Finding the Green in Green Biz

August 08, 2008

Case categories include: Trends   

With gas prices averaging over $4.50 a gallon, could there be any better time to be selling electric motorcycles? Probably not. But that doesn’t mean Alliance member Zero Motorcycles – which sells an electric trail motorcycle that gets up to 40 miles on a single battery charge – has got an easy ride.

“Green is a very interesting aspect of the company,” says Zero Motorcycles CEO Gene Banman. “But the challenges are really traditional challenges.”
Other Alliance members who run “cleantech” businesses tell a similar story.
Sure, the industry is hot. High energy prices coupled with growing consciousness about global warming is making green choices popular with businesses and consumers. And venture capital continues to funnel toward companies whose focus is providing energy, transportation, shelter and medicine in more environmentally sensitive ways.

Yet for all the hype, running a green business carries its own set of challenges -- not the least of which is managing growth. Banman (Group 305) who joined the company last year, describes this challenge as the fine art of “blocking and tackling” that comes with starting up any manufacturing company.
As of June, Zero Motorcycles, based in Scotts Valley, was building and shipping 10 motorcycles a week, but had a backlog of about 60, Banman said. Pretty soon, the company will be moving its bike frame welding business to Asia, which should ease the production strain.  But in the meantime, “we’re trying to catch up,” Banman said. “The orders keep coming in.”

Another challenge has to do with organic cash flow. Many green businesses would have trouble without financial investment or government incentives – and there’s no guarantee they’ll continue to get either.Until recently, there were no government subsidies to encourage the development of solar power, according to Paul Detering (Group 302), CEO of San Mateo-based Tioga Energy.
Today, companies like Tioga, which provides solar installations to commercial, government and nonprofit customers through long-term power agreements, benefit from a U.S. investment tax credit that’s due to expire at the end of the year. There’s no current plan to extend it.
“It impacts our business, and it impacts our whole industry,” Detering said. “I don’t think (businesses) should be subsidized in the long run … But subsidizing them at least initially is a good thing. It allows them to get off the ground.”

And here’s perhaps the biggest hurdle: Being green isn't enough.  It must prove it can help its customers reduce costs or increase revenues, or both. That’s not always easy when the technology behind many green businesses could still use improvement, or is still under development. CEO Darron Brackenbury (Group 110) of AIC Labs, said his company has routinely had difficulty explaining its value proposition to businesses.

Alameda-based AIC Labs, is a research and development company that has developed new technologies for batteries, biofuels, sustainable mining and water treatment. “If you can show people that you can put dollars in their pockets or save them dollars … you’ll always get a hearing,” Brackenbury said. “The challenge is to develop, scale, and demonstrate the technology in a commercially viable form, in a reasonable period of time.” Fortunately, AIC Labs has gotten better at it.

When Brackenbury and his two co-founders started the business in the mid-90s, AIC Labs was a consulting firm, and its expertise was electric chemistry. The business has since grown into a public company with three spin-off businesses. The current green trend has definitely helped AIC.
“We’re fortunate to be in position to ride on that wave,” he said. “Clearly, smart, large corporations are looking to the future all the time to consider what they should and shouldn’t be involved in, from wind power to more efficient vehicles, or whatever.”
Aside from the specific challenges, there are plenty of reasons why it’s a great time to be green.

The easiest one is money. According to the MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association, “cleantech” snagged $3 billion in investment dollars in 2007 and more than $600 million during the first quarter of 2008, in spite of a softening economy.

All those dollars have led to some great career opportunities for CEOs. Detering, a former telecom and data networking executive, began transitioning his career toward clean energy three years ago. He said it’s exciting to be part of what he calls the energy industry’s “renaissance.”
 “They haven’t seen a lot of change, and right now, we’re at a period of dramatic change,” he said. “That’s a lot of fun.” Meanwhile, the technology driving many green businesses continues to improve.

For example, there’s been interest in electric vehicles for years, but the batteries just weren’t good enough. “When the lithium battery came out a few years ago, we could really build a motorcycle with a lot of range and power,” Banman said.
Of course, current gas prices aren’t hurting sales, either.
“No question,” he said. “Four dollars a gallon is wind at our back.”