Experiences in developing sustainable RE startup companies

Investment Challenges of
RE Startup Companies
PT. INOVASI DINAMIKA PRATAMA

1
 WHAT IS A STARTUP?
D E F I N I N G S T A R T UP C O M P A N I E S I N T O D A Y ’ S E C O N O M I E S
footer

OTHERS SURVEYS

We won’t go into the history of what startup companies used to be. We all have
heard the stories right? Both Microsoft and Apple were started in the garage of the
founders. That hasn’t changed. What has changed is the speed and availability of
venture capital. That can be good, but it’s not all good. We need to look at the
sustainability of the companies, and whether the capital investments are getting the
returns they expect. In 2020, private capital funds have an average return of 6.8%
(https://pitchbook.com/newsletter/vc-leads-the-way-in-latest-private-fund-
performance). But let’s look at today’s startup companies.

2
 “A startup is a human institution
designed to create a NEW PRODUCT OR
SERVICE under conditions of EXTREME
UNCERTAINTY”
E R I C R I E S – T H E L E AN ST AR TUP

The key words here are new product or service and extreme uncertainty. Today I
would like to explore these two themes, what and how the new product or services
are being created. And what are the extreme uncertain conditions and how to
overcome them.

3
 Product or Service that
solve a specific problem
that has sufficient value

The key idea for new product or service is that it must solve a specific problem that
has value. Arguably, the most valuable problem to solve today is the sustainability of
our environment. How much longer will we have blue skies, fresh water, and forests?

4
Create solutions for
existing problems

NOT creating
solutions looking for a
problem to solve

Just because someone came up with an innovative invention, it doesn’t mean the
invention is useful, or valuable. We must be critical and evaluate whether our idea
can be impactful.

5
Let’s think about this for a moment… do we need vibrating shoes for gaming, music
or movies? But yet here it is.. Someone invented it.

6
 GOOD IDEA?

I’m sure many of you have heard of solar roadways with pilot projects in the USA,
France, Netherlands, and others. Is this a good idea? Let’s think about this for a
moment.

7
 The company Solar
Roadways raised several
million dollars through
government contracts,
Indiegogo, and other
crowdfunding platforms

Many of you live in big crowded cities must be familiar with these pictures. Let’s just
think about the idea of a solar roadway again for a moment.

8
Not all ideas create value for others. As an engineer, I can think of many new
products (and I have), but not all products are valuable. INNOVATION does not equal
VALUE. A Rube Goldberg machine may be very inventive and provide entertainment
and exercises our creativity. But it doesn’t mean that all Rube Goldberg machines
create impact that have value in the world.

9
 “Too often, the obsession is with
‘inventing’ something totally unique,
rather than extracting value from the
creative understanding of what is
already known”
B I LL B UXT ON – M I C R OSOFT R E SE ARCH

Inventing something unique is not necessarily valuable. It’s not necessarily startup
company worthy. Inventions does not always mean there is value in the idea.

10
 https://www.youtube.com/watch?v=GZAztPDAshI

Just because we invented something that is innovative, it doesn’t mean we’ll bring
progress with it.

11
Good startup companies create value and provide products and services valuable for
others. I would argue that every startup that failed is another pebble building a wall
for others to get funding. Talking with potential funders, they’re all always talking
about “risk profile” and how much risk they’re taking by funding a startup company.
Too many bad experiences in funding startup companies that should never have been
created is making a lot of investors wary about investing in startup companies.

12
 SUPPORTING STARTUPS
I N C U B AT OR S A N D A C C E L E R AT O R S
footer

OTHERS SURVEYS

So what about incubators and accelerators? What value do they bring to the startup
ecosystem?

13
Here’s a typical view of businesses. Note the focus on product development and
distribution. In my experience the incubators and accelerators focus too much
startups that make products. Even the application surveys ask questions such as
production capacity per year, or how many products have been sold.

14
There is a huge difference between startups that make tangible products and those
that provide services.

15
Incubators and accelerators often focus on companies that make products. They
expect the startups coming to them to be product driven, to have something tangible
to sell. Exceptions are IT specific incubators and accelerators where they focus on
startups providing services utilizing IT products.

16
But many renewable energy startups are also consulting driven. By this I mean
companies that rely on the human resources, expertise, and knowledge to provide
services. Examples include solar/small-hydro/wind/biogas contractors, project
development companies, asset management companies, asset operation and
maintenance companies, etc.

17
 Supporting startups in ALL the
ways they need help

One thing that many incubators and accelerators I have been involved with is missing:
Critial Mentoring – not just in how to run a business, but how good is their idea in the
market? Just because it’s innovative, doesn’t mean it provides value. Not many
incubators and accelerators give feedback to their startups that they need to rethink
the idea or to pivot their business model/innovation.

18
 https://www.youtube.com/watch?v=GZAztPDAshI

Let me bring you back to this… having a mentor that can give us guidance about our
ideas, products and services is very valuable, and not often available. We don’t have
access to mentors who tell us that we don’t have a valuable invention and to keep
trying. Instead we have access to mentors who are just as awed at our inventiveness
and innovation without giving us critical advice on how to create a successful
product.

19
So how do we support our startup companies? Let me close this part of my
presentation with this quote. A successful startup create impact, and that impact is
valuable to the people around us. Let’s help our startup companies create innovation
and inventions that make real impact in the world. Let’s guide that enthusiasm,
entrepreneurial spirit, energy and intelligence so they create companies that have
valuable impact in the world.

20
 CREATING A SUSTAINABLE
STARTUP footer

CHALLENGES AND SOLUTIONS

OTHERS SURVEYS

So how do we do that? How do we get these entrepreneurs to create impact?

21
 1 – Guiding Principles (WHY?)

The first thing that is needed is the WHY of the company. It’s not enough that the
founders think they have an idea, and they want to start a company around the idea.

22
To create a sustainable startup the founders must know the WHY. Why am I spending
all this time and money to create a startup company? The founders need to dig
deeper than simply “I have a good idea and I want to make money”. I suppose for
some people getting rich is enough of a why for them to make sacrifices as a startup
founder. But for the rest of us, finding the why is what gets us to get up in the
morning after weeks of little sleep implementing an idea, failing and doing it all over
again. Let me tell you mine. I’ve had a lot of different experiences in the past. This
includes growing up in a farming community in Eastern Oregon in the USA where I got
to see the importance of clean water for irrigation and what it means to have limited
supplies during snowstorms. I’ve also been a forest firefighter where I have seen old
growth forests disappear under fire, leaving charred remains of centuries old trees.
At the same time I’ve seen blue skies disappear and replaced with gray-brown smoke
of the fires; sometimes we don’t see blue sky for many days. My WHY is to preserve
our blue skies, clean waters, and forests.

23
 2 - Founding Team

Once the why for the company is established, find co-founders who share the same
goals and vision. However there needs to be a balance between the co-founders to
ensure success and sustainability. While a strong technical skillset is needed to
realize the company’s vision and implement the innovation, a strong leader to work
with the team directly and inspire the team is also needed. Someone with a strong
business sense and knows the market will also be needed. It’s very rare that a single
person has all of these attributes. Additionally, the work will quickly become
overwhelming for a single person.

24

B ay u Sety an in g
C o - Fo under/CEO
Pragmatis t
• Over 18 y ears ex p eri ence i n co mp an y o p erati ons
an d lo g i stics i n cluding R E s ecto r
• M an aged o ver US$10 mi lli on i n s o lar PV mi n i g rid
an d rural electri ficatio n p ro j ects
• I mp lemented an d o p erated s o lar PV mi n i grids
s ervi n g 4,000 p eo p le

• Over 2 0 y ears ex p eri en ce i n p ro duct des i g n ,

tes ti ng an d s y s tem i n teg ration i n cluding R E s ecto r
An dre Sus an to
• D es i gned an d i mp lemented i n n ovative mo dular
C o - Fo under/CTO
s o lar PV mi n i g rids acro s s I n do nesia
V i s i onary
• D evelo p ed I n do nes ia’s larg es t uti li ty s cale s o lar
PV wi th s i n g le ax i s tracker un i ts

Addi tio nal T eam M emb ers :

• 3 E n gi neers
• 1 C us to mer E n g ag ement
• 1 C us to mer Sup p o rt
• 1 R es earch O f f icer
• 2 Fi eld T ech n ici an As s o ciates

This is Inovasi’s founding team. A balance between an engineer and visionary with a
businesswoman and pragmatist and a balanced set of skills for the team

25
Most importantly, the team needs to be built on trust.

26
27
Finding the right skillset for the team is important

28
D i vers e s ki llset
Adap tabi lity an d f lex i bility
A b les s ing f o r s tartup s
Li f e -long learn er
Great f i t f o r leaders hip

In the beginning, a jack of all trade is much more needed than a potentially expensive
and limited functionality expert. In some cases, experts are needed even in the early
stages of a startup.

29
I am actually reluctant to use this term, because it relays a message that the
employee is somehow pledging an allegiance to the company.

30
I would rather use the word retention. This generates a culture of mutual respect.
Some of the ways to develop the culture and to show mutual respect is through the
compensation package.

31
Obviously during the startup phase, the company may not have a lot of resources to
provide high salaries or benefits. This is where we pull together all the lessons we’ve
learned so far. Leverage the common sense of purpose, trust and use the skills of the
team members. Providing a promise of future growth through stock options or
milestone-based bonuses puts the responsibilities on all the team members. Success
based compensation packages tied to the company’s financial progress is also
another way. Perhaps more importantly, providing non-financial benefits can be just
as important for retaining the core team members. This include capacity building and
learning activities, professional experiences that is difficult to obtain in other
companies, networking opportunities, and others. Find what is valuable for the team
members.

32
3 – Funding The Company

33
 3 – Funding The Company

• I deally th ere are g ran ts avai lab le at th i s s tag e

• D i f ficult to f i n d s uf f icien t f un ding at th i s s tag e
b ey o n d des i g n an d i n i tial p ro to ty pe
• T h e s cale o f th e f un di ng o n th i s g rap h vari es
dep en ding o n th e s tartup co mp an y ’s i dea
• Of ten th e f o un ders do n o t h ave en o ug h cap i tal
an d res o urces to wo rk o n th e i dea f ullti me
• Oth er cas h flow s o urces are n eeded f o r th e
f o un ders to earn en o ug h mo n ey wh i le th ey
develo p th ei r i deas

Ideally there is a startup community of founders and mentors that can exchange ideas
and test designs and concepts by leveraging the herd knowledge. Often this is not
available for most founders. Rightly so, it’s difficult to find funding other than the
founders’ own resources. Often at this stage the founders work on their spare time
on their idea and living on their full-time jobs. The product of this stage is often a
business plan, sketches of the product, or a set of procedures on how to provide
certain services.

34
 3 – Funding The Company
• T h e mo s t i mp o rtant p h as e to g et co n ces sional
f un din g f o r develo p ment
• D i f ficult to co n vi nce o th ers b as ed o n co n cep tual
p ro to typ es
• T h i s i s a cruci al ti me f o r th e co mp an y wh ere
th ey n eed to s tart g etti ng tracti o n
• A vi ab le p ro duct/services are n eeded to b e ab le
to g et s ales reven ues
• T h e f o un ders an d th e team n eed to b alan ce
g etti n g cas h flow ( f ro m o th er wo rk) an d wo rki n g
o n th e co mp an y’s p ro ducts/services to s ell
• T h i s i s th e mo s t di f f icult p h as e o f th e s tartup , to
s urvi ve wh i le develo p in g en o ug h tracti on s o th e
co mp an y i s vi ab le f o r i n ves tment

This is the stage where the founders must start producing something to show to
others. The business plans or design sketches need to start being implemented even
if it’s just a non-functional model. But this is the stage where the founders have to
start pitching their ideas to those close to their networks. There are starting to be
more grants and competitions available for the founders at this stage of their journey.
More time and resources from the founders will start to be needed if they want to
seriously get enough funding to move on to the next stage.

The way Inovasi have been successful thus far is because while we develop our
products and services, we also take on consulting work. We split our time and
resources between revenue generating activities and business development for our
ideas. Initially the focus is in obtaining more consulting work and slowly it’s evolving
to taking less consulting work and focusing more on maturing the ideas and pitching
the business model for fundraising.

35
 3 – Funding The Company

• I n ves tors o n ly i n teres ted i f th ere’s

en o ug h tracti o n
• Fo un ders us ually s trug g le f i n anci ally
an d p ers o nally to b e ab le to ach i eve
th i s level
• W i th s i g n ificant i n j ectio n o f cas h
f ro m an g el i n ves tors, th e co mp an y
can s tart i ts g ro wth s tag e
• T h i s i s th e s tag e wh ere th e i dea i s
truly tes ted o n a larg er market

This is the stage where the companies are getting to be successful in the fundraising
for the seed round. Grants and competition awards are becoming more available if
you know where to look. This is one of the challenges in the startup world.
Depending on the sector you’re in, it can be difficult to find information about where
these grants and competitions are available from. More and more time from the
founders are required and they need to decide. Many angel investors or other seed
investment institutions insist that the founders work full time on the startup. Some
grants and competition awards actually provide the funding specifically for the
founders to stop working full time somewhere else and focus on their startup.

Instead of looking at the value of the idea and the people behind it, many investors
now claim to be supporting the startup ecosystem but in reality they’ll look at a
startup company’s revenues, costs, and other business performance indicators. What
many of the startup needs are funding when all they have is the result of their hard
work, sweat, blood and tear and the value of their idea.

36
 3 – Funding The Company

• I n th es e s tages , th e co mp an y i s q ui te well - p roven

an d wi ll n eed to deci de i f a larger gro wth s trateg y
i s n eeded
• Gro wth s trategy th at’s to o f as t wi ll n o t b e
b en ef icial f o r th e co mp an y
• W h i le i t i s go o d to lo o k at th e un i co rns an d o th er
s ucces s s to ri es f o r s tartup co mp an ies, mo s t
s us tai nab le s tartup s ex p erience mo des t g ro wth

The last two stages are where most startup companies can say “they’ve made it”
financially. While IPO is the “dream exit” for many companies, it may not be the right
exit vehicle for most of them. The IPO world is very different than private investors
that the startups have been dealing with. WeWork’s recent IPO (in 2019) has been
recognized by the market, including Forbes, as “easily the most ridiculous, and the
most dangerous”. Other comments include “suckered venture capital investors
into valuing the firm at more than 10x its nearest competitor”.
(https://www.forbes.com/sites/greatspeculations/2019/08/27/wework-is-
the-most-ridiculous-ipo-of-2019)

37
 “WeWork has copied an old business
model, i.e. office leasing, slapped some
tech lingo on it, and suckered venture
capital investors into valuing the firm
at more than 10x its nearest
competitor”
D AV I D T R AI NE R – FO R B E S
h ttps: //www .f orbes.com /sites/greatspeculations/2019/08/27/wew ork -is- th e-most-ridiculous -ipo-of-2 019

As a responsible startup company founder, we must avoid this. Creating impact that
provide value should be what having a startup is about. I realize that I am an optimist
and an idealist. Is this how I want my company to be seen as? This is borderline
defrauding the investors. Although in the renewable energy scene, this is becoming a
trend. Startup companies are popping up promising innovative inventions that can
save the world. This is where critical mentoring comes in, to ensure that startups in
the renewable energy scene really have ideas that provide valuable impact.

38
 3 – Funding The Company

This is a quick graph for some of the new startup founders out there. Don’t worry
when you’re in the discovery phase, you’re not alone in emptying your savings
account and borrowing money from your credit cards. But be smart about it, and I
hope that you have a mentor at this stage who will guide you and give you advice on
when and what to spend your own money on.

39
 3 – Funding The Company

Another example of the funding stage and where the fund sources can come from.
Bootstrapping is common all the way through the seed investment stage.

40
 SUSTAINABLE STARTUPS
FINAL WORDS
footer

OTHERS SURVEYS

I want to close my presentation today with bringing back together the tree main
concepts needed for a sustainable startup company.

41
Find your WHY. Let this guide you in your startup journey. If you have a good WHY,
even when you pivot your business model or even change your idea altogether, you
don’t feel lost. You’re still guided by your WHY.

42
Build a good team, starting with your co-founders. Make sure you have a team that’s
balanced and diverse; create a culture where everyone is heard, listened to, and given
mutual respect. Get feedback from your team and make sure all aspects of the skills
required for a successful company are covered by your team members.

43
Find a good mentor who is not afraid to criticize you and make you cry. You need to
know if you need to pivot your business model and idea or find an altogether new
idea. This is valuable especially in the early stages so that you are not wasting your
resources on an idea that isn’t going anywhere with the investors. Be wise with the
fundraising, and just know that you’re not alone. Find a community of startup
founders and make friends and networks.

44
 THANK YOU
Empowerin g Rural Communities Through Innovation

BAYU SETYANING ANDRE SUSANTO

CEO/CO-FOUNDER CO-FOUNDER

https://id.linkedin.com/in/bayu-s-99357322/ https://id.linkedin.com/in/andresusanto

WWW. PT-INOVASI.COM
https://www.linkedin.com/company/inovasi -energi

45