Starting a green business isn't easy, but these days even the most established companies are trying to find ways to go green. The market is open to entrepreneurs with big ideas.
When it comes to green business, no one has a clear sense of what exactly makes a business green as opposed to more-or-less yellow, not even the Federal government. In 2010, the Bureau of Labor Statistics received funding to study how many green positions are emerging, where they're based, and who is filling them. They adopted a working definition of a green job as one involved in the production of a green good or service, or a job that observes environmentally friendly production processes and practices. Business leaders and entrepreneurs are no more in agreement on what it is that makes a business green.
While green business still isn't always big business, many of the nation's largest corporations are feeling both internal and external pressures to adopt sustainable practices. Companies like GE are speaking the green language, and while skeptics will argue whether or not it's all so much greenwash, there are others who want you to know that we're in the middle of the green zeitgeist.
Among green entrepreneurs, perhaps few are as committed to short-term growth as RecycleBank CEO Jonathan Hsu. When Hsu stepped into the company eight months ago after serving as chief executive at 24/7 Real Media, he made no bones of his ambitious goals—to build the company, which offers recycling rewards and works with 300 municipalities in the United States and United Kingdom, into a multi-billion dollar IPO. For him, being a green company is all about accepting staggered social progress. "We realize that everyone is at a different shade of green, some stage of their sustainability journey," Hsu said. "I think the label is too limiting because it tends not to embrace the mass market." Here's how to find your market and get started on your own green journey.
Starting a Green Business: Know the Field
While the green business field remains vaguely defined, insiders say that narrowing your focus can help you think about where markets are headed. Carol McClelland, author of Green Careers for Dummies and executive director of Green Career Central, said that many people looking to start a business in green fields have plenty of passion but not a lot of idea what they want to do. "People really need to understand the landscape to understand the industry they want to get into," she said. "A lot of people know they want to go into solar, but they have no idea how solar is organized. "No matter what field you chose, though, stepping into the wilderness of green business is going to take moxie, McClelland said. "This is a pioneering place. I call it the Wild West. In many cases, we are bushwhacking our way through to create the path. It is very difficult to predict how an industry is going to unfold."
A mixture of business and science knowledge helped Scott Cooney, author of How to Build a Green Small Business and principal at Green Business Owner, when he decided to start his own green business. After emerging from Virgina Tech a self-described "science guy and activist, a kind of policy wonk," Cooney went to business school at Colorado State University, where he developed a plan for a sustainable landscaping company that nobody thought would work. "Twenty years ago, people were not talking sustainability at B schools at all," Cooney said. Nevertheless, he founded the company in Salt Lake City with only a few thousand dollars in his pocket. Cooney, who has now built and sold three green businesses, said that his combined science and business knowledge has helped him throughout his career. "If you don't understand the science in some of these sustainability issues, it is very hard to communicate them," Cooney said.
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Starting a Green Business: Find Funding
Having a good idea doesn't guarantee that the money is going to pour into your coffers. Monty Cleeves founded Pinnacle Engines after a successful career in semiconductors. Now CTO of Pinnacle, Cleeves started the company after decades of tinkering with car engines. "I've been tinkering with engines since I was probably eight, ten years old, go carts, hot rods, classic cars. I've been in love with this for fifty years," Cleeves said.
Those years of tinkering led to an invention with revolutionary potential when he developed the Cleeves Cycle engine, a four-stroke, opposed piston engine that runs on gasoline and costs about ten percent more than standard engines but gets fifty percent better fuel economy. Cleeves met a hurdle when he went out looking for funding, though. "I started trying to raise money in 2007, and it took me a couple months and half a dozen visits to VCs. The business people were very enthusiastic," Cleeves said. As the economy took a turn around 2009 and 2010, however, Cleeves said that attitudes changed. When he went back for the second round of investors, he found that the well had dried up, even though Cleeves felt that the market for his engine, particularly in developing countries such as India and China, had only grown.
Now, Cleeves said, Pinnacle will look to cast its net abroad. "We'll look to China and India for that next round of investing," he said. Cleeves said he understands why investors and auto manufacturers are hesitant to adopt his ideas. The opposed piston engine design had been thought impractical for decades before Cleeves reinvented it. "The risks are really high," Cleeves said. "And if you have tens of thousands of crackpots coming by daily trying to sell you on their snake oil, you're suspicious of one more crackpot engineer who's trying to sell you on an engine that went out of favor years ago. So they're rightly skeptical." In the meantime, Cleeves said, he's waiting on a government grant to go ahead with a model of his engine for automobiles.
Government subsidies and incentives generate a lot of talk among green entrepreneurs, but for Kevin Surace, CEO of sustainable building materials firm Serious Materials, there's never any good reason to rely on government subsidies. His company doesn't take any he said, and he thinks that to do so would be bad business. Come up with a good idea first, he recommends, and a solid business plan. "There is no VC who would fund a company just because it's recycled or green," he said. "They would have years ago, but not today."
Hsu, whose company received significant infusions from venture capital firms, agreed. The investors were attracted to RecycleBank because they had a strong clean technology leadership division and a strong social Internet strategy. "When you combine the two, that's a very resonant value proposition," Hsu said. Budding green entrepreneurs should focus on their ideas first, Hsu said, and then worry about the money. "Much of the time I think entrepreneurs think 'let's follow the money and then come up with the idea afterward,'" Hsu said.
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Starting a Green Business: Distinguish Yourself
Surace said that distinguishing one's self means making a good product, not just a green product. "I would never start a 'green' company without a hard payback," Surace said. "The term is somewhat outdated, I think. And if all you have is green and it costs one penny more than something else, you'll sell none." Surace said that green companies make themselves viable when they tap into an existing budget line item, whether that is an energy cost or a heating bill. "If you think the market is that you can bring a company a greener tablecloth, it's just not going to matter enough to customers to build a big company," Surace said. "It might matter to nine percent of the country, but that does not a large market make."
Entrepreneurs who aspire to local markets, however, may have more time to educate their consumers in the value of buying green. Mark Callaghan is an entrepreneur who bought up the San Francisco-based toxin-free dry cleaners Blue Sky Cleaners in 2007. Blue Sky uses C02 to clean clothes instead of perc, an environmentally hazardous material that was the long-time industry standard, or hydrocarbon, which is also petroleum based.
Because Blue Sky's competitors will often use perc or hydrocarbon materials and still claim to be green, Callaghan said educating the public about their product has been one of the company's biggest hurdles. When Callaghan moved the company to Seattle, he knew they could service the city as well as existing dry cleaning companies, but penetrating the market proved difficult. "There was one business that was very entrenched," Callaghan said. "Every building, every condo, they were providing delivery of dry cleaning."
In August of 2008, Callaghan approached his competitor and offered to buy them out. Blue Sky acquired their rival in November, and picked up their clients. They retained the old dry cleaner's business because at first Callaghan didn't tell them that some new guy was washing their clothes. After a little while, he let them in on the secret. "We sent out an e-mail saying, 'We've been cleaning your clothes. Did you notice?'" Callaghan said. "Then we really pushed that and did a pretty big PR blitz." Now that his company has established itself, Callaghan is willing to take the time to attract customers singly. "You almost have to educate people one person at a time. And once they hear the story, most people say they had no idea. It is such a business of convenience, location."
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Starting a Green Business: Make Green a Core Value
As any green company grows, it may have to face questions about how to retain their emphasis on sustainability and environmentally-friendly practices. Leading companies approach the problem in different ways. Hsu said that RecycleBank, which regularly partners with companies like Coca-Cola and SC Johnson and Company, tries to remind their partners of the importance of green practices. "We do have a sustainability advisory council that is composed of leading thinkers within the sustainability movement," Hsu said. "No one has figured it out. We're actually helping to guide that overall conversation. We act as both a guide and a conscience."
Interface, a company that produces green carpet tiles, is willing to lose money in the short term if it means they'll become more green, said Maria Davlantes, vice president of marketing for the company. "We're the kind of company where it is such a part of our DNA at this point that if there is a new technology out there that is going to help us reach our sustainability goals, then we're going to use that even if it doesn't pencil in the short term," Davlantes said.