Friday, October 10, 2008

Inside Clean Technology

Clean tech startups pull execs from diverse backgrounds

By Catherine Williams, Special to Mass High Tech

For Daniel Irvin, a clean technology startup is all about the diversity of its team. Irvin, president and CEO of Gloucester-based Free Flow Power Corp., said the founding executives intentionally represent a mix of backgrounds from investment banking to regulatory compliance. Three Free Flow Power employees, including Irvin, hail from financial services giant UBS AG.

“One challenge for any clean tech startup is to understand business processes. We came at it from getting a business outlook first,” said Irvin.

Yet to land its first round of venture funding, the Free Flow Power pitch is based not only on its team but its hydrokinetic turbine technology as well. Industry experts agree the anatomy of a successful clean technology startup in an emerging market is complex. In order to win investors, startups need leaders with traditional energy market experience wielding a set of mature capital investment plans, existing strategic partnerships and a smart location choice.

Those familiar with the space agree that a clean tech startup faces a special set of rules.

Nick d’Arbeloff, executive director of the New England Clean Energy Council, said clean technology startups require top-notch teams with strong technology backgrounds and extensive entrepreneurial experience. Companies need agile leaders to develop business plans amid a fledgling market that shifts and grows quickly, he said.

“Of the utmost importance is an executive or leader who knows how to change the playbook when conditions on the field change,” said d’Arbeloff.

Irvin said a top priority for executive hiring was finding finance and business development expertise. Other priorities included technological expertise and traditional energy market knowledge. Most of the executive team knew or worked with Irvin before.

Two years ago, Irvin left his job as an investment banker serving on the UBS Investment Bank’s board of directors to jump to the clean energy industry. Irvin said he knew Robert Thibodeau, Free Flow Power executive vice president, socially and through their work on some investment deals. An aspiring serial entrepreneur, Thibodeau has co-founded two companies and has several U.S. patents pending in areas from financial services software to structural magnetic composites.

Henry Dormitzer, CFO, served as the commissioner of the Massachusetts Department of Revenue before shifting to the private sector. Prior to that Dormitzer served as managing director responsible for UBS’s Boston Public Finance Office.

The team also includes Ramya Swaminathan, vice president of project development, who specialized in investment banking as director in UBS’s Public Power Group.

The executive team also has regulatory expertise. As a former renewable energy and municipal water industry consultant, Jason Hines, vice president of product development, is an expert on project evaluation, design and construction. The company’s general counsel, Dan Lissner, specializes in regulatory compliance.

“We believe, in the whole area of renewable energy, there’s a shortage of skills in conventional energy projects,” said Irvin.

Free Flow Power’s technology team is headed by chief technology officer Christopher Williams. Williams founded three companies including Valent Software Corp., which was sold to Waltham-based Lycos Inc. for $45 million in stock in 2000.

There is a delicate balance between finding leaders with business growth experience versus market experience, said d’Arbeloff.  “They can go after a star athlete that grows companies or go after a rock star in a directly relevant market.”

For companies on the cusp of pitching venture capitalists, there are other components to think about.

It’s easier to draw in venture capital when startups have established strategic partnerships, said Dennis Costello, managing director of Boston-based Braemar Energy Ventures. Partnerships mean the startup is connected to the larger energy infrastructure, said Costello. He looks for companies that have joint partnerships with LED-based lighting technology manufacturers or meter suppliers, for example.

“Strategic partnerships are always very compelling,” said Costello.

For solar companies, Costello said, startups should have a steady source of silicon. Overseas production agreements tell investors a startup is far enough along the development cycle for serious investment, he said.

Due to the capital-intensive nature of the energy industry, Costello said, winning startups should also have a strategy to address future capital needs when seeking out venture funding.

Founded in June 2007, Free Flow Power employs 10 workers. As it begins its hunt for financing, the company plans to launch more than 100 projects in the Mississippi River and its tributaries in Mississippi, Missouri and Ohio.

Irvin said the company chose to locate on the North Shore to be close to where principal founders lived. Opting for cheaper office space, Irvin said the company considered sites in Manchester-by-the-Sea and Beverly. Since the company plans to launch so many projects on or near the Mississippi, Free Flow Power plans to open an office in New Orleans within the next six months.

Costello said location is critical to energy startups. Demonstration project sites require on-site scientific expertise, he said.

“You’ve got to be somewhere where there is a pool of qualified workers,” said Costello.

 

Catherine Williams is a freelance writer in Boston.