From idea to marketable product, the path a cleantech start-up takes to success is a bumpy one filled with unforeseen detours. Cleantech Authority spoke with Paul Bottero, President and partner of inMotive, while he was cruising along Toronto’s rail trail on his hybrid Fuji bike to relate his own start-up experience.
Tell me about your technology?
It is the world’s most efficient variable speed device for motors. Variable speed is necessary to allow motors to operate at more than one speed because electric and many other motors will otherwise usually only run at one speed. The best analogy is the difference between having a one speed and a ten speed bike. If you’ve ever ridden a one speed you know what a pain it can be going up and down hills. But if you have a multi-speed bike you just intuitively know how much more efficient it is.
What prompted you to start inMotive?
It started slowly and iteratively. Originally we [partners] all had jobs eight years ago when our inventor came up with the idea for our technology. He was an avid biker always thinking about ways to make his bike more efficient and one day came up with the idea while riding the streetcar in Toronto. He brought the idea to me because we were friends and he knew I was a business guy who knew how to run businesses and was somewhat entrepreneurial. I said to him if it’s a really good idea, let’s build it in our spare time. And we also figured relatively quickly that we needed to patent the idea. So we brought in a third partner who was a lawyer. The three of us together spent about a weekend a month just working on the patent application and checking out if the technology really was as unique as he thought from a patent perspective as well as thinking about how to make it real.
When I transitioned out of my job I started looking at new opportunities in other fields and through the Young Presidents’ Organization met Greg Kiessling, co-founder of green electricity retailer Bullfrog Power, who is now a mentor and our lead investor. He left the IT world like me and entered cleantech. He explained that whole world to me and I got pretty excited about it and started looking for a cleantech opportunity. Then it donned on me at some point that our idea had a cleantech application. It certainly helps the planet in that it’s an energy efficiency technology, can save fossil fuels, has wide application, and is all about saving electricity, which is the world’s number one energy source. We got especially excited once finding out the market for our technology is quite lucrative. But then we’ve had to set out to prove it.
What stage in the development and sales of your product are you at right now?
We’re still pre-revenue, trialing the technology. Technology like this requires years of development and years of proving before you can be commercial. We’re at the stage now where we’ve actually put our technology in a live setting in a real building and we’re going to verify those results in a lab this month.
Who are you aiming to sell your technology to?
HVAC is our key market. We don’t think of it as our only market, but it’s a pretty good market for us for a variety of reasons — it’s very large and it’s more accessible for us than some of the other markets such as wind power for instance.
What have been the biggest challenges you’ve had to face in getting inMotive off the ground?
A common challenge that other new technology start-ups face is gaining traction. Our competitors are a large established industry and our target market is a conservative, old school industry that is embracing energy efficiency, but moves slowly for a lot of very good reasons, not the least of which is life safety and building code issues, which promote conservatism. Then there are the more typical entrepreneurial issues: funding, breakthrough customers, proving out your technology.
But if I had to put my finger on one single thing for us, it’s been getting our prototype to deployability, which is what we achieved three or four months ago. It took much longer than we thought largely because our technology is the world’s first in terms of how it operates, but also because some of the supporting technology like the electronics and power supplies were also doing very unique things that we weren’t terribly experienced with. A lot of secondary technology that went into ours really made us stumble.
How did you obtain financing in the beginning when all you had was an idea?
Initially we were self-financed when in the concept stage. But as we started to develop the prototype it got expensive fast. It’s not like developing a web app. You have to spend a lot of money on physical technology, engineers, and materials when you’re doing what we’re doing. So what we looked to first was government grants. We partnered with the University of Toronto and relatively quickly pulled in close to $1 million worth of government grants, which was great and helped power us through the next stage of development.
The very first prototype that we built was self-funded and we also got some money from a small friends and family convertible debenture round. After that we did an angel round in mid-2010. At the end of this year we plan on doing another convertible debenture round that will take us to a series A, which is a full on investment round, that we’re targeting for Q2 or Q3 of 2012.
Does the Canadian government provide a lot in the way of grants for cleantech? Were they difficult to obtain?
There are quite a few government grants available for cleantech in Canada. Universities get lots of government grants. You still need a good idea and a good professor. We had both and we had good rapport with the professor, so we were able to leverage that pretty well. Doing development work for the university means of course the university is involved, which leads to extra time commitments. All told for us it’s been worth it. It’s opened up other doors for us too. It’s always good to be associated with a world leading university like U of T — they have a great reputation internationally. So we quickly identified that that’s the easiest path to funding, but since then have been applying to grants on our own now that we’re more stable, larger, and more referenceable.
Does U of T own a part of your company or rights to your technology?
No. We made a point of retaining 100% of our IP [intellectual property]. If U of T students were to invent something as part of this project they would have ownership of whatever they invent, but as of today that hasn’t been the case.
How does a great idea translate into a marketable product?
That’s really where the rubber hits the road in entrepreneurship. There’s a lot of great ideas out there. But turning an idea into a product is the tough part. You have to make sure it’s relevant and that people will care. People have to believe you. You basically have to sell people on your idea. It’s the selling part that a lot of inventors stumble on because inventors aren’t necessarily entrepreneurs. People are not necessarily going to care just because it’s more efficient, it saves water or it saves power better than a competitor. There has to be more than that. That business side of the equation is something that a lot of tech people may not appreciate right away. There has to be a benefit for the corporation or the consumer often just beyond the environmental benefits. As difficult as that is to accept for some people, that’s the hard reality of the marketplace. I found that environmental benefits alone don’t sell products. There has to be at least a double, if not triple bottom line.
In an unstable economy as we’re currently in, cleantech companies in the public realm suffer as nervous investors clutch their pocketbooks more tightly. What has the recessionary effect had on inMotive?
Being a start-up that’s pre-revenue, we exist in a different world than a lot of other companies, particularly these public companies. Because we don’t have a product and our investors take a long view of their investments, they’re not thinking short-term like stock market investors, so we’re more insulated from the market gyration. Once we have a product that changes and if we go public that would certainly change. But at this point in time we’re more insulated than our competitors.
Any recommendations to those planning a cleantech start-up?
A fundamental thing is to trust your partners. I think it’s a good idea to have partners unless you happen to be one of those rare individuals who have all the skill sets you need. If you are one of those people great, but even then you’re probably not going to have enough bandwidth to do the job properly. So if you’re lucky enough to have or find partners, make sure they’re the right partners and that you trust them because that’s a decision that can be very hard to undo once it’s done.
Mentorship, leading edge technology, R&D, entrepreneurship, and the ability to fundraise. You need all those elements if you’re going to succeed as an entrepreneur.
