,000 household items reused and recycled, over 20,000 packages of new furniture sent to social landlords, and over 150 people trained in logistics.

“Ten years ago I was given the job of turning a small voluntary furniture collection service into an organisation for change within the Liverpool region.

“Persuading people to think differently was our biggest challenge. It took us three years to get Liverpool City Council to see our Furniture Resource Centre [GF41, Sofa so good] as a way of delivering on the social and environmental targets they’d set themselves, rather than just a waste collection system.

“What we need now is an order book! We’re finding that government’s got grand visions for sustainable development, but they’re not filtering down to the people making procurement decisions day to day. They need to be flexible enough to be able to buy what people are offering.”
www.frcgroup.co.uk


Trevor Baylis

inventor of the wind-up radio

Value to the planet: Millions of batteries saved from landfill thanks to wind-up gadgets.

“There’s an invention in all of us. But you have to have an ego as big as a truck. And not go telling everyone your idea in the pub! I’ve been ripped off big time by people I trusted.

“I got involved after I watched this programme about AIDS in Africa. It was horrific – they said the only way to stop it spreading was through education and information. But people didn’t have radios out there – batteries cost more than a month’s salary. So later on, listening to an old wind-up gramophone, I thought blimey, if you can create that much sound by dragging a rusty old needle round a piece of Bakelite, surely you can do that with a radio as well. So I went out into my workshop – there’s a graveyard of failed domestic appliances there – and linked the back of an old transistor radio to a DC motor. I cranked the motor in reverse (which makes it run as a dynamo) by attaching it to a hand brace and turning the handle – and got the first bark of sound from the radio.

“Now I’m developing a range of low-price products for disabled people – you know, gadgets that mean you can take the top off a bottle with just one hand. Because I was a stuntman I always felt we were kinsfolk of the disabled. Disability is only a banana skin away.” www.trevorbaylisbrands.com


John Bird

founder, The Big Issue

Turnover: Many millions of £s
Value to the planet: In 15 years The Big Issue has helped a lot of people living on the streets. It has also created links between people. Sometimes the vendor cheers his customer up, or the customer realises what it means to be homeless.

“Gordon Roddick discovered a streetpaper in the US being sold by homeless people. I agreed to try and do the same thing here, but I didn’t want to start a charity; I wanted to create a business.

“There were lots of hurdles. Homeless people are not exactly the most reliable work force. You never know if the vendors will turn up the next day.

“I recently began a new company called the Wedge Card to encourage people to shop in their local shops [see GF63, Shop keeping]. I’m also running for mayor of London... I want to work with the people who are usually forgotten when London is described as a booming, successful, rich city.” www.bigissue.com


Juliet Davenport

co-founder, Good Energy

Turnover: £11 million
Value to the planet: The business prevented the emission of 40,000 tonnes of CO2 last year.

“The key to success for any entrepreneur is hard work and focus. For a sustainable entrepreneur, maintaining conviction in what you’re doing is an essential ingredient, too. Sometimes you need to make difficult decisions between profitability and sustainability, and having a clear purpose makes that a lot easier. Your audience, whether it be regulators or customers, is very good at spotting someone who doesn’t have their heart and soul invested in their work.

“Green electricity supply isn’t an original idea. But combining this with information, education and communication is what makes us different. That idea comes from my time teaching physics. I wanted to get people to realise that energy and power are not impossible to understand – in fact they’re very accessible.

“Over the last five years we’ve been through a major regulation overhaul, a complete change in the market place and a massive increase in demand for renewables. Our challenge as a small company is to keep up – and stay ahead of the game!”
www.good-energy.co.uk


Mark Constantine

founder, Lush

Turnover: £145 million
Value to the planet: Over 700,000 plastic bottles prevented from going to landfill through sales of ‘naked’ shampoo bars.

“It’s essential to have a sense of humour. You can’t sell your principles to customers too earnestly. You need to keep on explaining why you’re doing what you’re doing with as much joy as possible.

“I’ve been my own boss since the age of 22. I once produced a range of herbal products for someone as a freelancer, and they wanted to tinker about with the essential oils without knowing what they were doing. There’s a lot of greenwash going on out there, so if you want that sense of honesty in your life, you’re better off doing it yourself.

“Sustainable business is basically ‘very sensible business’. You’re going to spend less money – on cars and energy etc – so you don’t need as much investment. I made my first batch of cosmetics at home. I didn’t drive – still don’t – and I arranged a van to deliver it! At Lush we don’t bottle our products, so we don’t need to buy lots of packaging.”
www.lush.co.uk

Dale Vince

founder, Ecotricity

Turnover: £18 million
Value to the planet: 100,000 tonnes of carbon dioxide will be saved each year thanks to the wind turbines we’ve built in the UK this year alone.

“Staying power is definitely an essential ingredient for a ‘sustainable entrepreneur’. There’s still a mountain for Ecotricity to climb. But we’ve established green electricity as a fairly widely understood concept and all power companies have such a tariff now.

“When I started, I was living on a hill outside Stroud, using small wind to power my home, an ex-military trailer. I’d been living this low-impact travelling life for ten years and was inspired by the idea that large-scale wind energy could create a far bigger change.

“The biggest hurdle was planning. There was widespread scepticism about green energy and climate change – and it didn’t help that I was a hippy. Also, the electricity companies paid poor prices because there was no competition. That’s what gave me the idea of setting up Ecotricity, to cut out the middleman and reach the end user with green electricity.

“The next job is to achieve scale and to change the way electricity is made and used in the UK. We aim to supply one million homes in ten years’ time.”
www.ecotricity.co.uk


Richard Reid

co-founder, Innocent Drinks

Turnover: £78 million
Value to the planet: Innocent smoothies are free from concentrates, additives and flavourings. The company buys all its bananas from Rainforest Alliance accredited plantations. And it donates 10% of profits each year to NGOs in the countries where the fruit comes from.

“When the tenth bank manager turned us away, we really began to think that it wasn’t going to happen. Then out of the blue we found an investor who really bought into the idea, and here we are today.

“Before we set up the business, all three of us were leading pretty hectic lives in London and realised that we weren’t living a very healthy lifestyle. We knew we wanted a fresh juice in the morning but didn’t want to be queuing up in a juice bar. Fresh fruit smoothies you could pick up from the chiller cabinet seemed like an easy way to do yourself some good. We were 100% convinced that going down the natural route was the right thing to do.”
www.innocentdrinks.co.uk


Keith Johnstone

managing director, GoinGreen

Turnover: The low millions of £s
Value to the planet: 6,000 tonnes of carbon dioxide saved by 2,000 G-Wizz cars worldwide.

“The two directors of GoinGreen discovered a prototype for an electric car when they were out in India. With the congestion charge looming in London, they saw a commercial opportunity to make it work back home.

“Launching a new company is challenging enough. But launching a new sector is even bigger. Support for this kind of new technology has been pretty inconsistent across government.

“Business has now made firm decisions to commit to fighting climate change – the commercial opportunities are there for anyone to take. But we now need to see more action from government on fiscal and regulatory policy.”
www.goingreen.co.uk

Social entrepreneurs have shot into the mainstream, says John Elkington. But they urgently need support to fulfil their potential.

What’s the difference between a ‘social’ entrepreneur, and a mainstream one?

That’s a tough question – and one that will get ever harder to answer as boundaries blur. Talk to mainstream entrepreneurs today and it’s clear that, once they get the bit between their teeth, many pay little heed to the wider social and environmental implications of their ventures, unless forced to.

But this is changing, as folk like Richard Branson – a role model for entrepreneurs, whatever you may think of him – jump on the latest green wave.

It’s not just maverick billionaires, either. Bellweather venture capital outfits like Silicon Valley’s Kleiner Perkins Caufield & Byers are piling into the booming cleantech sector.

So why is this happening? This is part generational, part intelligent markets. By their very nature, entrepreneurs are sensitive to impending market changes. Just look at the latest wave of commitments by some of the most successful companies around [see Leaders of the pack]. And then there’s Citigroup, increasing its climate-related spending tenfold, and investing a cool $50 billion in environmental projects over the next decade.

The cleantech sector has, not to put too fine a point on it, been going through the roof. Take a look at www.cleantech.com. A wall of money is sluicing into this area. Definitions may vary, embracing everything from solar photovoltaics to nanotechnology. And sure, we’ll want to kick the tyres of many of those nano and biofuels investments. But some sort of political and market logjam is breaking up here.

However, if we’re really going to reap the potential, we need a new mindset. One that moves beyond current ideas of corporate citizenship and CSR; one that involves creativity, innovation, and scalable, entrepreneurial solutions to sustainability challenges. And no one encapsulates that better than today’s social and environmental entrepreneurs. That is the conclusion of our first Skoll survey report, Growing Opportunity: Entrepreneurial Solutions to Insoluble Problems (www.sustainability.com/skoll).

But these people can’t do this on their own. Our survey of over 100 entrepreneurs shows they urgently need – and want – more support. Specifically, they need this support from:

  •  Mainstream business – with connections, funding, skills and logistics;
  •   Financial institutions – with smart capital and new financial instruments; and, above all,
  •   Governments – which play such a crucial role, for better or worse, in shaping the incentives (or disincentives) for innovation and entrepreneurship.

It’s time, in short, to support your local social or environmental entrepreneur.

John Elkington is co-founder and chief entrepreneur at SustainAbility (www.sustainability.com) and he blogs at www.johnelkington.com/weblog/blogger.htm


ZELFO: scientific research and patents
ZOPA: experience applied to trend spotting
VESTERGAARD FRANDSEN: evolution based on need

“The advice I would give to someone new starting out is take your time, create a patent where possible, raise finance and invest in creating a team to support you.” Sustainable ventures consultant Paul Benhaim speaks from experience. He’s the business partner of materials scientist Martin Emegg, inventor of the new plant-based ‘eco-material’ Zelfo.

Already used to make such things as a Giorgio Armani bowl [above] and an award-winning chair and stool, Zelfo “came out of Martin’s knowledge about paper maché”, explains Benhaim. It’s derived from plants high in cellulose, such as hemp, straw and agricultural waste.

“The eureka moment happened in the research facility Martin had built,” explains Benhaim. Emegg got his patent and, after some false starts, their company opened its first factory in Australia with virtually waste-free manufacturing. It now works with established designers, manufacturers and builders to produce strong eco-alternatives to their existing products.

www.hempplastic.com

Zopa is an online marketplace for social lending. The name stands for ‘zone of possible agreement’. People lend and borrow money with each other: no bank in the middle, no huge overheads, no unethical investments. In just two years it has attracted more than 140,000 users.

Zopa was started in the UK by a small group of people who already understood banking, including Richard Duvall, the founder of Egg, and James Alexander, its former strategy director.

They identified a major consumer trend; ‘freeforming’, in which people’s attitudes and behaviours were becoming ever more individual and ever more self-reliant. “In money, freeformers wanted to feel more connected with what it was being used for. We also admired eBay and wondered what an eBay for money would look like.”

Looking back, Alexander gives this advice; “Start as soon as you can, spend as little as you can. Ask people for help, it’s rare that people say no. Believe in your idea: if you don’t, no one else will.”

www.zopa.com

Back in the 1950s, Vestergaard Frandsen was a weaving company specialising in new synthetic fabrics for workwear. It wasn’t until 30 years later that it started a new range of relief-aid products (blankets, tents and tarpaulins).

Then, in the ’90s, the focus shifted to developing disease control textiles. It now has three products that save lives: PermaNet (mosquito netting with insecticide), ZeroFly (a plastic sheeting for refugees which also kills disease-spreading insects) and LifeStraw [above – a water-filtration tool which removes water-borne diseases simply by sucking on it]. Today, Vestergaard Frandsen works with the UN, global NGOs and relief agencies – and is now ten times the size of the old business.

Innovation didn’t happen overnight. “LifeStraw was a process that took nearly ten years and suffered setbacks,” says Alexis Munier. But despite the slog, the advice to others is “Just do it! Never let anyone tell you it’s not possible and don’t give up in the face of a challenge.”

www.vestergaard-frandsen.com

Fiona Harvey is environment editor of the Financial Times.

Great to see that Green Futures has lost none of its edge. It simply gets better with wonderful images for a fresh new look.

Carol Somper, Principal Consultant, Temple Group Limited

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