VerdeXchange 2012: Global Models for Fostering Cleantech Innovation and Commercialization

Alex Beavers (SRI International): Let me introduce this panel by noting that I think this is the finest conference I’ve been to on clean technology in terms of the scope, the topics, the quality of speakers, and the energy and interest of the participants.  Thanks for allowing me to participate.

I’d like to offer a couple of words on what Stanford Research Institute is doing globally regarding commercializing technology. SRI is a non-profit research organization; we do contract research. We were founded by Stanford University 60 years ago with the goal of bringing good things to life. We have over 2000 scientists, quite a few of whom are in Menlo Park, CA, in the heart of Silicon Valley.

We’ve learned some lesson in Silicon Valley about commercializing innovation and the fact that it’s a global experience now. At the end of 2010, SRI did about $500 million in contract research. That means we have about 1000 research and development contracts going on at any time. My job is to find technologies among those 1000 projects that look like they may have a value in the marketplace for clean technologies. So out of those 1000 projects we’re working on in any one year, we usually end up doing two or three startups and half a dozen licenses. That tells you about the kind of challenge that we have in identifying good R & D and making sure there’s a need for it in the marketplace.

A couple of innovations we like to brag about at SRI include the very first mouse. In the late 60s there was some innovation at SRI, which led to some of the concepts that we take for granted today—point and click, server-client relationships, the mouse, and so forth. Unfortunately, SRI gained nothing financially from that commercialization—all of those technologies were commercialized by someone else. So over the years we’ve learned how to harness and accelerate that innovation. We created the startup company Intuitive Surgical, a robot surgery machine that is becoming very important in medical care. We also worked on Siri, a company that Apple acquired eighteen months ago and is now in the iPhone 4S. Siri was founded by SRI using technology created by the CALO project, which was funded by DARPA.

We also have quite a few technologies that we’re working on in the clean tech space. We have license to companies with a silicone feedstock technology, which produces silicon that is used in solar voltaic cells at a much lower cost than the conventional technologies that are used to produce microprocessor silicon. We’re also developing a water purification system that’s based on a catalytic process. We’re also commercializing a technology for carbon capture, which basically grabs CO2 out of exhaust plumes, taking it out of the natural system and turning it into an industrial product. We also have a synthetic biology project where we are working on designing new biofuels so that we’ll be able to produce renewable energy that will fit into the existing fuel systems.

We employ over 2000 people on contract research, and coming out of that are technologies that we commercialize. SRI participates financially by receiving royalties from the technologies we license. We take an equity position in the companies that we startup because of the technology we’re investing in with that company. SRI does get a financial return from the equity that is created, which is shared with our employees as well as with the inventors, so there is a financial incentive that helps stoke interest in the research. 

We’ve been in the middle of Silicon Valley for the last sixty years so the ecosystem that has grown up there to support the commercialization of innovation has been evolving over these many years. There is a continuous stream of visitors to SRI from delegations from around the world that are interested in establishing commercialization centers and initiatives. We have been distilling out of that evolution the best practices in commercialization. Basically, the thing that we’re learning is the desire to commercialize innovation is truly a global desire. For the startup companies that we create in Silicon Valley, we always have a business plan that considers the international competition issues. The entrepreneurs that join our startups come from all over the world as well. 

When we talk about putting together a business plan for a startup there are four major things that we consider: What’s the market need? Do we have an approach that satisfies that need? How beneficial is that approach? Finally, we need to understand who our competition is so we know how to evaluate and develop our business strategies. We’re talking about global competition. Every startup we create is concerned with the global competitive environment.  

Jonathan Dogterom (MaRS): MaRS is a large convergence center in Toronto, Canada. It’s often referred to as an incubator, but only about ten percent of the actually space we have is used to incubate entrepreneurs and new ventures. Overall it’s about 700,000 square feet, and it is two office towers. We’re in the process of building a third tower, which will bring us up to about 1,500,000 square feet. We are located right in the heart of downtown Toronto in an area that is called the Discovery District. It’s called that because all around us are academic institutions, research hospitals and facilities—really the center of a lot of the innovation that comes out of Ontario and Canada. We’re also bordered on one side by Bay Street, which is Canada’s equivalent of Wall Street.

It’s no coincidence that we’re located there because we’re trying to bring together the business community, the entrepreneurial community, and innovation. By bringing them together in one facility and one roof, we can move forward with commercializing innovation faster and more efficiently. We have three different groups that we focus on: life science and health care, which is how MARS started out (MARS stands for Medical and Related Science); we then expanded into IT; and then into clean tech.

The structure and what’s being developed at MARS, the model is based on the fact that it takes a long time to move forward with innovation and to create jobs out of it. It takes a long time to build a knowledge economy. We’ve been at it for about six years now, and we’re happy to report that last year our entrepreneurs and clients were able to generate about 600 new jobs and raised over $120,000,000 in capital to move forward with their efforts.

In clean tech specifically, our clients were able to raise about $60,000,000 to move their ventures forward. In clean tech we have been really fortunate in Canada and Ontario; we’ve got some strong support mechanisms in place and some great people helping us out. Our model works largely on a volunteer advisor base—people who have built companies before are giving something back to these new ventures, helping to guide them with their experience. One of my colleagues, Paul Mertes, who is one of the advisors with us, was critical to bringing the VerdeXchange last year to Toronto. It’s due to our volunteer advisors and their investing their social capital and their belief in the cause, that we were able to get traction.

The other thing about being in Ontario and Canada is that we have a very supportive government when it comes to green technology. Many of you are probably familiar with the green energy act put into place in Ontario a few years ago. One aspect has been the feed-in tariff program, where solar, wind, and other renewables are supported in grid connection at the proper rate to level things and make them competitive. That has really been critical to clean tech and innovation. Although it doesn’t specifically target innovation, it’s been able to build a bit of a manufacturing base in Ontario, which is really important when it comes to innovation. Without a manufacturing base, you don’t get the pipeline of innovation that you need.

What we focus on within our practice is not the specific manufacturing of existing technologies—we’re looking for what we are going to be able to manufacture next in the clean tech field. What are we going to be able to provide to export markets, and how are we going to create sustainable jobs in the future of the field? We’ve broken clean tech down into about twelve different sectors. There are a lot of different aspects to it, broadly speaking. We cover energy, transportation, agriculture, water, and advanced materials; there is a lot under that clean tech umbrella.

The practice started out two and a half years ago, and we’ve looked at about 500 different ventures. We tell everyone in Ontario that it is free to come in, talk with us for an hour, tell us what you’re working on, and we’ll try to guide you in some direction. Out of those 500 ventures that we’ve seen, we have about 160 entrepreneurs that are actively pursuing their business. In terms of job creation in Ontario, out of those 500 we’ve pegged 37 as high potential innovations that will make a difference in clean tech and that will be able to create sustainable jobs. 

I mentioned the size of our space: 700,000 square feet. What we do is populate it with strategic tenants. We’ve tried to bring under one roof everyone you need to build a successful business. We’ve got law firms, venture capital firms, and of course a lot of different research entities, that are all working together. We’ve tried to create an ecosystem where you bump into someone in the hall and it turns into a conversation that turns into helping move innovation forward. As in cities where the density of people propels ideas forward, we’ve tried to this do under our roof. We’ve tried to structure it so we don’t have to go back to the government every year and ask them for more money. We want this to be sustainable, and the way we do that is by taking the rent from the tenants and putting it into offering these free services for entrepreneurs.

As far as the specifics of what we provide, we’ve tried to set it up so that there’s something for everyone. Even though we’ve targeted 37 ventures as being the high potential ones for job and wealth creation, there’s another 100, specifically in clean tech, adding jobs as well.

We’ve put in place a robust education program; we provide it for free on our site at MARSdd.com. We videotape the conferences and programs that we have and make it free and available to everyone. Our education program holds a weekly session called Entrepreneurship 101, where we bring in experts from all areas of business creation, whether it’s the creation of your value proposition or market strategy. It’s not a credited program at a university, but we have 250 people every week showing up for that class. 

Within clean tech there are three of us present as employees working with these entities, and we have about 20 volunteer advisors, all senior members within the industry giving back time. Another thing that we’ve pulled together is a market intelligence team. When someone comes in with a new venture and they’re working on their value proposition and they’re trying to figure out their path forward, we can help to arm them with some of the data they need around their market and the value chain within it. We provide all of that for free. That’s been accomplished through the relationships we’ve established with a lot of the other research entities and the large research groups. As an entrepreneur, you wouldn’t be able to pay the $5,000-$10,000 fee for research reports—we’re able to provide that to them, and it’s of huge help.

We have law firms, PR firms, and consulting companies that also offer free services to our clients. They’re looking to establish a relationship with a company that’s going to move forward, raise some funds, and will need their services down the road.

We’ve built a good network with the sources of capital out there. We’ve worked to make sure the venture capital community and angle investors know who we are and what we can bring to the table. By going through those 500 ventures and narrowing it down to 37, they can see a huge amount of values in what we’re doing. As a third party, when we call them they know the only reason why we’re doing it is we can see the potential in the opportunity. We hold regular angle breakfast events where we put three companies in front of qualified angles to make seed investments. 

That is an overall summary of MaRS. We’re continue to innovate; we’ve kicked off the process of starting a MaRS clean tech seed fund of about $30,000,000 that will make early stage seed investments in opportunities we see. These are the ones that we know have potential but need to reach a certain point before the rest of the investment community will take notice. The other thing that we’re looking of doing in the future, and we’re exploring some potential partnerships for it, is the development of an energy institute, where we can focus a lot more of our attention on our energy clients. When we look at where the innovation is and where those funds are going to, today about 85 percent of it is going to energy ventures. Within out broad portfolio about 50 percent of the companies that we work with are focused on energy—from energy infrastructure and smart grid technology to energy storage and new means of producing power. 

I hope that helps a little bit to open up ideas as far as incubation and convergence centers go.

Timon Meyer (Berlin Cleantech Business Park): For many reasons historically, Berlin has been known as a great place for its culture, art, theater, tourism, for so many things but not necessarily for the industry. In order to get ready for the 21st century, the government realized it would be important to put an emphasis on certain sectors that are future-oriented, including clean technologies. In the meantime Berlin has become a very strong clean tech location, which is in part due to the feed-in tariff in Germany. To give an example, in 2010 and 2011 Germany acquired 7.5 gigawatts of newly installed PV.

Four or five years ago when Berlin had already becoming a strong location for PV and clean technology, we realized that the missing link was a good production site. I’d like to concentrate on three of Berlin’s strong points. It’s got a very good concentration of R&D institutions, scientific institutions, and very qualified personnel. It’s quite easy to attract and retain skilled people in Berlin because it’s such an attractive location. There are also financial rewards, with subsidies of up 35 percent cash back on your investment and attractive real estate prices. We have the great R&D, the bright people, and the financially attractive location. The missing link was the production aspect. Between 2006 and 2008 in the first boom off of the solar industry, we had to turn down a couple companies that were interested in settling down in Berlin, simply because we couldn’t find the right location for them.