What Cleantech Is and Why It Matters

By Dominique Trempont, Guest Author

Having spent 14 years of my professional life at Raychem Corporation, the world leader in material science and technologies, I was exposed to cleantech businesses before they were named that way. I am very interested in this field because it addresses the quality of our air, water, the sustainable availability of key natural resources and the well-being of mankind in general.

What is cleantech?

Quoting the CleanTech venture report.

The concept of “clean” technologies embraces a diverse range of products, services, and processes that are inherently designed to provide superior performance at lower costs, greatly reduce or eliminate environmental impacts and, in doing so, improve the quality of life. Clean technologies span many industries, from alternative forms of energy generation to water purification to materials-efficient production techniques.

The term “clean technology” describes technologies developed by biological, computational, and physical scientists and engineers that enable more valuable use of natural resources and greatly reduce ecological impact, although this may be only one of a technology’s benefits. […]

The impact of clean technologies is ubiquitous: there are large and highly disruptive market opportunities emerging in the multi-billion dollar agricultural, manufacturing and transportation sectors, as well as in the fundamental enabling areas of energy and water.

Example: an emerging cleantech shining star

I recently visited a very interesting and promising company: Energy Recovery Inc. in San Leandro, CA. Energy Recovery Inc. is the world leader in high efficiency energy recovery technology for seawater and brackish water reverse osmosis systems. Its energy recovery technology uses the principle of positive displacement to achieve efficiencies up to 95%. This technology is making desalination affordable.: it can turn deserts into forests and provide affordable water to everyone on earth. Quoting Hans Peter Michelet, Chairman of ERI: “Our oceans are now becoming our future fresh water reservoirs; it is cheaper for California to desalinate the Pacific than to continue to use the Colorado river water”. This company has the potential of becoming one of the shining stars of cleantech.

California takes the lead in cleantech

California is taking the lead in structuring this innovation. I attended the 2006 Award Ceremony of the California Clean Tech Open, at San Francisco City Hall on September 26, 2006. This was an interesting event sponsored by prominent entrepreneurs in different fields. For instance, Frank Levinson, founder of Finisar, is a gold sponsor of the event; we are both on the board of directors of Finisar. Another gold sponsor is Geoff Ralston, former Chief Product Officer of Yahoo!, whom I met on the advisory board of INSEAD. Vinod Khosla, a famous venture assistant (as he calls himself) provided a fascinating overview of what is ahead. Take a look at his site. There was also an insightful talk on the economics of cleantech by Arthur Rosenfeld, PhD, professor at Berkeley and California Energy Commissioner. More on this later.

Dissecting Online Tutoring

A number of businesses have cropped up that claim to provide online tutoring. It is a multi billion dollar market opportunity with incumbents such as eSylvan, and upstarts such as Growing Stars and Tutor Vista.

My thesis: the service is only effective in a one-on-one mode, and the P&L, then, is only interesting if off-shore tutors are used (i.e. tutors from India, China, Eastern Europe). India may the best solution, because language problems may be more of an issue elsewhere.

Here are some questions to ask in analyzing a tutoring business:

– How many students are they tutoring?
– How many hours on average do the students use the service?
– Who are these students? Public school students? Private school students?
– Any ethnic bias towards kids of Indian/Asian parents?
– Any geographical bias? Which school districts are adopting the service?
– Experience with home schoolers? Is that a segment they serve? What percentage of the business is home schoolers?
– What subjects do they receive the maximum number of tutoring requests for? Algebra I? Calculus? Biology? Physics?
– Do they ever have missed appointments, whereby students skip their scheduled session?
– What kinds of skill-gap assessments do they do? How do they zero in on what to focus on?
– What content/syllabus do they follow in tutoring the students?
– How do they reconcile state-to-state and school-to-school variations in course material?
– What is the user experience like? Hardware? Software?
– What is the pricing model?
– How much have they benefitted from NCLB certification?
– How do they market the service?
– Do they have experience with advertising using the MySpace/Facebook communities?
– Do teachers recommend/use the service to help their students?
– What are the primary drivers of the business? Test-preparation? Homework help? Other?
– Any issues dealing with teacher’s unions (NEA, etc.) due to off-shoring?

Here are some facts to keep in mind on this market:

While the tutoring TAM is very large ($5 billion), online tutoring TAM is likely to constitute of students who are quite motivated, and omit the ones who are not. This may limit the market substantially, and precise segmentation is necessary to tap into the right set of customers for efficient scalability. In my assessment, Growing Stars, one of the earlier entrants to this market, is doing a miserable job of strategic marketing, and hence will have difficulty gaining any traction whatsoever in terms of growth financing. The one thing they do right, however, is have a 1:1 service, which positions them well against the 1:2 and 1:3 offerings like eSylvan. Personalization is key. They understand that.

There are a number of VCs looking at deals in the area, gauging from the questions I get. It was not so two years ago; this is a good sign.

I haven’t seen the “right deal” yet, though, that warrants financing.

Hey, CEO! Do You Know How To Dress?

A few weeks ago, Businessweek published an article that caught my eye: Where MBAs Learn The Art Of Blue-Skying. For the longest time, high-tech has produced entrepreneurs and CEOs who are, for the most part, nerds. Fairly unidimensional, Silicon Valley is not known for its taste. It is known for its amazing talent in figuring out physics and electronics. BUT.

The but factor is Steve Jobs. Steve Jobs has taste. Exquisite taste. The staircase at the office of NeXT Computer (that salvaged Apple, eventually) was designed by I.M. Pei, one of the most fundamental thinkers in the history of architecture. And hence, it is no surprise that Steve Jobs is the one who comes up with the iPod, or, for that matter, the NeXT computer. (When I was in college, there was a “shrine” for a single NeXT machine in the computer science department at Smith College.) NeXT was a slick black animal, panther-like, precise, crisp. All those words that evoke imagery of salivating women. To me, the design of NeXT was like Pugliese, one of the greatest maestros of Argentine tango music.

According to Businessweek, “If you are looking for a business school that teaches you how to think creatively, design new products and services, manage your innovations through a corporate bureaucracy, or present them to outside angel investors, Fontainebleau, France-based INSEAD, the leading European business-school just outside Paris, may be just the place. INSEAD has joined with the Art Center College of Design in Pasadena, California to offer a joint program that teaches the role of creativity in business decisions, how innovation really works, and why design may be as important to corporate management today as Six Sigma was in the 1990s. A Swiss trustee who sits on both boards brought them together.”

I am delighted. The marriage of business savvy with design and creativity is essential. For example, I am frustrated that the Toyota Prius has not been able to come up with a better design. The world’s top-selling hybrid car is an ugly piece of industrial design.

Of course, it would be great if the fashion business learned some business, too! It would at least help them in staying . . . well . . . alive?