When it comes to turning the best green intentions into large piles of greenbacks, few entrepreneurs can hold a candle to Shai Agassi. A former software entrepreneur, Agassi founded TopTier Software in 1992, selling it to SAP less than ten years later. By 2007, Agassi was in line to become CEO of SAP but when the then-CEO’s contract was extended, Agassi resigned and started an entirely new firm — and an entirely green one.
A Better Place, Agassi has said, was inspired by a question posed by economist Klaus Schwab at the 2005 World Economic Forum at Davos: “How do you make the world a better place by 2020?” To Agassi, the answer lay in removing the fuel tanks from cars and replacing them with batteries.
Armed with an initial investment of $200 million, Agassi began developing not a new kind of electric car but the infrastructure to refuel the electric cars that others would create. While car makers focused on redesigning the vehicles, his firm would concentrate on redesigning the refueling process. Gas stations would run battery exchanges which could swap a battery in as little as two minutes — less time than it takes to fill a fuel tank — and drivers would also be able to plug their cars into special recharging stations set up by the road.
Entrepreneurial Drive Meets the Electric Car
It all sounds like a green dream but combined with Agassi’s entrepreneurial drive — and further investments that took the company’s capital to around $500 million — that vision has already started to become true. Refilling stations have gone up in Agassi’s native Israel, and no less importantly, A Better Place has brokered deals with Renault and Nissan to produce suitable cars, and with the governments of Israel and Denmark to set up the stations under a tax-friendly regime that will make the cars competitive. The Renault Fluence Z.E., compatible with A Better Place’s refueling stations, is scheduled to go on sale in 2011. Deutsche Bank has predicted that A Better Place will cause “massive disruption” to the auto industry. It’s the kind of disruption that could turn that $500 million investment in a green company into a multi-billion dollar multinational.
Few ecopreneurs have such high ambitions. Most in fact, might be thinking globally but they’re definitely acting locally. Waste Neutral, for example, was founded in 2008 by Keith Lasoya. An organic waste hauling firm, the company collects food scraps from restaurants, schools and office buildings in the Baltimore, MD metro earlier and turns them into compost. It’s a small firm consisting of just half a dozen staff, many employed on a freelance basis to sort the garbage. But it operates six trucks, sometimes powered by biodiesel, which hauls 50 tons of garbage every week.
The economics appear to make sense. Because Waste Neutral’s tipping fees are between $10-$20 cheaper than traditional landfill or incineration services, clients find that their costs are either neutral or a saving within three to six months. But for Waste Neutral, it’s vital to choose clients carefully. As Julie E. Gabrelli, a green business advisor, put it in an article about the company on Ecopreneurist.com, figuring out routes that are profitable is Waste Neutral’s biggest and most important challenge.
As Lasoya has learned, in the hauling world, the path to profit is through density of the route. The more stops along one route, the better. It’s simply not profitable to be too strung out, which means they can’t say yes to everyone.
That’s the sort of collision with the real world that didn’t seem to bother Shai Agassi.
What to Do with Green Money
Another collision with the real world that often bothers ecopreneurs is what to do with the money their green businesses have earned. Place it in the bank and the bank may lend it to the sorts of dirty, polluting companies the ecopreneur hopes their firm will replace. Buy bonds, and the ecopreneur is left to trawl through annual reports to count the number of trees the firms cut down and trace exactly where their money is going. It’s no surprise then that a number of ethical investment firms have sprung up to fill that gap. They choose investment vehicles for clients based not just on the funds’ financial performance but on their environmental value too — and try to measure that value.
Natural Investments, for example, was set up by the authors of the 1992 book Investing From the Heart and the 2000 book Investing with your Values. For fifteen years, the company has been using its own rating system to assess the ethical standards of the funds it offers. The slightly cheesy Heart Rating measures a fund’s avoidance filters — the degree to which they filter out firms involved in dodgy practices such as arms-making and tobacco sales — but gives greater weight to affirmative screening, funds that “seek and support alternative energy or invest in companies that have progressive employment policies.” The investment company then tosses in shareholder activism and “community investing” to produce a heart scale of 1-5 that indicates the fund’s degree of right-on behavior. Putting your money where your mouth is when you’re an ecopreneur isn’t easy; but Natural Investments makes it a little easier to put it where your heart is.
For many ecopreneurs though, choosing where they’re going to invest their hard-earned returns is a worry that they’d be happy to tackle one day. Green businesses might be growing in popularity but they’re still relatively new. Most firms, like Waste Neutral, are relatively small and operating in small areas. But even for those firms development can still be a danger: it’s not always easy to stay green as you grow. Anita Roddick’s The Body Shop, a chain of fair-traded, natural cosmetic stores, was one of the first to make use of ethical consumerism but came under fierce criticism in 1994 by a journalist who claimed that the store used synthetic products, donated less to charity than other businesses, and was generally about as right-on as the average burger bar.
If you are going to continue turning a green business idea into greenbacks, you’re going to have to keep it green.