There is no obvious cleantech equivalent to startup accelerators in web and software, at least not if you account for reputation. YCombinator and TechStars are household names in their corner of the startup world. They attract top entrepreneurs and businesses, and between entry and “graduation” confer a potent mixture of education, mentorship, and introductions that in many cases takes startups from launch to funding in a matter of weeks.
Can the accelerator model work for cleantech?
“Web accelerators are interesting because so much can be done in 3-6 months that an idea could develop into a company with real world traction in that period of time,” said Bilal Zuberi, a venture capitalist at General Catalyst. “Cleantech has typically been a different story. It’s been a struggle to see how one could show demonstrated traction in 3-6 months.”
And even if an accelerator model can work for cleantech, it’s unlikely that the same handful of accelerators can handle the needs of web and cleantech ventures simultaneously.
“Cleantech companies typically take much longer to develop, significant capital, and are higher risk,” said Scott Bailey of MassChallenge, a nonprofit accelerator, when asked about the difference between the needs of cleantech and web startups. “Cleantech companies also need much larger space, access to grants, and runway to develop their product.”
Though MassChallenge has accepted cleantech companies into its competition in the past and will continue to do so, this year it has chosen to partner with the regional branch of the Cleantech Open, a business competition and accelerator (more on CTO later).
The closest thing to the traditional accelerator model for cleantech is Greenstart, based in San Francisco and now in its second year. The program runs 12 weeks and includes $15,000 in seed investment and $100,000 in convertible debt for accepted startups, in exchange for a 5% equity stake.
While it’s too early to say much about the program’s success, its founders learned a key lesson in year one: focus on the intersection of IT and cleantech.
“What we quickly came to last year was that the intersection of cleantech and IT is where investors are most interested and where the entrepreneurs are doing the most interesting things right now,” said co-founder Mitch Lowe. “Many cleantech companies are a longer gestation period. There’s not a lot that an accelerator can do for them.”
The fit makes sense. Cleantech plays with a software component fit nicely with the accelerator model. They don’t need lab space or test sites, and they make sense for VCs – the next stage of the pipeline for accelerator grads – who might be skittish about more capital intensive ventures in, say, electricity generation or storage.
But if Greenstart has narrowed its focus to fit the traditional accelerator model, the Cleantech Open has moved in the opposite direction.
Founded as a business competition with a mentoring component, CTO has evolved into a sort of distributed accelerator model. It accepts applications from which each region then selects semi-finalists – there were 29 in the Northeast last year – to participate in the accelerator and compete in the competition.
Semi-finalists start with a three day bootcamp, and then receive mentorship and attend pitch and networking events over a four month period. And it only selects businesses that are mature enough to benefit from its services.
“In cleantech, especially if it’s a product related company, you can’t just turn a product into a business in four months,” said Alexandra Adler, Northeast Regional Director of CTO. “You just can’t do that.”
Since CTO has no physical location, it can accept businesses that can’t fit in a typical co-working space, but that means a less cohesive “class” experience for the startups going through the program. CTO does subsidize space at a variety of incubators.
And whereas Greenstart is focusing specifically on businesses that fit the VC model, CTO makes a point to help participants explore alternative funding sources like government grants.
Despite the stark differences between Greenstart and CTO, their philosophies aren’t really at odds at all. Both recognize that some subsets of cleantech fit better with the VC model than others. Both recognize that sectors like solar and wind aren’t good fits for the traditional accelerator model. And both approve of the other’s efforts.
“If there are people out there that are trying to help young cleantech companies succeed, that’s just great for the world,” said Greenstart’s Lowe.
There was a general consensus among those I spoke with that since cleantech entrepreneurship is relatively less mature, it lacks both the strong angel and mentor network of web and software, and its depth of seasoned entrepreneurs. For both Greenstart and CTO, building those networks and creating those entrepreneurs are a priority.
“We simply can’t afford to be worrying about the boundaries between different efforts,” said Rob Day, a partner at Black Coral Capital and chairman of CTO Northeast. “It’s all hands on deck time in cleantech and we need all the help we can get to pull through.”