Friday, June 20, 2008

The Web We Weave

Green business needs to learn the dot-com blues lesson

Newsstands and bookshops are bursting with publications on how to make your fortune in the green revolution. Everything needs to change and, as usual, tech entrepreneurs are on the leading edge of that change. What is not changing is our rush to take advantage of a new opportunity without getting the fundamentals right.

Entrepreneurs and their investors need to stop and take a deep breath. The hype around the green opportunity smells very familiar. In the web industry we’re seeing previously burnt investors hoping this latest wave will be their salvation and entrepreneurs still young enough to think the dot-bomb was an urban myth.

Kleiner Perkins Caufield & Byers’ erstwhile leader, John Doerr, provided an excellent keynote at MIT last month. But, among his brilliant insights were reminders that there is as much hype around the green theme as there was around the Internet. I’m clear on the fact that Doerr knows more than me but the tone of his talk sounded very similar to the dot-com conversations of the late ’90s. Claims that the green opportunity is 10 times bigger than the Internet surge will do nothing to calm the expectations of entrepreneurs, friends-and-family investors and day traders.

The excitement about the environmental and socially conscious opportunities should never be arrested. It is that very emotional momentum that we need to make a difference for our warming and polluted planet. It appears, however, that we are making the same startup slip-ups we made 10 years ago.

Mistake one: Spending too much cash before the entrepreneurs have proved their market opportunity. You would think this is a mistake made entirely by entrepreneurs, but the investment market is equally to blame. For the 10 or so green business ideas we see each month, only two or three will be based on any real research on whether customers will fork out cash for their idea. Greendeavor, the Greenwich, Conn.-based environmentally focused social network has already faded away with no foreseeable revenue model or additional funding.

Entrepreneurs need to be encouraged to bootstrap their business for as long as is reasonable, and not dive into investor relationships. Investors also need to take their heads out of the hype and remember that we were here a few years ago. Founders will always find it easier to spend other people’s money.

Mistake two: These companies still need the best possible leadership. Just because you have a great idea for reducing emissions or solving poverty does not mean you will accomplish it. Whether you are dealing with consumer issues, as is Cambridge-based MakeMeSustainable, or you are turning the utility grid on its head, like Boston-based EnerNOC Inc., you’ll still need a strong team.

Mistake three: The need for speed. Slow down. Drink a fair trade latte and don’t rush. There is no evidence that being first to market is an advantage. FaceBook was late to the social networking game; Google Inc. was the last big entry into the search engine market. Great businesses are built by creating experiences that their customers feel emotionally connected to. You cannot create that without being committed to the long term. Our environmental problems are not going away anytime soon. Sustainability isn’t just for forests.

There could be no greater threat to cleaning up our environmental mess than displaying the same bravado we showed during the late 1990s. There is not much we can do when an earthquake strikes or a hurricane makes landfall, but we still control our business decisions. Not taking money too soon, doing good market research, and taking a slower path to market are things we can do something about.

 

Richard Banfield is owner of Boston web design consultancy Fresh Tilled Soil. He can be reached at richard@freshtilledsoil.com.