NEW ENERGY NEEDS NEW FINANCING

Clean energy startups often need alternative financing; Larger investment needs, longer road to market test ingenuity in search for capital
Ann Meyer, June 21, 2010 (Chicago Tribune)

"With momentum building for clean energy, Chicago entrepreneurs Elizabeth Iwanicki and Giovanni Bonomi say demand for their wind turbines is accelerating.

"Once they seal deals with prospective customers in the U.S. and abroad, their startup, Tempest Wind Energy Inc., plans to add workers and move to a larger manufacturing facility…[But] Tempest Wind needs to raise millions of dollars to move from design to prototype, funds that are elusive at the moment…It's a challenge…[A] clean energy future…will take a lot of capital. While entrepreneurs can launch an information technology business for tens of thousands of dollars, renewable energy innovations often require millions…"

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"Tempest Wind plans to assemble two prototypes to prove that the machines' proprietary pitch control makes the turbines more efficient, compact and quieter, Iwanicki said. The small turbines, with output ranging from 65 kilowatts to 175 kilowatts, can be transported by truck or 40-foot container to remote locations and installed without a crane. As a result, Tempest is getting interest from rural communities in Italy, the Middle East and Asia, as well as Alaska.

"But the first step is finding the necessary capital…Tempest Wind has applied for government grants and is seeking private equity investments, Bonomi said. But competition is fierce. Venture capitalists have put about 10 percent of their investment dollars in energy-related startups during the past 12 months…But they generally want to see proof the business concept will be profitable before making an investment."

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"Nationally, the U.S. Department of Energy has provided additional funding for alternative energy through the American Recovery and Reinvestment Act, while the U.S. Small Business Administration's Office of Technology administers grants through the Small Business Innovation Research and the Small Business Technology Transfer programs, awarding about $2 billion a year…Startups also should look at state and local grants as well as foundation support…Strategic corporate partnerships are a sound strategy for finding the capital that a startup needs…[and because] alternative energy a hot issue, private foundations also can be a funding source…

"A recent poll indicates 61 percent of small business owners said moving to clean energy will help restart the economy and help create jobs, according to the nonprofit Small Business Majority. In addition, 58 percent of the 800 business owners surveyed support adoption of new energy policies and want their businesses to be a part of it…"