Energy innovation is both time- and capital-intensive and heavily regulated. Because investors tend to be risk-averse when it comes to technological development, cleantech startups face a broad array of challenges that can impede their technology from making it to the marketplace. According to one prominent venture capitalist in the energy space, “If I have to put in $30 million to find out if the technology will work, it’s a no-go.”
And herein lies the challenge: promising technologies can take years and millions of dollars to develop and substantially more to penetrate the marketplace at scale. For instance, the internet was originally developed by the U.S. Department of Defense in the late 1960s but didn’t become commercially important until the 1990s. And in the meantime, bootstrapping startup companies fall into the so-called “Valley of Death,” where too much technical risk can lead to a dearth of investment, partnerships and customers, and many such ventures do not survive this extended period of negative cash flow. Indeed, many investors, accustomed to the short development times, low capital cost and ease of scaling in the software space, expect hardware startups to have proven the fundamental viability of their technology before raising capital. Yet, according to Rafael Reif, president at the Massachusetts Institute of Technology (MIT), these companies need help to move their technologies from “idea to investment … to impact.”
Several innovation organizations have been established within the last five years specifically with the goal of helping these startups across this first Valley of Death. These organizations, which differ from traditional business incubators in their focus on technological development and understanding of the unique challenges faced by transformative product development in legacy sectors such as energy, represent promising approaches to ease the path from invention to scale-up in the marketplace.
In a new report published by the Joint Institute for Strategic Energy Analysis, researchers from the National Renewable Energy Laboratory (NREL) have studied a dozen of the country’s top technology-focused innovation organizations to see how these efforts can help companies overcome these challenges. Some keys to their success include substantial early-stage financing with risk-tolerant capital, providing access to expensive resources to develop, test and validate prototypes, enabling trusted third-party validation and demonstration, and facilitating customer and investor engagements.
Below, we share some additional insights into the JISEA study by looking at how innovation organizations have helped three cleantech startups accelerate their respective technology’s path to market.
- Mallinda is developing reversible thermoset resins for composite materials to be used in place of steel or aluminum in the automotive sector. For every unit of weight saved in the car, seven units of energy are saved in propelling the car, representing a potential savings of gigatons per year of carbon dioxide emissions, if deployed at scale.
- While carbon fiber composites already find their way into high-end and specialty vehicles, Mallinda’s innovative resin can reduce the manufacturing time for parts from hours to minutes, opening the possibility for mass and affordable deployment. In addition, unlike incumbent thermoset materials, Mallinda’s end-of-life materials can be circularly recycled to monomer and reinforcing fibers for the recovery and reuse of both resin and reinforcing fibers.
- Cyclotron Road offers an entrepreneurial fellowship program at Lawrence Berkeley National Laboratory to promising technical innovators, embedding these entrepreneurs into the lab facilities for two years while providing a full two-year salary, a development budget, entrepreneurial training and networking.
How Cyclotron Road Helped:
- Mallinda’s founders developed the proprietary resin while graduate students at the University of Colorado. In terms of aiding the technical development, Cyclotron Road provided meaningful capital to extend the runway of their government grants as well as access to specialized lab space to convert bench-scale research into a commercially viable product. Meanwhile, Mallinda was able to hone their pitch through weekly meetings with sector investors organized by Cyclotron Road, culminating in Mallinda closing a $2 million seed round with SABIC Ventures earlier this year.
Smarter EV Chargers
- PowerFlex Systems’ adaptive charging network dynamically adapts to changing electrical conditions, optimizing existing charging station infrastructure with speed and precision.
- PowerFlex Systems makes smart electric vehicle (EV) chargers that can collectively lower load requirements for the building where the chargers are sited. The result: optimized charging for peak demand and other metrics.
- Wells Fargo Innovation Incubator (IN2): A multiyear, $30 million program funded by the Wells Fargo Foundation and co-administered by NREL, the program was created in 2014 to improve energy efficiency in commercial buildings.
- The IN2 program leverages the financial capital and market knowledge of the WFF combined with the technical expertise and world-class facilities at NREL to help promising startups gain traction in the marketplace.
How IN2 Helped PowerFlex Systems:
- As a benefit of selection into the program, PowerFlex worked with scientists and researchers at NREL’s National Wind Technology Center to test its software. NREL was able to use the data from chargers to co-develop an improved algorithm for their smart chargers. At the same time, PowerFlex received validation that their smart chargers work in a real-world application.
And Finally … Fusion!
- Commonwealth Fusion aims to deploy fusion energy to the world on a timescale that will make a difference.
- Combining physics with high-temperature superconducting magnet technology, Commonwealth Fusion is accelerating the path to commercial fusion energy.
- The Engine by MIT: A home for “Tough Tech” founders building the next generation of world-changing companies.
- The Engine takes a hybrid approach to cleantech commercialization, combining a long-term venture fund with access to well-equipped labs and entrepreneurial guidance.
How The Engine by MIT Helped Commonwealth Fusion:
- The common quip “nuclear fusion is 50 years away and always will be” should preclude a startup from claiming to have a viable reactor within the decade. So the notion that Commonwealth Fusion was able to spin out of the MIT Plasma Science and Fusion Center and receive substantial investments from energy companies and VC funds is a testament to the pathways created by The Engine. In particular, the long-term capital and hands-on approach provided by The Engine allowed the fusion company to cleanly spin out of MIT and begin development of their for-profit business model rather an academic pursuit.
Through innovation, the world’s energy system, and by extension nearly every sector of the economy, will see dramatic change in the coming years. Designed to fill the existing gaps that prevent entrepreneurs from commercializing disruptive clean energy technologies, these innovation organizations are constantly iterating and improving their programs in order to better fulfill the goals they set out to achieve. While early results are promising and exciting, they are just the first steps on the path to improved cleantech energy innovation.
Richard Adams is the director of the Innovation and Entrepreneurship Center at the National Renewable Energy Laboratory (NREL). David Garfield is a post-doctoral fellow in NREL’s Innovation and Entrepreneurship Center. Kate Moore is the assistant director of NREL’s Innovation and Entrepreneurship Center.