From ideas to the market: Bridging the gap between cleantech entrepreneurs and investors
How can cleantech entrepreneurs learn to better sell their business ideas to investors? We asked the CEO of an Indian early-stage incubator company.
Adopting clean technology, or cleantech for sustainable, environmentally friendly development is a growing global trend. But entrepreneurs in many developing countries often struggle to find the right investors to get them started, and later to help them scale up and take their product or service to market. So how can cleantech entrepreneurs learn to better sell their business ideas to investors? We asked Kunal Upadhyay, CEO of Infuse Ventures, an Indian early-stage incubator company which is bridging the gap between both sides. Clean technology is just starting to take off in India, as in most parts of developing Asia. What are the main challenges and opportunities for cleantech entrepreneurs in this initial stage? One of the main challenges is access to capital. The venture capital industry and angel investor community are not really putting their money behind cleantech startups as much as they are with Internet businesses or mobile apps. Cleantech is also a very capital-intensive sector, which requires huge amounts of investment for R&D and for deploying the technologies. That’s why cleantech entrepreneurs struggle to go from the pilot stage to commercializing the idea. Often this is more about creating the right business model instead of the right technology. This is a mindset problem, of thinking more about the product than the market for the product. Once the market exists, then I think all the other challenges can be taken care of – including capital. How do you encourage cleantech entrepreneurs to change this product-oriented mindset? As an incubator working with very early-stage entrepreneurs, our goal is to get market validation done on Day 1. Even before the product is ready, we put the entrepreneur in front of potential customers, and make sure they are co-developing the product solution with the customer. Whenever some policy intervention is required, we work with the government on it to help the initial phase of product development and market validation. The second thing we do which really helps entrepreneurs is financing the product development process, and our advice to the entrepreneur is to always co-develop the product with the customer.
The same way you meet with entrepreneurs, you also meet people, firms or institutions interested in investing in cleantech businesses. How does the language change, and what are the main challenges on that side? There are different types of investors. Angel investors are likely investing because they have a passion for a certain sector, while venture capitalists have a different investment yardstick. The investor is always looking at an eventual exit strategy. They are putting money into the company with the hope that 5 years later, they will be able to gain from it. What they are looking for is actual proof – they want to see technology that has been tested, that the customer is willing to use it, and that the market for the product exists. When entrepreneurs come to us, often that is missing. You’ve had a very positive experience working with the Government of India, which seems to be really on board to scale up the cleantech industry. What advice would you give entrepreneurs from countries with governments that are weaker, or less committed? How can they take the technology to market with little or no government support? Irrespective of how supportive a country’s government is, entrepreneurs should try to create solutions on their own, without any official support. The more you start depending on government subsidies, the more distant you will be from the needs of the market you want to sell to.
Having said that, incubators, accelerators and venture capital funds can still use governments to leverage support, if the government is willing of course. For a lot of developing economies where the government does not see cleantech as a pressing need, focusing on solutions which are immediate and obvious—instead of long-term, R&D-driven ones—is the way forward. There are many technologies that have been created all around the world, so what you need to do is create the right business model in the context of a specific country and its market. What that would do is cut down on the gestation period of developing a technology and go straight to creating the business model and taking it to market.
Kunal Upadhyay is CEO of Infuse Ventures, a venture catalyst that provides cleantech-focused entrepreneurs with early-stage venture funds. He also leads the Centre for Innovation Incubation and Entrepreneurship (CIIE) at the Indian Institute of Management in Ahmedabad. Prior to joining CIIE, Mr. Upadhyay was a co-founder of clean drinking water startup Sarvajal, and an internal strategy and operations consultant with Citigroup and American Express.