Seattle clean tech needs a startup star like Chicago’s Groupon
For the Seattle clean tech sector to finally take off and reach its potential, it needs a breakthrough success story, according to a handful of local entrepreneurs, executives and investors. It needs a company to do what Groupon has done for Chicago.
Here’s the analogy: For years, the Windy City was an underachiever in growing tech startups, outpaced in tech jobs not only by coastal hot spots like San Francisco and Boston, but also by smaller markets like Dallas-Fort Worth. The founders of Netscape, PayPal and YouTube all studied at the University of Illinois, WBEZ Chicago reports, but they all left for Silicon Valley to make it big. Among ambitious tech entrepreneurs, Chicago had a reputation as a place to escape.
But the meteoric rise of Groupon is changing that. The company, which offers huge discounts on things like restaurant meals and hotel stays, has grown from 200 to 3,000 employees over the last two years. It’s rumored to be clearing $1 billion a year in revenue, and last December it declined a buyout offer from Google reportedly worth up to $6 billion.
That growth affects the city in several ways. For one, it creates a lot of wealth for Groupon investors Brad Keywell and Eric Lefkofsky to reinvest in new local startups. They’ve created an angel firm, Lightbank, to do just that.
It also provides experience for a lot workers who may decide to strike out on startup ventures of their own. Here’s Groupon founder Andrew Mason’s colorful way of explaining the cycle, according to radio station WBEZ.
“What’s made Silicon Valley Silicon Valley is the fact that there have been a lot of great companies that start there and then they get big and they get too big and they become a sucky place to work and then all those really smart people that learned so much go off to start their own things,” he said at an event last spring. “So I think for Chicago to really develop a strong technology community, we need companies like Groupon to get really big and then start to suck and then for all our people to go off and do other things. “
The company’s success also upends Chicago’s reputation as a dot-com backwater, a less tangible effect that makes it more likely entrepreneurs will stick around.
“There are enough successes now in our community that young entrepreneurs can look at those successes and say to themselves I can absolutely do it here, I can do it here in a unique way that I probably couldn't do it on the West Coast,” Groupon investor Brad Keywell told WBEZ.
Groupon hasn’t come up by name in my recent conversations with Seattle clean tech leaders, but the need for a standout example has been a recurring theme. A shining star of a company, they say, would attract more workers from the region’s deep pool of IT talent. It would attract investors who have been cool to the turbulent energy industry. It would bring some swagger and glamour to an industry that has been slow to take off in the Northwest.
“What really needs to happen to get into a full swing are examples of success,” said Byron McCann, an investor who wears several hats – consultant at Ascent Partners Group, regional co-chair of the Clean Tech Open competition and co-chair of the Northwest Energy Angels, an early-stage funding group.
He would like to see more frequent exits – acquisitions and public stock offerings – that give clean tech founders cash to reinvest in new ventures.
Entrepreneur Gino Borland and Mark Liffmann, vice president of business development at the nano-materials storage startup EnerG2, echoed the same point. Liffmann’s also a regional director of E2, a network of business leaders advocating for strong environmental policy, where he’s been working to attract high-level executives from the region’s top IT firms. Having a local clean tech standout would help, he said.
For Cascadia Capital’s Michael Butler, who leads one of the few regional investment banks with a clean tech team, the key is getting more of that executive talent to switch over to clean tech.
The industry already has a high-profile failure of sorts in Imperium Renewables, the biodiesel producer that cancelled a planned initial public offering in 2008, saw its chief executive resign abruptly and had an explosion shut down its main plant last spring. (The company says it’s getting back on track.)
So who’s likely to become that success story?
Liffmann was too modest to mention it, but others peg the venture-backed EnerG2 as one of the most promising prospects. It’s got proprietary technology, a growing market (for storage and ultracapacitors), a well-regarded chief executive in Rick Luebbe and success in netting federal grants.
Other names that get mentioned include EnergySavvy, the maker of user-friendly home energy measurement software and HydroVolts, the in-stream hydro-power turbine designer that has won the regional Clean Tech Open the last two years.
Building a star company is, of course, tougher than talking about the need for one.
“When we start to see that here, I think the investors that are traditionally focused on IT will get excited about allocating more to clean tech,” McCann said. “Then I think things will really get going.”