Could green startups be the answer to a cleaner future, and if so, are they getting enough support?
A prominent businessman once said that young business should be seen in the same light as young nations. We invest in education because young people will become future leaders. In the same way, investing in startups should be a priority, because small business, if nurtured, can become big business. This man was Fadi Gandour, the founder of Aramex, one of the world’s largest logistics companies.
There is no doubt that attitudes are changing and things are picking up for small businesses. But is it the same for green startups? As climate change tops global headlines, the earth’s reality of slow destruction is becoming more frightening. The answer, many have said, is innovation. A quick glance at the business world will narrate countless success stories of innovative startups, with the likes of Uber, Tidal and Snapchat. Baby boomers doing big things. So where are the groundbreaking clean tech ideas or the fantastic startups that will revolutionize energy or reduce carbon footprint at the touch of a button? Why are we inclined towards new companies that yes, meet our needs, but also add to the mass consumer culture that is destroying the environment?
Green startups do exist, and innovation is budding. But the scale is still unfortunately far too small to make any significant difference yet. The potential of these startups is prominently unknown due to lack of media attention.
The problem has many faces. Part of it has to do with funding and a lack of support both from big business and consumers. People who start green companies and the consumers who support them are those having personal inclination towards environmental conservation, but unfortunately they are still in minority. This may change, but will take time. The other side of the problem is lack of experience among entrepreneurs, which often discourages potential investors and leads to a high failure rate.
Green is Good for Business
According to investment expert, Hisham Al Gurg, green startups actually attract more investors, as they want to be associated with Green or Eco-Friendly companies. He says people are ready to invest at risk but only if certain parameters are met. Al Gurg is the CEO at the Private Office of HH Sheikh Saeed bin Maktoum, one of the Dubai ruling family members. His office aims to attract smart and ambitious business projects in the region for direct investment opportunities.
The most common mistake that many startups make, according to Hisham, is that they don’t invest enough time into researching their idea. At times they have excellent business plans and inspiration, but very often the idea has not been validated by customers, so when they launch, they find that everything they assumed to be true is not.
“The majority of startups fail early, mainly due to lack of experience. Many turn their hobbies into business, without much understanding. Business is not rocket science, but to make it a success, it requires time and in business, time is very expensive. You have very costly payouts, so don’t start until you have carefully thought it through,” says Hisham.
His advice is to find a mentor or join a business training course for making your business successful. Al Gurg is currently spearheading Lean Launchpad, which was brought to the UAE from Silicon Valley. It’s the kind of training he suggests all entrepreneurs should undergo, as the trainees get a chance to go out into the market and interview customers for their feedbacks.
“This will have a huge impact on startups in the region, as well as the incubators and accelerators because it will reduce the failure rate. It will also attract more investors on account of the credibility gained after receiving the certificate of training. Investors often believe that investing in a startup is too risky, he says. Hisham also advises entrepreneurs not to borrow money from family or banks, as they are not designed to assist small business. The best option, he says, is angel investors.
“Majority of us don’t want to recieve merely interests for our money locked in banks. We all seek opportunities to invest in business projects,” he says. “We look for something that is unique and in demand. We look for the person pitching the idea and judge how flexible and coachable is he? Is he committed or is he going to quit on us? How experienced is he in the proposed field? We also look at how scalable the idea is. Will we have to keep putting money into the project or can it generate its own revenue quite quickly? We are looking to invest in companies that can generate revenue up to 100 million within 5 years.”
As far as green startups go, Al Gurg is confident that there is a growing interest in clean tech companies. He agrees that though they are few in number but believes that they can flourish if given more attention from the private sector, governments and other stakeholders. Venture capital firms are crucial for new, innovative businesses at all stages of development. Angel investors, in particular, usually provide the capital needed when there is no guarantee of any revenues—and often no guarantee of even a completed product. This is more complicated with green companies, specifically the clean energy business, as its aim is not merely to create a simple product, but to build infrastructure.
Nonetheless, Al Gurg says, “The opportunities are there. Investors love green projects because it’s not a crowded space. If done the right way, they can be very profitable.” Commenting on the success of Silicon Valley, he says it’s unique and within it, is a complete ecosystem.
“When you start a company, you need money, guidance, mentorship and legal support, and all of this is provided in Silicon Valley. It’s a mature market and we can learn a lot from it, but it’s a difficult model to replicate.”
John Van Zuylen, the founder of a small, yet successful startup in Dubai offers a slightly different perspective, as he consciously chose the self-funding route. But even as he talks about his experience, a similar theme resonates – business skills are important. John describes himself as a “cautious thinker” rather than a “rusher”.
Originally from Belgium, he moved to Dubai six years ago, and together with his wife, founded “Keep it Clean”, which is dedicated in making eco-living much easier for city dwellers. They noticed a stark difference in the approach to recycling compared to what they use to do back home and saw this as both a niche in the market as well as an opportunity to do something good.
“At home we have five types of garbage bins, and we have to buy different colored bags from the shop. The bags are also transparent, so if you don’t separate your rubbish correctly, you get a big sticker on your bag so the neighbors can see what a bad person you are,” jokes John.
The company’s latest project is Homecycle, which is a home recycling service that allows members to request daily pick-ups of recyclable waste from their doorsteps. They collect in small quantities, which no other recycling company will do. In just few months, they already have more than 700 members and have diverted more than 13 tons of waste from landfills. It’s a great idea, especially for people in apartment buildings who have limited options for recycling. The company is only four years old, and operates with a small dedicated team of 5, but it’s growing steadily.
“I don’t know many companies who get several calls and emails every week, just to thank them!” beams John, who relies mostly on word of mouth to reach people. All the services provided by Keep it Clean are free, and the income is generated from CSR projects with big brands. The plan is to grow the number of members to reach at least 5% of the local population and later expand globally.
It hasn’t always been easy, admits John, who has a business studies background and works as an independent consultant for the waste management and solar sector. Some of the main challenges have been starting from zero, administrative set-up, logistics and public scrutiny.
“As a green startup we’re in the kind of business that makes us soft targets for scrutiny. Many people perceive us as purely recycling service providers, so if we do one thing that’s not 100% environmentally friendly, we get a lot of criticism”, he says. He admits there were many times when he wanted to give up, but his love for the environment kept him going, along with the tremendous support from customers.
“My work has a purpose. It’s what drives me to work 14 to 16 hours a day!” he says.
Despite his passion for work, Van Zuylen’s way to take on things is refreshing. His advice to other entrepreneurs is to be patient, don’t rush into it, but at the same time don’t take too long. Execution is important, according to John, as somebody else out there may have the same idea as yours, but the difference lies in how fast you realize that idea. He says people also underestimate the importance of luck and timing, in the sense that sometimes even if your plan looks perfect on paper, it may just not work out. John’s outlook is that it’s a game in the end, and you have to accept that, try to influence it, but also be able to adapt when things happen that you did not anticipate.
For most green startups the biggest challenge beyond securing seed capital, is probably, how do we make money? Unless you’re manufacturing solar panels or biodegradable cups, selling a concept of eco-consciousness is not easy.
“You can’t ask people to pay for doing the right thing. So we need to motivate people in a different way,” says John. “In the end it’s all about the money. If u can explain to people the true cost of their actions or how your startup can benefit them they will buy into your idea.”
He believes there is scope for many more green startups, not only because it’s the right thing to do, but also because it’s a business and people are definitely interested.
When asked about his dream for the company, he replies, “It’s a strange dream. Somehow I wish we would not have to exist. It’s based on a feeling that we can do better for the environment.”
“Maybe we will look back and say we were crazy, but for now it’s working.”
Can Green Startups be the Next Big Thing?
It’s also working for a number of green startups across the international stage. New funding options are making this easier, such as startup competitions and crowdfunding platforms like Kickstarter and Indiegogo. One US Company called Simple Shoes recently launched a KickStarter campaign to raise funds for their startup that makes shoes from sustainable materials. Already, they have quite a following.
In China, a former chief technology officer for the country’s largest Internet search-engine started a company that develops electric scooters. It uses the same lithium-ion batteries as the Tesla Model S, and he plans to export them to Europe. Li Yinan invested $3 million of his own money into the venture and has completed a round of financing that raised $50 million in total. The E-scooters can cut carbon emissions by 42 million tons a year.
These are just a few of many emerging green startups, but many that go unheard of. Waiting to see which of them withstands the test of time will be interesting, but let’s hope we don’t have to wait too long!