Black Coral’s Rob Day Talks Cleantech By Way of IT, Why Evergreen Solar’s Bankruptcy Isn’t the End, and Boston’s Energy Future

Two years ago, we took a close look at Boston-based Black Coral Capital, just as Rob Day was joining the newly formed, cleantech-focused private equity firm as partner. Since then, both the Day and Black Coral names have shown up as part of investments in some innovative cleantech plays in Boston—several that go beyond traditional materials and dabble in the services and IT realms.

On a recent visit, Day had a lot to say about how and why traditional, materials-based cleantech firms should innovate, and the sprouting up of new companies using IT to solve cleantech challenges such as energy efficiency. He’s also pretty rosy on Boston’s up-and-coming (and pretty gritty) cleantech incubators, and the city’s potential to become a center for innovations in energy controls.

Read below for an edited transcript of a chat I had with him at Black Coral’s offices last week.

Xconomy: Tell me about some of your existing area investments, in companies like Next Step Living and Digital Lumens.

Rob Day: With Next Step Living, the business model is coming into homes. It has a full set of options. The idea is, “Hey, what do we have to do to get this home to be more energy efficient and get the homeowner to save more money? What makes most financial sense to homeowners?” They’re establishing themselves as a trusted energy advisor to them.

I see them as a channel, solution provider to the home. I keep not being excited about residential energy efficiency technology and products because there aren’t any good channels. That’s where Next Step Living can solve a major problem.

Digital Lumens is much more your classic technology play. They’re putting together what LEDs can do and what controls can do with LEDs. That’s much more of a hardcore tech play.

The similarity is, in all of these markets you need to provide a full solution.

X: What do you see as some of the next big plays in energy efficiency?

RD: There’s a good opportunity to continue to take building energy intelligence downstream. Energy intelligence for buildings has been aimed at homes, like smart thermostats, or it’s been aimed at very large buildings. But there are hundreds of thousands of buildings out there that are too small to use the existing solutions. There is an opportunity there. Ninety-plus percent of commercial buildings don’t have any intelligence out there.

The key is going to be coming up with something that is very flexible [for buildings between 25k – 50k square feet]. They’re going to need to come up with hundreds of thousands of solutions, and they’ll have to be a little bit more cookie cutter-ish. Because the buildings are all different, it has to be highly flexible and easy to configure. Even EnerNOC is starting to get involved in this. I think Boston has a particular opportunity to be an area of expertise of energy controls for buildings.

X: Is the popular notion that cleantech startups are having trouble getting money true?

RD: It’s certainly out of favor right now with investors, at least … Next Page »

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2 responses to “Black Coral’s Rob Day Talks Cleantech By Way of IT, Why Evergreen Solar’s Bankruptcy Isn’t the End, and Boston’s Energy Future”

  1. noisetosignal says:

    I believe the following rational is poorly thought through …”It’s one on a long list of painful lessons learned by those who are investing. You need to look pretty far out on the cost curve, and make sure you’re not investing in a temporary part of the cost curve. It’s tough to do because you don’t know what other people are working on.”

    It is not so much about looking far out on the cost curve or worrying about what else someone is working on; it is more about understanding the fundamentals of the “who is writing the check?” For example, what is this entity’s (government, consumer, business) source of funding? Is the source of funding stable? Government funding should never be assumed as stable neither should financing provided by banks, which at this point are still heavily leveraged and continue to receive backing from government programs.

    Lastly, how do you propose consumers will have the CapEx to invest in solar or have sufficient disposable income to afford low OPEX options? Your premise fails the basic test for consumer spending.

    Consumers go into debt or stretch their dollars for the following: children’s education; entertainment, and productivity tools (communication). Solar is none of these.

    Have you forgotten that the majority of today’s homeowners struggling to do their best to not repeat the another great depression in their lifetime? Now you propose renewable generation with another form of debt. My question to you — why do you continue to build a business out of consumer debt?

    Lastly, it appears you know a lot about consumer behavior — what motivated you to install solar panels — assuming of course, you have installed solar panels? We’ve had solar for 11 years with local storage. And you?