A hectic week at the beginning of November gave LED lighting innovation company enLighten firsthand experience of how well established the clean technology industry is in the United States. After winning the Australian Cleantech Open competition in October, Sydney-based enLighten was awarded the opportunity to participate at the global Cleantech Open Global Forum to engage with hundreds of other clean tech innovators and potential investors.
Tony Fehon, enLighten Director with extensive start up and capital raising experience in both Australia & the US, represented the company in San Jose. He explains how participating at this event has proven to be both a valuable learning and international networking experience.
The US clean tech market currently stands at 15 times the size of the equivalent markets in Australia and NZ combined, with between 20 to 40 per cent of the world’s venture capital now being raised in California’s Silicon Valley (this figure includes angel investment, private equity, start-up and expansion capital as well as corporate investment). Coming to San Jose meant focussing on our offer to knowledgeable professional investors. A number of parties showed interest in our products and business focus.
For a company looking to emulate the success of a thriving foreign market such as the US, participating at the event in San Jose provided enLighten with the opportunity to learn, network, be inspired by and find a willing and like-minded audience to pitch our solution to.
The Global Cleantech Forum was spread over several days and attracted Cleantech entries from 31 countries, with 11 sending teams to San Jose. The Eight company strong Australian delegation participated in a welcome function hosted by regional business accelerator ANZA Cleantech, a tailored US market entry analysis workshop and business matching meetings in addition to participating in the Cleantech Open Global Ideas Competition.
The fact that enLighten’s award winning Chamaeleon light has been proven to deliver up to 93% savings helped enLighten to be shortlisted as one of 6 finalists in the Global Ideas competition as well as win a legion of new fans and admirers, including the influential US commentator, Katherine Tweed of Green Tech Media.
Should Australian companies establish an office in the US?
This was a recurrent theme among potential investors and one which was supported by Vikki Forrest, CEO of ANZA Cleantech.
She stated that virtually any service or product that is a success in the home market is ripe to reap huge rewards in America, but to make this happen your sales and marketing team need to be close to your customers. She continued to stress that while Skype and email are great, they are no substitute in the early and critical days of relationship building that goes into securing a new customer or raising capital.
For entrepreneurs who wish to have a real and meaningful impact in a market the size of the US there is no substitute for showing up in person. The digital world may be fast evolving but seasoned business folk know that in successful business personal relationships still come first.
Talking to the Investors
As part of the Cleantech Open Global Forum competition, enLighten Australia was invited to the Investor Connect session, which links the most promising Cleantech Open start-ups to corporate investors and VC funds.
The process included a pre-forum online review, matching process and intensive face-to-face showcase meetings, allowing each company seven minutes to pitch to up to 12 investors (a process which has helped Cleantech Open alumni companies to raise $700m since 2006).
As an established business with commercial LED lighting products generating a positive cash flow, we were looking for stage two expansion capital to fund further product development and international market entry.
Our pitch was well received and the potential investor questions focused on several key areas:
- Our market analysis and understanding;
- US market plans and entry potential;
- Production capacity;
- Competition defence mechanisms; and,
- Design patents and IP protection quality.
The line of questioning proved that in this mature market potential investors are both highly knowledgeable and street smart. The bottom line is you need to come not just well prepared but with a business strategy that covers the entire commercial ‘what ifs’.
How is capital raising in Silicon Valley different from in Australia?
Our first observation is that there is normally an extra “0” in discussions related to investment amounts. This is a big country with big demand and big orders. So don’t be overwhelmed.
Secondly US investors are astute and quick to work out if your business is within their sphere of expertise or interest. Given its size, the US venture capital market has more niche segments and therefore you have to meet a lot of people before finding the right ones.
Despite this, we observed significant numbers of investors with the capacity to look at deal and “do it”. Australian investors are more relationship-focussed, and as a result deal with the issue of getting to a scalable market. The US investors are making that decision for the much larger local market, where success leads to significant company returns.
Where to from here for enLighten?
Having gone to the US well prepared but without any preconceived expectations we thoroughly enjoyed participating at this event and got a substantial amount from it, not least the sheer size of potential that the US market offers.
It is still early days, however we are now in further discussions with several potential investors from the Investor Connect session as well a number of distributors who approached us as part of the competition expo; another upside of participating at this event.
Beyond this, I would have to claim commercial in confidence and simply say watch this space...