Three San Francisco entrepreneurs with backgrounds in automotive advertising want to help green technology ventures get off the ground.
On Tuesday, the trio officially launched Greenstart, a program modeled after Silicon Valley web-star-tup accelerators like TechStars and Paul Graham’s Y Combinator, which count companies like Dropbox, Reddit, AirBnB and DailyBurn among their alumni. But Greenstart will focus exclusively on greentech ideas that “grow the use of clean energy or reduce use of dirty energy,” according to Mitch Lowe, a co-founder and chief executive of Greenstart.
Behind the project are Mr. Lowe, founder and former chief executive of Jumpstart Automotive Media; Dillon McDonald, a former Jumpstart executive and creator of the Entrepreneurship Center at Cal-Poly San Luis Obispo; and David Graham, co-founder of the car classifieds Web site Open Auto and a managing partner with Arizona Bay Technology Ventures.
The founders intend to to provide seed financing for an initial class of 10 companies. These start-ups are expected to give up a 3 percent to 10 percent stake to Greenstart in exchange for three months of networking opportunities, a $25,000 direct investment, work space in a downtown San Francisco office building and mentorship from industry insiders, including Marc Tarpenning, the Tesla Motors co-founder, and Steve Wilhite, the former Hyundai North America executive and creator of the “Drivers Wanted” campaign for Volkswagen.
Ideally, Mr. Lowe said, participants graduating from the program would leave with valuable connections to the Energy Department and strategic investors like General Electric, as well as a business model that would enable them to raise venture capital.
At the end of the program, which runs in two sections, from September to December and March to June, participants will have an opportunity to pitch their ideas and polished business models to an audience of venture capitalists and angel investors active in the greentech market.
Despite the modest $25,000 direct investment, Mr. Tarpenning said that Greenstart could benefit ventures focused on technologies related to cars and transportation, be they systems for improving engine efficiency or social tools for encouraging more fuel-efficient driving habits. He qualified, however, that Greenstart “maybe isn’t quite the right place,” for capital-intensive ideas requiring deals with major automakers. Even so, he said the program could still open doors to such investment channels.
“Simply being in a network of entrepreneurs that are trying to do things is really powerful,” Mr. Tarpenning said. Having started other companies prior to Tesla, he and Tesla co-founder Martin Eberhard were already well connected before they began pitching potential investors. “We could spin the tale to investors that you’re not going to see revenue for years,” he said. In contrast, entrepreneurs building their first start-up would have a harder time convincing venture capitalists to invest in a company promising distant returns, he said.
A common mistake among first-time entrepreneurs, said Mr. Lowe, is raising “too much money too soon, and they stay on the wrong path for too long.” As a source of mentorship, Greenstart would work to “make sure they’re pointed in the right direction,” he said.
An innate sense of direction would not hurt an entrepreneur, however, considering a venture must have a “strong possibility of revenue in 12 months or less,” according to Mr. Lowe. “What we need to be really good at is aggregating people,” he added.
While Greenstart’s founders have experience building companies, it was not gained in greentech or energy industries. Asked if he believed this deficiency might hamper the program, Mr. Tarpenning replied, “Everyone has to start someplace.” That the three men have experience building successful companies, he said, is much more important.
“Green technology is not that different than any venture,” he said, adding that there’s always a regulatory environment to contend with, margins to worry about and revenue that must be generated