Green Start-ups to Get New Home in Los Angeles
The pursuit of a green future is commendable, but support for the endeavour is, sadly, far from a majority in this country. That being said, there are organizations making leaps for the sake of businesses that are seeking to create a green future – no safety net. For some it’s a moral obligation, for others it’s the opportunity to get in and cash out. For the team at the Los Angeles Cleantech Incubator (LACI) it’s a desire to turn L.A. into the greentech hub of the world by nurturing start-ups with a similar mission.
LACI is the City of Los Angeles’ official cleantech business incubator created to accelerate the development of cleantech start-ups by offering plug and play office space, CEO coaching and mentoring, and access to a growing network of experts and capital. Thirty companies have joined the incubator since it’s conception three years ago; LACI has raised more than 50 million dollars collectively for those companies, and over 400 jobs have been created in the process. It is estimated that these incubated companies have generated over 100 million dollars in revenue.
Take CA 101 directly into the heart of Downtown Los Angeles, hop off anywhere from Temple to 7th St and you’ll find yourself in the Arts District. The drive winds you past gentrified apartment buildings, design studios, high-end boutiques, and even an Urth Caffe. There are models posing in penthouse windows and artists puffing pensively on American Spirit cigarettes. What you surely won’t miss is the massive construction project that is the future of LACI.
This area of downtown has been dubbed the Cleantech Corridor by the City of Los Angeles – a four mile block stretching across the Los Angeles River. The original plan for this block of land included local, state, and federal financial incentives to attract early stage companies to Downtown Los Angeles.
I met up with Michael Swords, VP of Partnerships at LACI and former Chairmen of Cleantech Los Angeles, in the small office space that serves as LACI’s temporary home. From the street, the building is reminiscent of a decade old auto repair shop. Inside, the space is packed with desks, prototypes and an impressive collection of photos of powerful people. I spotted one of Juicer’s Electric Motorbicycles (a LACI incubated company’s product) leaning against a wall and directly above it I found a picture of Fred Walti, Executive Director of LACI, surrounded by a group of President Obama’s Cabinet members.
Men in suits bustled through congested doorways with cellphones to their ears, determined buzzing coming audibly through their earpieces. Mike pointed out two men debating heatedly in a small conference room, and told me that one of them was an in-house business coach and the other was the CEO of one of LACI’s portfolio companies that was going through a series of investments. These were business people in their natural environment – no fancy architecture, no kegs of Yerba Mate.
Mike and I stepped into a large conference room. At one time Mike worked for the Vice Chancellor of U.C.L.A. in research, and one of the partnerships that they developed was Cleantech Los Angeles: a consortium across the L.A. area including U.C.L.A., U.S.C., Cal Tech, Jet Propulsion Laboratory (JPL), The Mayor’s Office, Los Angeles Department of Water and Power (DWP), The Bureau of Street Lighting, the Port of Los Angeles, L.A. Chamber of Commerce, Los Angeles Business Council, and Central City Association. Those were the original partners. Then General Electric came on as a board member, a few small start-ups joined in, and Cleantech Los Angeles became a virtual organization for the betterment of the Cleantech Corridor in L.A.
Two projects were started in the Cleantech Corridor: The La Kretz Innovation Campus (where an incubator, soon to be known as LACI, was to call home) and the Cleantech Manufacturing Center. After about a year and a half of work on these two premiere projects, the state government cut their funding and the Cleantech Corridor was left to fend for itself. But never underestimate the resolve of Los Angeles – the City decided to turn the two active projects over to independent agencies and continue the work.
So what does this all mean for LACI? How did an incubator spring up after the state government cut their funding?
The Board of Cleantech LA “realized that they had bumped up against the threshold for what could be done as a virtual organization.” It was time to build something tangible, so they “decided to apply for grants, created some memberships dues, generated some revenue, and transformed Cleantech LA into the Los Angeles Cleantech Incubator,” says Swords.
Mike and the new Board of Directors at LACI didn’t want to wait three years for the La Kretz Campus to be built, because although private firms were jumping at the opportunity to continue the campus’ construction, no one was really sure if these firms were simply in it for the value of the land or truly interested in the betterment of L.A. and a green future.
Also, the team at the newly founded LACI knew there were companies out there aching to be a part of this grassroots, greentech movement. So they found a small space a block from the La Kretz construction site and set up shop. That’s where I sat with Mike as he orated this history. The concept of the Cleantech Corridor, as a whole, may be in hibernation, but LACI has far exceeded everyone’s expectations.
“We’ve become a model for how incubators can work anywhere. [LACI] has been named the 6th Best Incubator in the World by the UBI Index. We get calls from incubation agencies all over the world who want to know how we’re doing what we’re doing. Over the past three weeks, we’ve hosted four delegations from Asia and the Middle East who want to consult with us and create a similar model in their respective capitals.”
In an effort to turn L.A. “green”, LACI has stumbled across an incredible model for incubation. It’s a bit of a mystery why exactly this model is working so well. When I asked Mike what he thought the reason was behind the success, he chucked proudly:
“I’ve only worked for one incubator, but I’ve been told by people who’ve been in the milieu for a while that because we’re a non-profit that gets local, state and federal financial support, philanthropic support, industry support; that J.P. Morgan has made a five year commitment to us and that we get support from the utilities: DWP and Southern California Edison; that we’ve been hired by local universities to create satellite incubation programs including Cal State Northridge and Otis College of Design – all of this gives us a very diverse revenue stream, which is unique for an incubator.”
But it’s not just the revenue stream that separates LACI from other incubators:
“We have eight seasoned entrepreneurs running this place. Most incubators have non-profit executives or governmental bureaucrats in charge who’ve never spent a day working in business. There isn’t one government official in this building. There isn’t one person who, prior to working here, worked for a non-profit. Every executive here has started a business or has been a VC.”
You can see the power of LACI’s business building strategies in their retention rate – only two of the thirty original startups have left the incubator: one that exited and another that priced themselves out of business. That retention rate is pretty rare for an incubator, and Mike believes that’s because the executives and coaches in-house have proven themselves in the business arena.
I reached out to one of the companies being incubated at LACI, called4sphere. They’ve created an alternating wake turbine… I’m no engineer – they lost me at turbine – but I do know that they’ve received support from water, energy and urban organizations across the world. “If we hadn’t been accepted into [LACI] there’s no way we would have the network of connections that we have today,” Zack Fleishman, Co-Founder and COO at 4sphere. “4sphere has taken off because of the guidance from the business coaches at LACI. Also, we’re collaborating with a few other companies within the incubator to expand all of our businesses. Who knows if we would have met those companies without working within the same organization.”
The entrepreneurial blood that pumps through LACI isn’t nearly the last unique characteristic of the organization. The incubator is capitalizing on a niche that is finally reaching the summit of universal support in many forward thinking urban hubs like Los Angeles:
“In L.A., we have nearly across the board political support. Every local, state and federally elected official is tripping over themselves to outgreen their competition. When you combine that with the desire to create jobs, it’s a win-win,” added Swords.
LACI isn’t the only organization in Southern California striving to incubate cleantech businesses. There’s a Cleantech Orange County, there’s a Cleantech San Diego, and in the Los Angeles area there’s also competition. But even with the revenue stream, entrepreneurial executives and political support aside, no other incubator or accelerator is offering a network of contacts like that of LACI.
In October, LACI held their second annual cleantech Global Showcase (GloSho ‘14). During the investor’s dinner on the night of GloSho, about 120 people were in the room – 40–45 of them were investors from all around the world, about 15 were LACI staff and Board members, and the rest were entrepreneurs. “People kept mentioning to me that they hadn’t seen anything comparable, even in the Bay Area where it’s much easier to get top flight investors together. There are so many deals being done as a result of GloSho,” says Swords.
It isn’t unique that GloSho ‘14 brought investors together with budding entrepreneurs – what really separated the event from others like it was the scope of investors that the convention attracted:
“We have the power to convene stakeholders from the investment community, entrepreneurial community, utility sector, local and state and federal governments, Universities – you name it – and we have contacts there, and when we call they respond because of our track record.”
LACI’s Advisory Board, as Mike called it, is a powerhouse of heavy hitters from all across the sustainability sector – and sustainability isn’t the final step for LACI. They’re expanding into markets outside of cleantech thanks to their successful model – the incubator at CSUN already has portfolio companies in biotech, transportation and medical technologies. The incubator at Otis College of Art and Design is all about design, and LACI isn’t stopping there.
“Right now, we’re still the Los Angeles Cleantech Incubator, but over the next six months to a year we’re going to establish ourselves as an innovation focused organization that is really intent on building an innovation ecosystem here that transcends cleantech.”
Mike is confident this change will happen organically with the completion of the La Kretz Campus, which is an 85,000 square foot plot of land – 60,000 of that will be the La Kretz building, of which LACI will be the primary tenant. Other attributes of La Kretz include a workforce training and development center, a prototyping lab, a smart grid testing center, a customer service wing for DWP, a massive covered parking lot doubling as a solar farm, and a half-acre community park.
La Kretz is due for completion in late 2015, early 2016.
Do you own a business that would be perfect for LACI? Apply here for admission, but know that this incubator receives hundreds of applications a month. A helpful hint: they care very much about passion. I’ll be conducting a follow up interview with Mike Swords once construction of La Kretz is complete and LACI is running at full capacity. Follow me to read the follow up article, and, more immediately, to be notified when I post my next piece in this Incubator Series.
Until next time, friends.