Scaling Up in Cleantech

Last night SJF Institute and the Council for Entrepreneurial Development teamed up to present the first of four CleanLinks Forums in 2011. Moderated by Rick Bain, Director of Business Development at Cree, Inc., the panelists included Michael Shore, Founder, President and CEO of FLS Energy; Wayne Flournoy, Founder and President of Entex Technologies; and Mark Munday, President & CEO of Elster Solutions North America.  The panelists briefly described their own business models and then discussed key challenges facing cleantech entrepreneurs in the current economy.

FLS, a solar generation company, has grown from 3 employees in 2006 to 70 today. The firm targeted solar thermal as one of the most effective ways to generate energy and has devised an effective business model. At Marine Corps base Camp Lejeune in North Carolina, for example, FLS is installing solar on all the new housing. The company owns and operates the solar installations to take away the up-front cost, then sells the base the hot water – at a lower cost than they would pay to heat the water with conventionally sourced electricity. “We are like a little utility on our clients’ roofs,” said Shore.

Entex, a wastewater treatment solutions firm serving industrial and municipal clients, was founded in 2004 and now has nine employees. Flournoy said that many, including Red Herring in 2005, have called water “the next oil.” Projects created immediately after the Clean Water Act of 1972 are ripe for updating, giving Entex a strong market for its custom solutions which are currently employed at 25 installations treating 60 million gallons a day.

Elster, a worldwide smart metering firm serving utilities, is a 175-year-old firm with 38 locations, 7,000 employees, and a recent IPO. Munday said the firm is one of the world’s largest electricity, gas and water measurement and control providers. He described the concept of the Smart Grid as “a journey, not a destination,” explaining that his company’s products aid in the journey. For example, Elster provides energy management for all the Wal-Marts worldwide.

The number one challenge for cleantech entrepreneurs is, unsurprisingly, money, according to Shore – how to raise money to fuel growth as well as managing cash flow. Although the national stimulus funds helped some cleantech companies, Shore stressed that it was “not the deciding factor.” Flournoy’s firm has been involved with half a dozen stimulus-funded projects, but he said the paperwork involved can be “unbelievable” and that some already funded projects stalled for long periods waiting to see if they could obtain additional funding from the stimulus, which slowed the sector’s growth. He believes that good projects will always be able to find funding if they can “deliver value on the macro level.”

Due to currently high energy costs, Munday said it is cheaper for his firm to produce many parts destined for use in the U.S. here in this country rather than overseas. He touched on the topic of green job creation and said the stigma against technical colleges will need to be overcome so that many more Americans can utilize this resource to receive training to work in the green economy.  “These are good jobs that Americans can do very well if we’ll raise the status.”

Shore agreed that hiring is not a problem at FLS Energy, and that “people are eager to work for a green company.” In fact, he said his firm is excited to be creating jobs in the current economy, but that FLS feels pressure beyond what a typical startup firm faces.  “We have a responsibility bigger than our company,” he said. “We have to make it work to demonstrate that a clean energy company can be successful.” – Anne Claire Broughton, SJF Institute Senior Director

(Note: The next CleanLinks Forum is scheduled for May 24 on the topic of the Smart Grid)