The Pitch: "Our Vegawatt system generates power from waste vegetable oil. Any commercial kitchen with three or more deep fat fryers can use it. The system costs $32,000, is about the size of a refrigerator, is installed outdoors, and generates 10 percent to 25 percent of a kitchen's power. Typically, kitchens use disposal services to haul away their waste oil and receive 15 cents to 20 cents per gallon for it. With our system, each gallon burned saves them $3 on their electricity and natural-gas bills. Businesses can also receive a 30 percent federal tax grant on the price of the system. With those savings, they can expect a return on investment in two years. We are in negotiations with a contract manufacturer that can produce up to 10,000 units a year. To help gear up production and meet demand, we're seeking our first round of funding."
OWNERS: James Peret, Robert J. Peret, and Ben Prentice
LOCATION: Boylston, Massachusetts
2008 REVENUE: None
2009 PROJECTED REVENUE: $800,000
PROJECTED GROSS PROFIT MARGIN: 50 percent
PRICE OF SYSTEM: $32,000
AMOUNT CUSTOMERS CAN SAVE ON ENERGY BILLS: $800 to $1,200 a month
FUNDING SOUGHT: $500,000
Appeal to Their Wallets
Distributed small-scale power generation is a terrific area with enormous potential. Owl Power has put together a system that has the benefit of eliminating specific costs. But although two years is a relatively short period for a return on investment, I don't know if restaurant owners will think so, because their balance sheets tend to be fragile. To speed up market adoption, Owl Power could finance a portion of the systems' costs. But if the company pursues that model, $500,000 is unlikely to be enough funding, and it will have to seek more.
Can You Scale It?
Owl Power seems to have a good play on energy efficiency. The Vegawatt system has a short-term payback, its gross margins are attractive, and there is a fairly large market. With the trial, the company is on its way to proving the technology. But it needs to provide a more detailed plan on how it will deploy the systems once it starts manufacturing more of them. Though selling kitchen to kitchen may be a good strategy in the beginning, it will be a challenge to scale up. The company might consider partnering with a commercial appliance company as a sales channel.
Don't Forget Hidden Costs
Owl Power has developed a technology of potential interest. But there is no indication here of how much installing the system and integrating it with the kitchen's electrical and heating systems add to the total cost. When the company advertises prices to clients and investors, it needs to take into account all of those factors. The company also needs to address whether the systems will meet local building codes. Burning waste oil could run up against some fire departments' guidelines, and Owl Power should be prepared to answer any questions.
Advanced Technology Ventures