Managing Risk: Reducing Uncertainty in Energy Investments – Advice From Solar City

“From 2012 to 2018 cumulative revenue in the energy sector worldwide could total $1.9 trillion,” according to the Pew Clean Energy Initiative.
That number’s not surprising, considering the entire global economy runs on energy. It means the potential payoff for innovations in the energy space are huge – and fraught with uncertainty, especially in the face of climate change. On top of unpredictable market dynamics, we also have the fickle Mother Nature to contend with, and only so much ability to predict where her wrath will strike next (and with what severity).
Everybody wants to get in on the next Google or Facebook without losing their shorts on the duds. Even the big investors get it wrong sometimes. I heard David Rubenstein, CEO of the famed Carlyle Group, on NPR recount recently that he passed on investing ~$100,000 in Facebook in its nascent stage, because he thought it was a crazy idea.
Managing this risk/uncertainty/market adoption dance was a theme at the recent ARPA-E 2015 Innovation Summit, from developing profitable and innovative business models, to finding funding, to overcoming market resistance, to navigating or circumventing the choppy political waters in this highly regulated sector.
There are Always Risks in New Technologies and Within Risk is Opportunity — for The Not-So-Faint of Heart
When former Microsoft CEO Steve Ballmer told his mom he was joining Bill Gates to form Microsoft, his mom said (legend has it), “That’s great Steve, but who would want to use a computer?”
Because of the unique role of energy as an economic driver, many believe it’s government’s role to remove the technical risk, including ARPA-E Deputy Director Dr. Cheryl Martin, who told us so on a panel I moderated at a Greenbiz Verge conference. She puts ARPA-E’s money on the line too; they’ve invested about $1.1 billion in over 400 companies since ARPA-E’s inception in 2009 (established by President George W. Bush in the America Competes Act of 2007.). The purpose, as Dr. Martin told us is to evolve the early stage companies to the point where private capital is comfortable kicking in. Here are insights from clever, successful entrepreneurs at ARPA-E 2015:
Shark Tank Winners, Investors, and Creative Energy Entrepreneurs
Two people who put their money, time and reputations on the line to seize these opportunities are industry-leading investor Nancy Pfund, Managing Partner of DBL Investors, and Lyndon Rive, CEO and Co-Founder of Solar City. They talked about this dance of managing risk and introducing new technologies into the marketplace (and about managing Rive’s cousin and Tesla Founder Elon Musk who sits on their board).
Lyndon addressed the personal side of it too, in one of the most authentic moments of the Summit. “If you have an idea, follow up on that idea. It’s a high probability that your friends will tell you it’s not a good idea…as you follow through on it,” Rive said. He added, “The success of the company is tied 100% to the people you hire, so spend a lot of time hiring the right people and empower them.” This is an example of what Martin referred to as the ecosystem that’s required for successful innovation: “Inspiration…and having the processes and professional support to take those ideas forward.”
One of the early-stage entrepreneurs I interviewed at ARPA-E 2015 was Andrea Sreshta, cofounder with Anna Stork of Luminaid, which won a $200,000 investment and support from Mark Cuban on Shark Tank. Sreshta told me on Green Connections™ how they developed the innovative solar light source that looks like a small inflatable pillow, and grew.
Reinventing the microgrid, is Go Electric, whose CEO Lisa Laughner told me that their washer-dryer-sized unit is specifically for back-up power for “mom and pop” or small businesses, like convenience stores. It can make it possible for communities to access life-sustaining goods in a natural disaster or other power crisis.
Much of the resistance to wind farms, both on and offshore, are the blades in the wind turbines, either because birds are sometimes hurt by them or because they are perceived as an eyesore. ACCIO has developed a way for wind turbines to gain more without the blades, as Jennifer Baird, CEO of ACCIO (and serial entrepreneur who has made millions for her previous investors) told me.
Advice for Entrepreneurs from Lyndon Rive, CEO and Co-Founder of Solar City
Lyndon Rive’s advice for entrepreneurs and innovators with an idea they just can’t get out of their heads: “You having passion in your own ideas is the key and look at the realistic view of your idea. If it’s going to make a minor change, that’s not enough. Look at something that is going to have a huge impact, even if it’s a crowded space. Just have a model that can differentiate you and follow through….
“The number of successful businesses is low, but if you have a passionate idea and you continue to beat on that drum even with the number of obstacles around the way” you are likely to succeed.
Luminaid, ACCIO and Go Electric – and SolarCity and Tesla – are proof of that.
This article first appeared in the Huffington Post