COLLABORENT 

By Jason Rissman

Collaborative purchasing for the public and nonprofit sectors

Overview

How is this not happening already? That’s my reaction to learning about Collaborent’s business model of facilitating group purchasing programs for the public sector. The budgets of public entities ranging from municipalities to school districts to transportation authorities add up to $3-$4 trillion annually. Much of that spending includes goods and services that can be discounted with aggregated buying power. Enter Collaborent. By negotiating group purchasing programs for these public sector entities, Collaborent saves them time and money, and it keeps a percentage of the spending as its fee. Essentially, Collaborent’s business model helps make the public sector more efficient and frees up resources for other important programs. As it turns out, Collaborent’s innovation isn’t the group purchasing program. There’s already non-profit buying consortia that serve the public sector. What Collaborent brings is a for-profit, growth oriented strategy and more aggressive sales approach. The bigger the group it can serve, the deeper the discounts it can offer. Its not sexy, but its solid.  

The Offering

Collaborent has begun to build a local presence and hopes a small equity round will help fuel its growth nationally. The company built the Northeast Ohio Sourcing Office, a council of governments in 13 counties, and has begun demonstrating that public entities are willing to share the savings Collaborent can deliver. Its current funding round is aimed at expanding its sales team and improving its IT infrastructure. Its founding team brings strong domain experience in sourcing and operations. I think Collaborent’s potential to scale is a major upside. If it’s able to expand into other regional markets, I think it will offer strong validation for the company and an improved value proposition. Turning down a way to save money should be a difficult thing for the public sector to do. But I think turning that corner to reach beyond Collaborent’s local market in Northeast Ohio and gaining momentum elsewhere will be an important and telling challenge. All politics are local, and its surely easier to gain the trust and business of those nearest by.  

Social Impact Economic Impact: Saves public sector money that can be spent on additional services.

3 RD ENERGY  

by Andrea McGrath

Addressing demand for cost-effective renewable energy products

Overview

Wind turbines anyone? How do I buy one? How do I use one? Are people really utilizing wind power as an effective option to their traditional energy sources? 3 RD Energy believes that they are - and believes they are well suited to take advantage of economic, political, and technological trends positively impacting the growing demand for renewable energy products. To be honest, I had to research some information about the ‘wind’ industry to understand a little more about the market and the opportunity for 3 RD Energy. At a basic level - the industry is divided into three main segments:

(1) Big Wind (greater than 100 kW nominal, 2-6 MW in practice); (2) Small Wind (less than 100 kW); and (3) Micro-wind (less than 1 kW). Overall, there are positive trends in the growth of renewable energy - and specifically in wind turbines - and the ‘relatively’ lower costs and lower regulatory compliance issues for ‘small wind’.

The Offering

3 RD Energy is a B2C is a renewable energy company whose core product is a proprietary 50 kW wind turbine. It believes this product fills a “niche” in small wind above the more readily-available 10 and 20 kW turbines and significantly below the utility-grade turbines in the ‘big wind’ markets (anything > 1KW, and specifically  1.5 – 7.0 MW in practice)  

Mixed Trends While demand for alternative energy products is growing -and investment capital is increasingly interested and available - I did find some trends specific to the wind industry - and 3 RD’s product - somewhat mixed and I’d want to explore them further to see if this was the right product to explore (of note, I referred to the AWEA as a resource for this information - as did 3 RD in their plan).

• PRODUCT: specific to their choice of core product (50 kW turbines), the AWEA report from 2007 noted that while the growth in small wind was 14-25% annually, the bulk of this has come from 1-10 kW systems and this remains the fastest growing market segment. I would want to know more about how and why they chose to focus on the 50 kW turbines.  
• GROWTH: While the demand for alternative energy is growing - wind and solar - and while they are possibly complimentary in driving up the demand - solar (currently) dominates this growth. The main reason noted: consumers purchasing solar currently receive federal tax credits - while those purchasing wind does not. This is significant in terms of the RATE OF GROWTH: One industry group predicted a potential 40% growth for wind turbines with the introduction of a  30% federal tax credit (this was based on the experience with the solar tax credit). Clearly - any changes in tax policy in the wind industry could have a LARGE impact on growth - I would want to see how close the industry is (or is not) toward benefiting from favorable tax policies.  
• HIGH COSTS: Currently, wind products still have a relatively high price tag for consumers, and the AWEA noted that while Americans typically want pay back period of 5 years or less, and the period for wind turbines runs 6-20 years (of note: a tax credit program could reduce that). There are some trends lowering costs (technologically) - but tax credits still seem like one of the major factors towards significantly lowered costs.

Those concerns stated - there are certainly some positive trends as well for 3 RD and wind turbines, including:

• Demand - increasingly strong potential for wind energy in high cost energy areas
• Costs - the industry aims to reduce hardware costs by 20% by 2010
• US strength - small wind appears to be a US dominated industry (40-50% sales are exports)
• Wind power strength - small wind remains the only US dominated clean energy technology

Wind turbines - worth a look!  

POTENCO

by Jason Rissman

Powering Endless Possibilities  

Overview Visit almost any developing country and you’re likely to see people spending hours of their day gathering and transporting fuel. In many places, for example, firewood is carried for countless miles everyday. As we in developed countries lament our own energy economies, we rarely think about how much time and effort people spend elsewhere to fuel up.  Potenco sees possibility within each of us, literally. The company is creating a small, handheld electric generator powered by the user. All one has to do is pull a cord, repeatedly, for a few minutes. Currently their generator can hold up to 40 W of power. Its quiet, portable, quick, ergonomically designed to use several muscle groups at once, and packs enough punch for a couple hours of talk time on a mobile phone. Its’ not enough power to cook a meal or heat a home, but it can be used to lighten a dark room or power a variety of small electrical devices. The company sees opportunity both in the developing world as a regular source of energy, and in developed countries for emergency or travel use.   

The Offering The company has conducted prototype tests in several markets and begun building a network of local market partners, ranging from micro-finance institutions to One Laptop Per Child. Its leadership team is very strong in product development, operations and supply chain management. Potenco is now looking to raise an equity round to begin production and expand sales and business development.  

Social Impact

• Environmental impact: Captures human-power as a renewable energy source, replacing batteries, kerosene and other unclean fuels.
• Economic impact: Brings cheap off-the-grid electrical power for lights and small devices. This might help lessen the burden of finding or paying for some fuel needs, while also creating new opportunities for productivity – such as studying at night
• Social impact: Consider the statistic on the Potenco homepage: “60% of Africa has reliable cell phone coverage, but only 10% has reliable electricity coverage.”  

Challenges I think Potenco has a real opportunity. Its sales in developed markets to business travelers looking to recharge on the run (and get a little exercise) could probably fund its efforts in poor markets where it will need partnerships for distribution. The question I’m left with is not whether human powered generators have potential, but whether Potenco will be the only important player in this wide open space with few barriers to entry. Their team is solid, their product sounds good, but who else is out there than will give Potenco a run for their money?

908 DEVELOPMENT GROUP

by Andrea McGrath 

A socially responsible development firm  

Overview

Socially responsible real estate development with a triple bottom line: social, environmental, and economic. Sounds good - and this is exactly what 908 Development aspires to practice through it approach to developing quality affordable housing and redeveloping urban infill parcels in major urban areas.

Availability of affordable housing is an increasing challenge in the United States. As 908 Development notes, the Millennial Housing Commission Report stated that “the gap between the available rental supply of units affordable to the poorest households and the demand for them stood at 1.8 million in 1999”. More recently, the National Low Income Housing Coalition calculated that nearly 95 million Americans - 35 per cent of US households - have a housing affordability problem (defined as housing for which the owner or tenant pays 30 per cent or less of his or her income). Increasingly, more residents are living in severely inadequate housing, placing their health and safety at risk. The United States is becoming “functionally poor when it comes to housing,” according to Paul Farmer, Executive Director of the American Planning Association.[1]

Clearly, the societal need exists - but what about the ‘market’ opportunity to develop more affordable, quality housing in light of a looming recession, the sub-prime mortgage market fallout, increasing foreclosures? 908 Development notes these but insists they have been watching and waiting for market inefficiencies which would provide the right opportunities for them to enter the affordable housing industry - and they see those opportunities NOW. So what are these attractive market factors? (1) Recessions seem to minimally affect affordable financing industry; (2) the complex financing arrangements can keep the number of entrants low; and (3) development of affordable and multi-family requires minimal capital commitment

The Offering

908 Development is focused on the acquisition and development of multi-family properties - and they utilize several local, state and federal financing options (including the Low Income Housing Tax Credit) to do this work. They are looking to raise senior debt (promissory notes of $100,000, a return of 18%, and maturity of 36 months)  

Social Impact

908 Development group wants to focus on this development - and it goes further to take a “triple bottom line” approach to its real estate development - producing social, environmental, and economic benefits as follows:

• Environmental impact through the utilization of green building materials and practices which would reduce carbon emissions and improve indoor air quality for the tenants; these more energy efficient units would also helo to reduce tenants’ utility expenses  
• Economic impact through developing affordable housing in unused or poorly used urban areas. They hope to develop this housing close to mass transport and businesses - increasing economic opportunities for employers (to attract and retain entry-level employees) and the community (through attracting or retaining employers, increasing work opportunities, and stimulating further development)  
• Social impact (immediately) through developing housing options for the neediest (those meeting 60% and less of average annual incomes) - and stimulating further social impacts (such as improved employment options, improved health and safety, improved access to food (see below[2]), and improved community development)  

Further on the Affordable Housing Market

Did some research on urban infil and housing development to learn a little more about this ‘space’. Redeveloping urban infill - which focuses on the use of land for further construction and on the reuse and repositioning of obsolete or underutilized buildings and sites - is often as part of a community redevelopment or growth management program or as part of “smart growth”. While developing urban infil can come from private developers (like 908 Development group) - it can also be supported through public and philanthropic dollars. One such effort I found is “Infil Philadelphia” - which is a five-year initiative created by the Community Design Collaborative to promote workable, innovative design solutions to revitalize older, urban neighborhoods. The Collaborative receives support from the William Penn Foundation and the City of Philadelphia’s Office of Housing and Community Development (http://infillphiladelphia.org/food-access.php)

That said - also came across some words of caution on some potential downsides of affordable housing developments and some of the new movements in urban development (such as Smart Growth, New Urbanism, and Transit-Oriented Development (TOD)): To note: many neighborhoods that are located near city centers and have vacant or underutilized land that’s suitable for relatively dense new development have also historically been home to lower-income, working-class populations. When policy frameworks and economic incentives are enacted to attract new development in these areas, they often have the inadvertent effect of driving up housing costs and changing the demographics of communities, sometimes to the point of pushing long-time working-class residents out of the neighborhood (see more on this at http://www.worldchanging.com/archives//006401.html)

This week, out comes a predictable Sunday story about one place that is turning the food crisis into a market opportunity. In this case it’s Ghana.

It’s not cynical to view the media in that way; it’s that the pattern is predictable; the call from editors for no more gloom and doom stories, show me how something works goes out mid week, and by Sunday, it’s there. I’ve been in those newsrooms, and that’s the drill. You can also use that pattern to your advantage if you are aware of it.

Launched a year ago with help from billionaire-investor Warren Buffett, the effort sells “fundraising” shares, priced at $32 each, with proceeds going to Homeward Bound of Marin.

LABORFAIR

By Andrea McGrath

How do you find someone to clean your house? Or clear out the gutters, mow the lawn, plow the driveway, move that old living room set to the local dump? How about finding reliable childcare or elder care?  Typical solutions - such as personal referrals, yellow pages, classified ads, online ads, or online searches can be time-consuming, expensive, and inefficient. Most importantly, many of these solutions often lack the critical aspect of ‘trust’ - trust of the referral source, the person contracted, and in the transparency of the pricing. Enter Laborfair - an “eBay for labor” whose mission is to provide an easy and trusted solution for connecting those who need a service with those who can fulfill it - while at the same time enabling fair prices and fair wages - and additional work opportunities - to a workforce of service provides that includes many of today’s working poor.

So how does it work? Uses have free access to search for, connect to or post a job request and can use Laborfair continually. Those providing services build profiles (with viral social media), and credibility is checked through at least one professional reference (required - and Laborfair verifies) and user reviews (as submitted). Those looking for services can go to the online platform of providers which shows profiles, reviews, ratings, availability (days), and provides the ability to search by locations (currently the Bay area), categories of service, ratings, or name. Users contact providers directly with a request, or they can simply post details of their request and how many responses they would like to receive by email or phone - and providers are notified of these details. Providers assess service requests and contact those interested directly. Market pricing is transparent, and all wages go to providers. Laborfair is free for consumers and provider registration -although providers pay a $3-to-$10 fee to respond to exclusive job requests. After hiring a provider listed on Laborfair - users are encouraged to provide a review of the service - which helps to build the desired trust and credibility of listings through user reviews. In addition to building their ‘core’ online home services marketplace, Laborfair is also actively building their value proposition to potential partners (consumer products and service organizations) - building on the needs of branded products to connect consumers and service providers; placement agencies to match clients to employers; and industry groups/nonprofits to match their base to employment opportunities. Laborfair seems like a really strong bet! After winning the Duke MBA start up challenge and raising seed capital of $450K in 2006, in 2007 they developed the proof of concept and beta model and rolled out to the L.A. market by December. They also have a solid management team of three (3) including a Reuters Digital Vision fellow and a great board of advisors with diverse experiences ranging from AOL., Microsoft, microfinance, labor, and several entrepreneurial ventures. Operationally - since launching - Laborfair has healthy initial revenue numbers from revenues per lead, retention of providers, and lead revenue from returning customers - and healthy growth in site traffic, service provider listings, lead generations, and revenues.  

It seems that there are many ‘wins’ in this model - I’ve read the materials twice and I just keep thinking “I like this model..” Listed above are some of the organizational and investment strengths - there are more that could be highlighted on the consumer end and the provider end - and importantly on the social impacts of its business model. For example, some of the initial data gathered to date demonstrates that Laborfair’s provider market includes many ‘working poor’ who have been able to gain additional work and clients, build a solid reputation, ensure a fair wage, and increase their monthly and annual incomes. These are real results, and measuring these numbers - and others related - should be central to Laborfair’s mission as it moves forward. Net-net - at its core - Laborfair (as they state) is a model that empowers the working poor while addressing a real consumer need. Win-win!  

SUMMIT VIEWS

By Jason Rissman

Summit Views LLC is a CA based company working to introduce more sustainable hearth products made from surplus biomass. While their Goodwood brand includes mesquite charcoal and soy candles, it is their densified Goodwood Firelogs that seems to be their main focus and business driver currently. Targeting the $3billion US firewood market, Goodwood offers an alternative to the less clean though also easy to use wax-based logs that have claimed a 7% market share. Finding a second use for wood waste that otherwise might be en route to the landfill, while also reducing pollution and greenhouse gas emissions from fireplaces and wood stoves, Summit Views seems to be a company to root for. Still, I’m left with a couple questions: 

• First, can they scale? Is this a small regional and niche opportunity, or is Summit View on its way to creating a national brand. The later goal is certainly challenging, but I’m impressed with a business model that includes some promising strategies, including looking at both the B2B and the B2C markets. With some distribution already in both segments, the company has gained traction that bodes well for growing sales as it expands capacity. Another strong strategy (that I won’t disclose it fully) is developing a regional partner program to help expand geographically. 

• Secondly, what really is that positive environmental impact the Goodwood brand offers? Competition and more educated consumers will likely push Summit Views to better demonstrate the sustainability of their products including a full carbon footprint analysis. Perhaps the impact of transporting their products will make their regional strategy all the more valuable if it can be successfully developed and help cut the distances their products need to travel. 

• Lastly, while there’s seemingly an opportunity and definitely some importance in thinking about cleaner wood fuels in the United States, I keep thinking about biomass emissions in the developing world where wood and charcoal are more predominantly used for heating and cooking. 

Of course we need to do our part in our homes as well. So maybe this July 4, when we Americans light more fires than any other day of the year, you’ll try out Goodwood’s Mesquite Charcoal. Come back and let us know what you think.