by Lisa Huber, MEM/MBA ’14
This article was written in response to a seminar given by Pedro Santos, Founder and CEO of OsComp Systems, in an EDGE Seminar on Nov. 13, 2013 at Duke University’s Fuqua School of Business.
Pedro Santos, founder of OsComp Systems, sold his first business before graduating high school and has followed his passion for entrepreneurship ever since. In our most recent EDGE Seminar, I was pleased to walk away from his lecture with a “How To Be a Successful Energy Entrepreneur” guide. While some of Santos’ lessons apply to all areas of entrepreneurship, others have unique implications for innovating in the energy space. Below are some of the tips I took away.
1. Don’t hedge your bets. After being turned down from over 30 venture capital firms and losing team members, Santos didn’t give up on OsComp. He couldn’t, really, since he had put his life savings and student loans toward operational costs. He had put himself in a position in which he would have lost more by quitting the project than continuing to pursue it. In the end, OsComp did bring in a strong team, develop solid intellectual property (IP), and receive funding. This lesson can be true for any entrepreneur, but I think it’s especially applicable to those in the energy industry who can face technical barriers, long project development timelines, and high capital intensity. These features of innovating in the energy sector, combined with a soft venture capital market (see lesson #2), pose significant challenges to entrepreneurs and will require an even larger dose of determination and commitment.
2. Choose your investors wisely. Santos acknowledged the recently difficult funding environment for all start-ups given decreased investments for early-stage companies by venture capital funds. When asked about funding opportunities with corporate venture capital firms, who have significantly increased investment in the space, he explained that it’s not always best to chase corporate money due to a misalignment of short-term goals and long-term vision for the start-up. In the energy space especially, where technical innovation can take years to reach commercialization, many corporate investors will look to only be in a deal for a short period of time and will experience higher turnover rates of employees, which can cause complications for that very delicate entrepreneur-investor relationship.
3. Measure your technology by value to the customer, not performance. This tip from Santos I found to be especially interesting. We learn at Fuqua, in our core marketing class, about developing a clear value proposition to the customer and honing your strategy around this. Oftentimes, we forget that this is the real measure of a product, not necessarily how it performs in the laboratory testing phase of development. In the energy industry, technology innovations in battery systems, for example, will take decades to reach commercialization, but Santos offered a good reminder that there can still be other solutions which lack the technical punch, but can easily create customer value in the interim. Focusing on these opportunities and pursuing them through gaining customer insights and iterating product offerings, will be essential for successful entrepreneurs.
4. Opportunities abound, despite bad press. Despite headlines in the media destroying hope for innovation in energy, there are many recent trends and discoveries that present a number of opportunities for technical and business model innovation. While Solyndra, Fisker, and A123 didn’t work out so well, there are many success stories both on the technical side (i.e. CoalTek, Tesla, and Fluidic Energy), and the business model side (i.e. Opower, SolarCity, and EnerNOC). Opportunities abound for entrepreneurs in the energy space, one just needs to understand the market size and needs.
I walked away from Santos’ lecture feeling inspired about the number of opportunities for innovation in the energy sector. Last summer, I interned at a clean technology-focused venture capital firm, and saw hundreds of business plans and pitch decks focused on energy efficiency, electric vehicles, sustainable agriculture, wastewater treatment, renewables, storage, and the list goes on. As long as we have entrepreneurs like Santos eager to innovate and willing to “go all in,” I have high hopes for our energy future.