Turn on your television and watch a bunch of billionaires evaluate start up business ideas? Are you crazy?
I'm sure that's the reaction of a lot of TV executives when they were first pitched the idea for the reality TV show Shark Tank®.
Somebody really made a mistake! Contrary to conventional wisdom, Shark Tank®, now in its tenth season, has proven to be wildly popular with a large segment of TV viewers. It offers insight into how sophisticated investors evaluate business ideas that have moved beyond what's called the "friends and family funding" stage, where the company founder gets investment capital from her parents, or Uncle Louie, or her former boss and mentor. All of a sudden, ordinary people are getting a feel for "pre-money valuations", market segments, "scaling a business", and all the other things investors have to consider.
The investors on Shark Tank® ask all kinds of questions, but there is one type of question they never ask: what are the politics of the company founder? That's because they're interested in whether they can make money on the investment, not the political views of the company founder.
That same principle applies to another class of start up businesses. In this case, I'm talking about companies being started to develop technology to solve the problem of greenhouse gas emissions. There are a bunch of companies like that, and lots of sophisticated angel investors and venture capitalists are looking at them closely, just as Kevin O'Leary, Mark Cuban, and the other "Sharks" do on Shark Tank®.
Most angel investors and venture capitalists don't just make one investment. Instead, they try to assemble a portfolio of such investments. The Shark Tank® investors are each doing the same thing. To be successful, you normally need to make at least 15 to 25 different investments. Investors interested in Shark Tank® style investments in clean energy are doing the very same thing.
One such fund is called Breakthrough Energy Ventures. Breakthrough Energy doesn't have Kevin O'Leary or Mark Cuban, but it does have an all star list of investors, including Bill Gates, Jeff Bezos of Amazon, Marc Benioff of Salesforce.com, and John Doerr, the legendary venture capitalist from Kleiner, Perkins. Breakthrough has assembled a portfolio of 14 investments in emerging companies. Most likely, the fund will expand to include other companies with breakthrough technologies.
While the Shark Tank® investors look at businesses of all sorts, Breakthrough says it only wants to invest in companies that are developing solutions that could have a very large impact on greenhouse gas emissions. To be a candidate for investment, a company must have a technology with the potential to reduce at least one half gigaton of greenhouse gas emissions per year, meaning at least 500,000,000 pounds/year. To put that in perspective, total emissions of greenhouse gases each year worldwide are about 44 gigatons. In other words, to be considered for investment, a prospective company must convince Breakthrough that it could reduce 1.1% of worldwide greenhouse gases emissions in a given year! Of course, the prospective candidate also must show scientific feasibility for the technology, as well as a plan for scaling it.
The other thing that Breakthrough wants is technologies that cover areas not already being addressed, something the Shark Tank investors look for, too.
As mentioned above, Breakthrough Energy Ventures has made 14 investments. Let's take a look at two of those companies: Boston Metal and Carbon Cure. I'll profile some of the other companies in future posts. When it comes to greenhouse gases, most attention goes to emissions from coal fired electricity plants, or from the exhaust of your automobile. Boston Metal and Carbon Cure are focused on less obvious, but still very important, aspects of greenhouse gas emissions.
When you think of steel production, places like Pittsburgh, Birmingham, and Gary, Indiana come to mind – classic steel towns. Boston, Massachusetts doesn't normally come up in the conversation, but it may in the future. That's because Boston Metal, which is based in Massachusetts, has developed some amazing technology that could have a major impact in reducing greenhouse gas emissions from the steelmaking process.
During 2017 world steel production totaled 1,691 million tons. To produce a ton of steel, an average of 1.83 tons of CO2 are emitted into the air, about 3.1 million tons in total, representing about 7% to 9% of worldwide greenhouse gas emissions. Boston Metal has developed a technology that can produce steel with no CO2 emissions. The technology reportedly can also be used to produce rare earths – materials that are used in a wide variety of technology products – without using fluorides. Fluorides represent about two percent of worldwide greenhouse gases.
Boston Metal is a classic example of how innovation comes from outside an industry.
The company's key technology is called Molten Oxide Electrolysis. (MOE). The process is summarized in the following equation: Fe2O3 + electricity -> 2Fe + 3/2O2 . The MOE process produces steel without throwing off carbon dioxide as a byproduct.
Instead of being developed by any of the world's major steel producers, it came out of the research labs of the Massachusetts Institute of Technology (MIT). The MOE process was developed at MIT by Professor Antoine Allanore and is described in an article in Nature magazine. Allanore's technology was spun out into the newly formed Boston Metals.
Developing a revolutionary technology is one thing, but scaling it up is something quite different. To help with that, Boston Metal received additional funding from the Defense Logistics Agency of the US Department of Defense, as well as funding from the Department of Energy and the National Science Foundation.
Breakthrough Energy Ventures has now invested in the company to help it scale up the technology and commercialize it in a way that will be highly competitive with current steelmaking processes. Assuming it can do that, steel production around the world will be done without greenhouse gas emissions. Additionally, Boston Metal will provide a terrific financial return to its owners.
The second company in the Breakthrough Energy Ventures portfolio to profile is called Carbon Cure. As with Boston Metal, it represents a case of new technology being developed outside of the industry, in this case, from outside the cement industry. The company captures CO2 emitted at a process plant. That CO2 is then trucked to a cement plant where it is injected into a cement mix. When the CO2 is injected into a cement mix, it creates CaCO3, a mineral. Converting the waste CO2 gas into CaCO3 offers two benefits:
- It strengthens the cement
- It turns the CO2 into a mineral, which means the CO2 can't escape back into the air.
Carbon Cure has developed applications for ready mix, concrete masonry, and precast.
Innovative technologies often require significant capital expenditures to implement. The beauty of the Carbon Cure technology is that it can be retrofitted into existing cement plants, reportedly in one day and without any capital expenditures. Assuming that's in fact the case, it should permit very rapid adoption of the technology.
Carbon Cure wasn't developed by anyone in the cement industry. It came from a fellow named Rob Niven. Back in 2007 Rob was a recent graduate of McGill University in Montreal with a Masters degree in engineering. He developed the basic Carbon Cure technology.
Carbon Cure estimates that its technology, if adopted around the world, could reduce greenhouse gases by up the 15%! If even half way true, that could have a hugely positive impact. The company is one of ten finalists in the NRG Cosia X Prize competition. The winner of this will receive $ 20 million. Carbon Cure has also been cited as one of the top technologies by the Global CO2 Initiative.
Both Boston Metal and Carbon Cure could help significantly reduce greenhouse gas emissions worldwide. There, of course, is no assurance of this, just as the Shark Tank investors have no assurance about their deals. After all, many companies with outstanding technology fail to scale and become the successes envisioned by their founders. That's where the connection with Breakthrough Energy Ventures could help. Venture capitalists and angel investors don't simply provide capital to the companies in which they invest. You'll notice that the "Shark Tank"® sharks often tout how they could help the entrepreneur grow the business. They can provide managerial and technical resources, too. With the all star investor list that Breakthrough Energy Ventures has, both Boston Metal and Carbon Cure should be able to attract highly competent people.
These two companies, as well as the overall Breakthrough Energy Ventures portfolio, demonstrate two very important things often overlooked in the greenhouse gas debate. First, the key to solving the problem is not governmental regulation and taxation, the great fear of conservatives. If these companies succeed, it won't be because of the government. The only way the government plays a role is to the extent that it funds research, as it has done with Boston Metal. The very best role that government can play in helping the solve the greenhouse gas problem is by funding research and development.
Second, these companies show great financial potential, and an opportunity for their investors to reap huge rewards. Climate change skeptics love investments that reap huge rewards just as such as anyone else. The wisdom is exactly same as it is for companies seeking investments on Shark Tank®: the way to get their attention is by showing economic opportunity. Show the investors how you can make them a lot of money by solving a problem.
Will berating Kevin O'Leary, Mark Cuban, or any of the other Shark Tank investors get the company founder funded? I don't think so! Yet somehow the average person who believes climate change is a huge problem – and I include myself in that group – seems to think that if we yell loud enough, and berate climate change skeptics enough, we'll somehow shame them into changing their minds. Do you think Kevin O'Leary or Mark Cuban will put money in your company if you try to shame them?
I don't think so!
What will get the Shark Tank® investors to invest? Show them a realistic way to solve the problem, scale the business, and make the investors a lot of money. If the company founder on Shark Tank® is presenting a way to clean up the environment, the very same principle applies. Focus, on the economic potential of removing greenhouse gases from the atmosphere.
While the typical Shark Tank® entrepreneur is extremely unlikely to be developing the kind of technology that would appeal to Breakthrough Energy Ventures, there are still others out there who are. Fostering that, creating an environment that will produce the next Boston Metal, Carbon Cure, or other investment in Breakthrough Energy Ventures portfolio, is potentially the very best way both to get climate skeptics "on board", and to create the products that really will take care of greenhouse gases.
