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Monday, November 10, 2008

Some insight from a former Dragon's Den inmate

Doug Richard (Former Dragon)

Cleantech, Chutzpah and Capital

Entrepreneur, Library House Founder and former ‘Dragon’, Doug Richard discusses the Cleantech and mobile sectors, the pull of Cambridge and ‘FutureFest’.

As Founder and Chairman of venture and innovation research specialist Library House, Doug Richard is at the fulcrum of technology innovation. Richard, who is also the chairman and Chief Executive of mobile social networking specialist Trutap, and was a member of the BBC’s ‘Dragons’ Den’, has a clear vision of the future. And the Cleantech industry is at the heart of it.
Library House has developed its own Cleantech taxonomy, defining “clean energy” to include diverse products, technologies and processes, which through improvements in the clean energy supply chain from energy source to point of consumption, result in a reduction in CO2 emissions.
Despite the challenging economic marketplace, Richard sees the Cleantech industry being a key driver of technology adoption.
“Although you can’t talk about any trend in the marketplace without talking about the elephant in the room that is the global economic downturn, there is a case for some insulation from the downturn for technology-driven companies, because corporations are still actively purchasing technology and the federal markets are still fairly solid. What are the drivers of this technology adoption? The rising price of oil and the clean industries.”
Richard adds that it is not only Cleantech but “dirty energy” too that is driving innovation and opportunity.
“New North Sea oilfields are opening up now, and technology that can extract oil is a technology play that people would not have done ten years ago because the marginal economic costs were too high. Cleantech is absolutely the largest beneficiary of an economic crisis that is predicated on two core issues: the rupture in the flow of capital from credit and a core rising price of key commodities, primarily oil."
“Cleantech benefits because more change can be affected more disruptively by alternatives to oil than by cheaper oil, whether they’re bad ideas like biofuels or good ideas like total renewables. Cleantech is much more complex than most people realised, yet it stands to benefit enormously from the marketplace. You need it to be trendy, you need it to be real, you need it to be profound, and it’s got to have an unimaginable upside dimension. Cleantech has got it all, and a lot of money is going to circle around it.”

Richard says it is important to understand that there are elements to the food chain in clean technology.
“You have Discovery, Distribution, Production, Generation and Consumption and all of these elements of the food chain have innovation opportunities. We can innovate in how little we consume, how we distribute, what we discover and how we produce. People tend to think only of Production, whereas the largest waste in fuel is in Distribution i.e. getting the fuel from point A to point B. So any innovation in that area would have an incommensurate impact in the cost of energy.”
When it comes to investor exits for VC backed startups, Richard suggests that can be a complex area.
“The challenge to understanding exits in Cleantech is to understand that the term is a rubric and applies across many sectors. The timescales for exits change for different areas of the food chain. Solar power or wind farms are profoundly different from, say, an engineering additive to a fuel tank or a new long-lasting light bulb.
“If you’re a true technology based company and you’ve come up with a new widget or a new process, then the exits are pretty much the same as for new technology start-ups, which means an average lifespan of five to seven years, and a return multiple of 25% compounded growth rate per year. If your exit is caught up in production economics, then no-one knows what the exit periods are. But if you come up with a better light bulb, you can exit in 24 hours. A good widget still has a lot of merit.”
Another key research area for Library House is the Mediatech sector, comprising the intersection between Media and Technology, which is where Richard’s own investment interest primarily lies. He has high hopes for Trutap, which is creating the first mobile social network.
“If somebody were to reinvent Facebook to take advantage of everything you can do on a phone, then that’s Trutap. We’re off to a fast start, in 190 countries in our first seven months. Do I have a firstmover advantage? Actually, it’s a first-mover disadvantage. The challenge in the mobile business is that it’s a complicated and messy industry with lots of very large incumbent companies with entrenched interests. And you’re negotiating with a lot of very big players as a small company. They say you always know who the pioneer is. He’s the guy with the arrows in his back, while it’s the settlers who make the money. It’s not necessarily good to be first. But we happen to be very early, so we’re in that position. It takes chutzpah and capital, probably in that order.”
Richard’s other vision, which will see fruition in June next year is the creation of a future technology conference and festival called FutureFest being held in Cambridge.
Richard wants FutureFest (www.futurefest.com) to become “the Davos of innovation”, featuring both a conference, with 50 speakers and 500 attendees, plus a festival based on four themes: Earth, Life, Communication and Machines.
“It’s picked up a lot of momentum recently, and I expect our audience will draw heavily from both the technology community and also from those who have a responsibility to guide very large entities into the future. There’s a whole community of people who care deeply about what’s coming next.”

Cambridge is a natural city to host the Festival, says Richard, because it is one of the few technology “clusters” in Europe, and one of only two in the UK (the other being London).
“At any given time, by Library House counting, there are easily a thousand companies in the Cambridge cluster. That’s a lot for a city of 100,000 people in five square miles. Cambridge defies all normal statistics because it is a very small place doing a very large job. For a while, Cambridge was taking 10% of all VC funding in Europe.
“A cluster is a place where people will choose to relocate to because it improves the odds of success. In terms of true self-standing clusters with all the ingredients, Cambridge is next to none.”

By Gillamor Stevens
"Gillamor Stephens is a leading Executive Search company serving the European Technology, Online and CleanTech (TOC) marketplace through focused practice areas. In addition we have arguably the most dynamic and successful Venture Capital practice in Europe.A distinguished client base has been built up over the last ten years by delivering uncompromising quality of service through personal attention. We are relentless in our commitment to excellence in all aspects of the recruitment process, truly partnering with our clients. The result is exceptional talent sourcing giving our client definitive competitive advantage.The resulting knowledge base and expertise is without equal in our sector and our clients and candidates benefit accordingly. Our innovative range of recruitment solutions allows us to work flexibly with our key clients over extended periods and geographies. We have genuine international capability through our Mosaic alliance partners.The Gillamor Stephens ethos can be summarised in three words: Knowledge, Commitment, Results."

Comment: Not sure on the Cambridge Cluster, there are a few better areas in the UK I believe.

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