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How Clean Tech Innovation Differs from Software Innovation

Excerpt from Blog Posted on July 9, 2012 by Rob Delwo

This past Friday I drove up to Ft. Collins to check out the entrepreneurial scene in Northern Colorado. I did a quick tour of the Rocky Mountain Innosphere, which is a non-profit formed to accelerate the success of startups in the region. The Innosphere has hired new leadership and will be a meaningful resource to the entrepreneurs in the area. I plan to keep in touch.

The hidden gem of the trip was the tour of the CSU Engines Lab. Lab Co-Director Dr. Morgan DeFoot gave us a fascinating tour of the lab and showed us some of the intellectual property that was developed at the facility. More specifically, it was interesting to see how innovation in clean-tech differed from that in the software world.

 

Incremental Efficiencies vs. Market Disruption

As someone who invests primarily in software, I’m always looking for the product and team that is going to change the market. Market-changers are few and far between, and most of the time I get pitches focused on building a slightly different, yet better mouse trap: “Foursquare with automatic check-ins”, “Pinterest for pet lovers” or whatever other improvement you can think of. At High Country Venture we try and steer clear of software with incremental technology.

On the other hand, the CSU Engines Lab is all about creating efficiencies to the current infrastructure. A slight change in the efficiency of a disel engine can be worth billions in cost savings and have a significant environmental impact. Unlike software engineers who start from a blank slate these engineers are improving the current system. While this may not work in software, it’s a great model for clean-tech.

 

Why Does Incremental Innovation Work in Clean-Tech?

  • It really comes down to distribution and switching cost.
  • Most of natural gas is pumped using giant 2-stroke engines.
  • Ninety four percent of two and three wheelers in India are powered by 2-stroke engines, each producing 6.5 times more harmful emissions that a 4-stroke would produce.
  • Around 3 billion people use open fire to cook most of their meals, causing sever health conditions and pollution

 

The massive distribution of the energy markets makes an incremental changes extremely powerful. The folks at CSU Engine Lab are laser focused on use cases with large existing network, ultimately making a huge impact with one modification.

When it comes to physical infrastructure it is more efficient to improve vs replace. Financially speaking, physical infrastructure has already been recorded under capex and amortized over a set of years. What this means is that there is a specific lifecycle for things like engines, and most companies will elect to repair over replace. This means that retrofitting the existing infrastructure will have more of an immediate impact than attempting to build a new network. We’re talking about the switching cost. This is very different from the software world, where the switching cost from Sugar CRM to Salesforce only takes a few man hours. More