Ahmed Badruddin

I have now been working on my startup full-time for over two months and want to share a few things I have learned that may be useful to people considering making the leap to start a company. The tech startup world is a whole new world and it required me to learn a very different way of thinking than when working in a large (or rather largest in the world, while I was there) software company. When I decided I was going to make the leap, all I had was an idea that made it to the top of my list of 100+ ideas, and I had done a lot of research in the GreenTech industry and run ideas by many folks in the GreenTech industry. That was enough for me because there’s no better way to learn than jumping into things, and it wasn’t something I could make much progress working part-time.

I began to go to a lot of startup events, read about successful and failed startups, talk to established tech entrepreneurs, angel investors, and venture capitalists. My favourite book is “Founders at work” because it has a diverse set of startup success stories. My favourite blog is Mark Suster‘s “Both Sides Of the Table” because I think Mark brings in great insights being both an entrepreneur and a venture capitalist. I also find Mark’s blog especially useful because he explains his advice and thoughts in depth based on his experiences, which is good because it helps you understand the context of the advice and whether it applies to you or not. There are several other really famous people with popular blogs in the startup world but I’ve always felt there’s a degree of self-promotion in their posts, whereas Mark’s posts feel more genuine to me.

One of the things I hadn’t thought of initially that led me to go back to the drawing board a while back is that I never spent time thinking about what kind of startup I wanted to build. I think it’s important because I think it also limits the kinds of ideas you can work on. Buiding a startup and getting funded is very complex and the entire process has many variations. However, I’m going to simplify the analysis here and look at three scenarios and types of startups:

1) Startups with no funding

2) Startups with growth funding to scale revenues

3) Startups with early stage funding

A couple notes:

• There are many funding options, it can be angel funding, incubator funding, VC funding. We’re going to consider them all the same for simplicity of this analysis
• There are many exit strategies too, such as IPO’s and acquisitions. VC funded startups go to IPO, for the rest we’ll assume exit is acquisition

No Funding

In self-funded or bootstrapped startups, typically founders take the startup to revenue, grow it organically to a sustainable business and eventually exit without any outside money.



Growth Funding

In this scenario, founders typically are able to get the company to revenue, but use funding to scale the revenue model and/or take a niche idea mainstream

Early Stage Funding

Founders figure their product market fit, or at least have done some validation. It’s hard to get investor money without at least a prototype, initial users, and some market validation. Then, heavy VC investments come in to build a team that can deliver on vision, typically tens of engineers.

Thinking about what kind of startup I want to build caused me to pivot a lot with my ideas but I think eventually it enabled me to make better decisions of where I want to be.  Early exits are more capital efficient than VC funded startups, and exits happen much sooner than VC funded startups (3-4 years vs. 12+ years on average). However, VC funded startups are the ones that have the big, famous exits like Mint.com, which I think most entrepreneurs dream of. Also, it’s a lifestyle choice. In VC funded startups, founders lose freedom and control but on the other hand, through the VC’s resources, founders can build a very strong network, accomplish a lot more, hire young rock stars, and work on really big ideas. There are advantages and disadvantages to each approach so do give this some thought when founding a tech startup!

Resources:

http://www.startupcfo.ca/?p=329

http://www.early-exits.com/Early_Exits_Reviews.html

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A couple of weeks back I was in Charlottetown, Prince Edward Islands, a small Canadian city with a population of about 30,000. It’s a beautiful city with a small downtown and a very scenic harbourfront, unspoilt by industrialization. It’s the kind of city I want to go back to whenever I need a break and some downtime. Life is so laid back. The water is so calm and still.

I began wandering aimlessly around the city and right outside a house, I noticed an Itron Smart Meter!! Charlottetown is one of the last places in Canada I was expecting to see a Smart Meter. I walked around the block and every house I could see had an Itron Smart Meter outside it. I was very surprised to see Charlottetown being an early adopter of Smart Meters when there are major cities in the United States still working on installing their first Smart Meters.

Most people I talk to are unclear on what Smart Meters are or what the Smart Grid is. In short, Smart Meters measure each home’s energy consumption data in more details and report back to utilities over a wireless network. This way, someone from the utility company does not have to take down meter readings every 2 months. In Ontario, every hour the current meter reading is sent back to the utility. Smart Meters are a key component of the Smart Grid, which is a modern electricity grid enabling two way communication between each home and utilities, increased reliability and security, more data to help manage and optimize energy consumption, and better integration with renewable energy sources.

Some of the major problems with the traditional power grid are:

1) Consumers do not have data to understand and optimize their energy consumption

Traditionally, homeowners see a bill from their utilities containing their total energy consumption for an entire month. However, they are unaware of what parts of their homes or what appliances/devices are contributing to the bill and how they can reduce their bills.

Secondly, because the traditional electricity bill only displays monthly consumption data, there is limited trending data available to users. The only conclusions a consumer can draw from the limited trending information available is what months his or her energy consumption is at a highest and by what percentage compared to other months. However, if we had more granular trending data such as “Your air conditioning usage increases by 80% between May and June, which is 40% above your neighbourhood average”, users would be able to make corrective measures to reduce their bills. Furthermore, comparisons with averages such as neighbourhood average or city-wide average will help set a baseline for consumers to set energy efficiency goals.

2) Consumers are unaware of ways to improve their energy efficiency

The average home owner has no expertise in improving home energy efficiency. Let’s take Toronto and Ontario as an example. One of the biggest energy conservation challenges identified by the Ontario Power Authority is Customer Awareness.

Government-supported efforts such as Green$aver have been launched to help residents of Toronto improve their energy efficiency. It is partially motivated by the fact that the City of Toronto determined that more of the city’s CO2 emissions came from houses (30%) than cars (20%) because most Toronto homes were built before 1960 and were poorly insulated. Such efforts have met with some success. For example, retrofits of Toronto Community Housing units done by Green$aver have achieved permanent 35% – 40% reduction in energy use, more comfortable homes, and reductions in greenhouse gas emissions of over 3 tonnes per house annually. Having more data about energy consumption enables us to improve energy efficiency.

3) There are no incentives to shift energy consumption

Taking Toronto as an example again (mainly because I live in Toronto!): to manage peak demand, Toronto Hydro has come up with a Time Of Use pricing structure which encourages consumers to reduce energy consumption at peak times and shift it to off-peak times.

For utilities like Toronto Hydro, the advantage is reduce cost because additional energy generation during peak times is costly. There is a significant price difference between off-peak and peak-time this new pricing structure which presents consumers with an opportunity to optimize their usage and drive more consumption to off-peak times. The most important scenario is plug-in electric vehicles. As PHEV’s become more popular, we’ll need better ways to manage the charging so we ensure this extra load is distributed. If we don’t distribute the load over time, it is the equivalent of a traffic jam in the electricity network, except it can result in blackouts (which results in more profanity than a regular traffic jam!)

Utilities are already trying to help consumers shift their loads, but they obvious lack the resources and expertise to manage each home’s energy consumption optimally. For instance, Toronto hydro has started a program called peaksaver in which they pay customers $75 and swallow the cost of installing a small device on the customers Air Conditioners which reduces the AC’s energy consumption during peak hours

Therefore, Smart Meters enable a Smarter utility grid, which creates many more possibilities for innovations around managing and optimizing energy consumption. And for someone like me building a startup in this space, it’s very exciting to see adoption of these smart meters in seemingly unlikely locations like Charlottetown. Keep installing them Smart Meters!!

Introduced by Venture Beat’s Matt Marshall as “The best known investor in Web 1.0, involved in the founding of Amazon, Netscape, and Google,” John Doerr and his firm, Kleiner Perkins, have raised a billion dollars to be channeled into greentech. “Greentech could be the largest economic opportunity of the 21st century,” said Doerr.

Last September, YPIN was kind enough to select me to be on their board. In my application, I expressed my interest in organizing a GreenTech event to raise awareness of the innovations in the field. I am passionate about using technology to help improve energy efficiency, reduce our carbon footprint, and I felt YPIN was the ideal non-profit organization in Seattle that could make such an event happen.

In talking to other new board members,  I met Benjamin and we quickly discovered we have similar interests and started brainstorming for the event. Amber and Philippe joined the team right after the first board meeting and that was how the YPIN event “Innovations & Careers in the GreenTech Industry” was born.

Since then, there has been no turning back. We put together a dream-team panel of GreenTech experts in Seattle. We’ve done a lot of promotion through social networking and have been able to reach thousands of young professionals in Seattle. We booked a fabulous venue, Pravda Studios. We even have a book signing by one of our panelists Kevin Wilhelm, CEO of Sustainable Business Consulting, and we have past winners and organizers of the CleanTech Open, an organization that fosters entrepreneurship and clean technologies, to help aspiring entrepreneurs in the audience learn more about how they make their ideas a reality.

What I am most excited about is the impact this event, I feel, can have on Seattle’s Green economy. We’re going to have a panel with leaders of Seattle’s GreenTech industry, and an audience of about 200 young, ambitious, professionals, looking to make a difference and wanting to learn how. During the panel, we’ll hear stories about how each of these leaders got into the GreenTech industry and got to where they are today, and we’ll get firsthand access to their insights on where the industry is heading, and where the innovations and opportunities of the future are. During the networking time, we are putting together a couple of hundred ambitious young professionals in an environment where they can share ideas and learn from each other. They might find their next business partner for a GreenTech venture, a lead to a job at a GreenTech startup, or learn about an area within this industry that will eventually become their passion. And any of those connections or realizations are going to influence the direction Seattle’s Green industry is headed. I truly believe Seattle is going to be a leader in the Global GreenTech industry and events like this are further proof of how committed people in Seattle are to this effort. Four of the Global CleanTech Top 100 companies are based in Washington state, and one of them, Infinia, will be at our event.

At a personal level, this event helped me confirm that GreenTech is what I am truly passionate about. My energy level skyrockets whenever I think about, read about, or work on anything related to Green technologies. And this was instrumental in helping me make the decision to start a GreenTech company back in Toronto.

Thanks for reading, my friends, and I hope to see you there! I’m sharing the event details below.

When? February 23^rd 2010

6pm – Doors Open

7pm to 9pm – Panel Discussion and Q&A

9pm to 11pm – Post event networking

Where? Pravda Studios, 1406 10th avenue suite 200

Price? $8 for YPIN Members, $12 for Non-members

Panelists:

• David Leonhardi (Moderator), a Business Strategist at Boeing
• J.D. Sitton, CEO of Infinia, a global CleanTech Top 100 firm developing solar power generation systems.
• Kevin Wilhelm, CEO of Sustainable Business Consulting, delivers solutions to help clients meet profitability and sustainability goals.
• Bryan Guy, Managing Director of Cypress Venture Group, a startup developing smart grid solutions
• Clare Nordquist, Director at Cascadia Capitals, an investment bank for sustainable technologies
• William Einstein, Manager, Emerging Technologies & Climate Change department, Puget Sound Energy
• T. Ron Davis, Chief Marketing Officer, Vu1, a Seattle-based startup developing a new technology for energy efficient lighting

Link to event flyer with panelist bio’s and details

I was recently contacted by Microsoft Hohm to write a guest blog. Here’s a link to my blog entry on their site, where I talk about the role of Design thinking in energy efficiency. Check it out!

http://blog.microsoft-hohm.com/news/10-02-17/Design_Thinking.aspx

Towards the end of every year, I do a recap of how the year went and plan what’s next for me. In my annual planning, I spend a lot of time thinking about my personal goals and breaking them down by career, health, social, community, self development, and financial. A lot of that has been taken by learnings from books by Steven Covey and David Allen. I then make a powerpoint presentation, with slides for each area, goals, action plans, accountabilities, schedule, the whole nine yards. I don’t share that powerpoint with anyone. Once all my goals are locked, I just go at it, and perhaps look at that powerpoint file once every 2-3 months. This allows me to focus on execution through most of the year and allow life to take its course after I have defined the initial direction.

This has served me well in the past few years. I look back at 2009, and it’s been a great year. What I am most proud of in 2009:

Towards the end of 2009, I sat down to think about the next year and how I was going to push myself even further. This was also at the same time I was really getting interested in Green/Clean technologies – technologies to help us become more energy efficient and sustainable. It started off as something I was just interested in and would tweet about here and there, to something I got really passionate about and started going to green networking events and organizing my own GreenTech Panel event, to something I would think about day and night. I began to see so many possibilities and ways software and technology can be used to increase energy efficiency and optimize energy consumption.

Somewhere  deep in those thoughts, the entrepreneurship bug bit me. My childhood dreams of starting, owning, and running a company were reawakened and they took over my 2010 planning. My 2010 plan was condensed into the following statement - To Dream, Dare, and Deliver. Dreaming of possibilities, daring to go after them, and delivering on them.

Dreaming in itself isn’t enough. Without action, we can’t realize our dreams. Hence, the need to dare. It takes a lot of courage to quit a great job and comfortable life to start a company. That first step requires tremendous strength and conviction. Daring by itself isn’t enough either. Strong planning and execution is required to go from where you are when you take that first step to where you dream to go. Therefore, the need to deliver. And that has the most unknowns because there are so many factors beyond your immediate control.

I think there are a lot of opportunities to build novel technologies that can improve people’s lives and reduce their carbon footprint. Over the next few blogs, I will write more in depth about the problem space I am targeting and at a high level, some solutions I have in mind. As people are becoming more environmentally conscious, the market is shifting and our culture is evolving. Every change and evolution creates new business opportunities and unfulfilled consumer needs. I want to be part of that first wave of solutions and innovations that will transform how we consume energy.

I am excited and scared at the same time. Excited because there are plenty of opportunities out there. Scared because there is an equal number of ways I can fail to realize my dreams. I don’t know how I will fare but I won’t know unless I try. What excites me is impacting and creating value for society. Ultimately, that is how we will be remembered, how we build the legacy we leave behind. When we create businesses, we create jobs, we expand the economy, we satisfy a customer need, we create value.  It’s real. And one of the best feeling is taking an idea and bringing it to life. There was a time when people risked their lives to open new frontiers of knowledge and sciences for mankind. We have evolved to a point where the amount of risk we have to take is far less than what our ancestors had to take. We don’t risk religious or political persecution anymore when trying to innovate or proposing new ideas and ideologies. Taking those times as a baseline, we’re fortunate to live in the times we do, and have the opportunities we do. We have little excuse not to take some risk to seize opportunities.

I will be moving back to Canada to start the company which I am excited about. However, this has been the toughest thing I have had to do. I made some of the best friends I have ever had in Seattle and I really love Seattle for all that it’s given me. I’m sure I will visit many times, there are many memories attached to this city. The plan is to start heading back sometime in March.

I am also aware of the sacrifices needed to live the life of a tech entrepreneur. I will live a more frugal lifestyle. I will barely get sleep. There will be many emotional ups and downs. I might fail and lose all my life savings. But.. it will be worth it because of my strong belief in the following:  as long as you work hard, love what you do, and create value for others, good things will happen.

Last week, Google surprised many people be launching “Google Energy” and making a request to the federal government to buy and sell energy at the wholesale market.

There is no plausible theory out there on why Google is looking to enter this market, traditionally run by utilities. While Google does allocate 10% of their budget on what they call “wild and crazy ideas” with no clear business model, they are always relevant in the long run. According to Alan Eustace in his interview at Xconomy:

We have a 70-20-10 rule. We spend 70 percent on core products, 20 percent on emerging areas, and 10 percent on “wild and crazy” ideas. Those are things we may not have a business model for, but may be important in the long run.

Taking a step back, let’s look at Google’s mission statement:

to organize the world’s information and make it universally accessible and useful.

Every Google product you can think of has some relevancy back to their mission statement. Through Google Books, Google is digitizing information that has never been online, making it more accessible. Through Nexus One, Google is making information accessible no matter where you are.

It’s not clear what Google’s Green Initiatives have to do with that mission statement. While most companies are working towards becoming more ‘green’, and there are initiatives in every single large tech company to reduce their carbon footprint, none of them are looking at generating energy, as Google states under it’s green initiatives:

We have a goal of producing one gigawatt of renewable energy capacity – enough to power a city the size of San Francisco – in years, not decades.

Furthermore, they have requested the license to buy and SELL electricity through Google Energy, an extremely different revenue source from all their existing products and services. So what’s up with Google Energy? There’s already opportunities in the software side of the energy industry that Google is pursuing through Google PowerMeter. Ttheir goal is:

Google believes consumers have a right to access detailed information about their home electricity usage throughout the day – to help them save money and make smart energy decisions

That still makes sense and is still relevant to their mission statement. Your utility consumption is information. Google is making it more accessible. But that still leaves you to wonder why they started Google Energy. Even if Google was just getting into energy generation to reduce their costs, why would they want to SELL energy.

Here’s my wild theory: Google is experimenting with new utility models for the future.

The Smart Grid has the potential to make the existing utility model obsolete because one of the goals of the Smart Grid is to reduce energy consumption, which conflicts with the existing model because it means less revenue for utilities. Furthermore, if each home generates more energy than it needs at each point by having enough solar panels, and once energy storage technology makes it easy to store energy, each home becomes a utility that can potentially buy and sell energy from the grid. We can have small businesses operate small, dispersed clean energy generation plans such as solar installations, wind turbines, etc.. which can help with peak demand.

Essentially, the entire power grid becomes like a p2p file sharing program. But instead of sharing files, you are sharing energy.

For example, Home A needs x kW to run water heater at night but has run out of stored energy. It goes to the grid and determines that the cheapest option is to buy it from Home B. This is done without any human intervention.

Or Home C is trying to make a decision on whether to store excess energy now or sell back to the grid and it determines that it will make more money if it stored energy for another 4 hours and sold that excess energy back to the grid at around 6:17 pm.

With Time Of Use pricing, electricity prices could fluctuate as much as the stock market, especially if energy generation is decentralized. Every home becomes a small utility and we won’t have big utilities. This means decisions will need to be made in microseconds and software will have a very key role in managing those transactions. This also means there is a lot of INFORMATION that needs to be captured and made more accessible so those decisions can be made by software.

Perhaps Google is using Google Energy as a way to experiment with new utility models and understand what software needs to be built for these new models. With the convergence of IT and energy, software will be managing energy generation, distribution, and consumption in ways we don’t even know yet.