Accelerator targets 'clean-tech' start-ups

The start-up accelerator model made popular locally by Startmate, and internationally by Y-Combinator and Techstars, is being appropriated for the clean-tech industry as part of an experiment to see whether it can be transplanted to a niche.

The new clean-tech accelerator, Ignition Labs, hopes to attract start-ups that are developing technologies that boost energy efficiency. Its founder, ATP Innovation business development manager Andrew Stead, has attracted some high-profile investors and mentors, including the founders of car-sharing program GoGet.

It will take a 7.5 per cent equity stake in a start-up in exchange for a three-month mentoring program, an investment road show in Australia and the US and $25,000 in seed investment.

Entrepreneurs are often faced with a catch-22, Stead said; they require funding to commercialise an idea, but investors — such as angels, venture-capital firms and government grant programs, like Commercialisation Australia — need to see some business validation before they will part with cash.

This is felt acutely in the clean-tech industry, Stead said, and Ignition Labs is hoping to break this cycle by launching sustainable businesses from day one, with the clean-tech cousins of Aussie successes Atlassian and BigCommerce.

"[An accelerator is about] taking a validated idea and moving it up to an investible proposition, and that might mean a validated customer, or defining the market clearly so people can understand," Stead said. "It's all about market proof.

"It's going to be absolutely customer focused. You're better off focusing on how to sell stuff, get a sustainable business and grow it slowly, but at some point you can kick it up, using investment.

"Atlassian, BigCommerce, 99designs, Tigerspike; they were all businesses that got to break even."

Startmate has built its success on the back of transaction-based online businesses that can be scaled globally, which is something that Stead has seen firsthand as one of the program's mentors.

Ignition is seeking similar tech start-ups to sell energy-efficiency technologies, planning to take between three and five in the inaugural intake. It will target a range of opportunities, including a collaborative consumption start-up that hires out unused capacity on trucks.

"We're looking at the renewable market, and how can we make it more efficient, such as the better design of renewable plants or management of existing plants."

Stead oversaw the sale of a locally developed search engine to Google during his time at the University of New South Wales' tech-transfer arm in the mid-2000s. He is now talking to the big four universities in Sydney, as well as research organisations CSIRO and NICTA to explore similar research-commercialisation opportunities.

There is a big risk in launching a relatively unproven model in a new market, Stead admitted. He looked to American pioneer digital clean-tech accelerator Greenstart, which established a vehicle for follow-on funding in its second year of operation, to identify how to establish early success.

The proof is in the pudding, he admitted, and the quality of the entrepreneurs will decide Ignition Labs' fate.

"People is absolute number one," Stead said. "I was speaking to some young guys, a couple years out of uni, who said 'we're young, we don't have any grey hair, but we're massively enthusiastic', and for me part of the point of an accelerator is to add grey hair to the business."

Applications for the accelerator close on Sunday.

SWOT analysis

Strengths

He has applied the tech accelerator model in a very promising niche that already has significant innovation and investment activity.

Weaknesses

It's very risky; Australia has an extremely limited talent pool to build clean-tech start-up businesses, and a small customer base to purchase these. These technologies typically have a very long sales cycle.

Opportunities

There's huge global demand for energy-efficiency technologies.

Threats

It will need to get an early success story in the first intake, otherwise it will not survive in the long term.

Conclusion

It's a very ambitious and well-executed project being led by a qualified start-up industry veteran. However, I can't see how it can overcome the major bottlenecks in the local market: limited talent pool, small customer base and long sales lead times.

Verdict: BUST