A non-profit clean technology accelerator and innovation hub in Brooklyn is claiming an 88% success rate for the climate solution start-ups it supports, with an approach that stresses stepwise business development rather than a search for the next technological “unicorn”—and weeds out greenwash at an early stage.
The Urban Future Lab (UFL) at New York University’s Tandon School of Engineering launched in 2009, and currently receives most its funding from the New York State Energy Research and Development Authority (NYSERDA), a public benefit corporation set up at the state level in 1975. For every dollar it has received in public funds, UFL has generated US$288 in the private market, said Pat Sapinsley, the lab’s managing director of cleantech initiatives.
“That’s a return on taxpayer dollars, and that’s crazy. We’re a not-for-profit,” Sapinsley told The Energy Mix in an interview during Climate Week NYC in September. The $2.3 billion that member companies have raised with UFL’s help is “better than many VCs (private venture capital firms),” she added, and it all goes to start-ups that hire people across the city and beyond.
“We are definitely growing the clean economy with our work.”
One of UFL’s six programs, Accelerating a Clean and Renewable Economy (ACRE), has offered extensive start-up support to more than 170 companies—“so much help”, Sapinsley said, compared to a home start-up working from a kitchen table or a garage. Participants get other start-ups to connect and collaborate with, and advice from UFL staff, many of whom have started their own new businesses. The lab introduces its participants to potential customers, channel partners, funders, “and that is what contributes to their success”.
A UFL presentation package says the organization has raised more than $2.3 billion in venture capital, project finance, and grants and created 4,100 jobs.
At least as important, UFL sets high standards for companies’ climate performance, but realistic expectations for how they’ll develop and how fast they’ll grow. In contrast to the VC sector, where Sapinsley previously worked, “we don’t care if they’ll become a unicorn,” she said. “And that also means we don’t rush them to exit. Some of them rush themselves, but we don’t make them reach beyond their capabilities.”
Deploy, Deploy, Deploy
UFL understands that it can take two years for a new company to pitch itself in the risk-averse real estate sector, or three years to break in with utilities, so “we let them grow at a slow rate,” Sapinsley added. “We care very much about whether they can continue to help the emissions picture, of course, and the VCs care about that, too.” But “we don’t care how quickly they scale. We just want them to [achieve that] scale and deploy, deploy, deploy.”
The other key criteria for a new arrival are “whether the entrepreneurs are coachable, whether we can help them, whether we have the knowledge and capability on our team to help them,” she said. And crucially, “whether they’re the kind of people who will take responsibility when something goes wrong. Because something always goes wrong with a start-up.”
UFL’s other current programs include:
• Clean Start, a one-semester cleantech certificate program for mid-career professionals, hosted at NYU’s School of Professional Studies;
• The Carbon to Value (C2V) Initiative, a partnership aimed at commercializing technologies to turn captured carbon dioxide into useful products and services;
• A start-up accelerator for legitimately low-carbon hydrogen companies;
• An offshore wind innovation hub that lists Norwegian state fossil Equinor as one of its partners;
• A global incubator program that helps UK-based cleantech start-ups find footholds in the U.S. market.
“In many of these initiatives, we’re kickstarting new industries,” Sapinsley told The Mix. The C2V Initiative focuses on end products like carbon fibre, sustainable aviation fuel, carbon-based chemicals, and a new, yet-to-be-named product that could “serve the same purpose” as petroleum-based plastics. The three-year partnership with Equinor builds on the company’s existing expertise in offshore wind.
Showing the Way…With No Greenwash
“We are not opposed to working with oil and gas to show them the way to renewables,” Sapinsley said. “We want to say you’ve been [major climate polluters] in the past, let’s show you how to do it right. So we’ll take their money and create an offshore wind industry that can help them to the transition they need.”
The huge potential for offshore wind in the U.S., notwithstanding recent setbacks, points to one of the ways a small organization like UFL can help a giant multinational like Equinor. “We see that big potential, but we need all those small companies that facilitate offshore wind, like the autonomous vehicles that measure the ocean floor underwater, or the company producing virtual reality headsets so you can train the construction crew without taking them out on a boat.” Far better, she explained, for technicians to use a simulator in a classroom to get used to installing wind turbine tower components against the rocking of the waves.
None of UFL’s programs could deliver on their objectives without a rigorous assessment of a project’s true climate benefit—and cost. “When there’s any question about whether it’s greenwashing, they don’t get selected,” Sapinsley stressed. “We only allow companies that are truly green, that are using renewables, that are not drawing renewables away from the grid” where they would otherwise be needed.
With carbon-to-value projects, “if you’re drawing down carbon you’re using a huge amount of energy,” she added. So “we look at the energy in/energy out lifetime analysis, and we also look at the availability of renewables wherever they’re doing this.” Enhanced oil recovery (EOR) projects, where captured carbon is used to pull more oil out of depleted wells, need not apply.
SWTCH, a Toronto-based start-up that supplies energy management software for electric vehicle charging, is one of UFL’s current program participants.
“UFL was instrumental in SWTCH’s growth journey,” the company’s head of strategy and finance, Samuel Bordenave, told The Mix in an email. “They gave our founder Carter the opportunity to meet NYC-based investors, provided us with office and meeting space which helped us gain a foothold in NYC, and facilitated contacts with potential customers in the city.”
He added that Sapinsley “is an invaluable resource, both very approachable and eager to help, and very well connected within the NYC ecosystem.”
Financing for Community Energy
Another one of the start-ups on UFL’s roster is NineDot Energy, a climate finance and community energy company that currently emphasizes battery storage to “support a more resilient grid, deliver economic savings, and reduce carbon emissions” in and around New York City.
“The only way to solve difficult, creative problems is to imagine things that are not just inside the existing mode of thinking,” said CEO and Co-Founder David Arfin, citing the Nine Dot Problem as one of the company’s inspirations. “That’s reflective of the way we try to approach solving the urban energy problem.”
Arfin, a former SolarCity executive and Silicon Valley entrepreneur, laid out the challenge of addressing energy and climate in a large metropolitan area—where utilities, zoning, finance, real estate, economics, and accounting have to navigate three levels of government regulations and incentives, then “merge that with the technologies that are commercially available, what is scalable, what is safe, and what is bankable.” Against that complicated backdrop, he said, “we are creating infrastructure of the future for New York with distributed storage. We’re trying to reduce dependence on dirty peaker plants and build a cleaner, more resilient grid.”
That effort “requires a lot of creativity, a lot of patience, some impatience, and some capital,” he added.
NineDot opened in 2015 and was still a very small operation, with two full-time and two part-time staff, when it connected with UFL in 2018. In the last 18 months, the company has grown to a team of 45. Arfin attributed that shift to successful projects, a “big market need and opportunity,” a talented team, and an influx of financing from several financial institutions, including the New York Green Bank.
UFL supported that growth in two ways.
“They brought us in, so that we’re now part of the New York City urban future culture,” he said. “It gave us a level of legitimacy, a brand recognition, and the brand benefit that UFL has built up,” and to which NineDot now aims to contribute as a success story in its own right.
And beyond that, “they brought in terrific connections,” he added. “They’re not directly investors, but we are a part of their story. [Sapinsley] wakes up in the morning trying to think of how she can help our companies make connections, move things out, build introductions in this complicated ecosystem of finance and investment and technology and climate.”
No Wild Goose Chases
Rochester, NY-based WexEnergy produces lightweight, easy-to-install window insulation panels that boost the energy efficiency of “the most porous component of your building.” The company says its product can bring an older double-pane window up to the performance of a new ENERGY STAR® unit at less than 20% of the cost of replacing it.
Windows and doors are “enormously expensive” to replace, more so with triple-pane glass, and even the best installations only get 15 to 20 years of use before their energy performance has significantly deteriorated, explained WexEnergy CEO and Co-Founder Rachel Rosen. As a self-described “recovering landlord”, Rosen said she knew that building owners and developers always listed windows among the top three building components they want to upgrade.
But almost invariably, “all the other pressing needs are far more immediate. The windows are still working. It’s not raining or snowing inside.”
WexEnergy was ready to launch its WexWindows product in early 2020—but once the COVID-19 pandemic hit, property owners had to prioritize building air exchange over energy performance. Meanwhile, the magnitude of weather disasters was changing profoundly, and energy costs in New York are very high.
Now, Rosen said, “people are beginning to understand that something has to change. The building envelope has become very, very important in the last year.”
With introductions from UFL, WexEnergy opened conversations with New York utility giant Consolidated Edison and three other power companies, all of them interested in WexWIndows as a possible solution for low- to moderate-income households.
“Pat is an incredible connector,” Rosen said of Sapinsley. “I have to tell you that when Pat sends me an email and says you need to do this, my only questions are, right this second? And how high should I jump? She has never sent us on a wild goose chase.”
Pay-Per-Mile Financing for Clean Fleets
London, UK-based Zeti Group aims to speed up electrification of vehicle fleets by changing the way acquisitions are financed. “Traditional automotive finance has run its course in many ways,” said Director of Strategic Partnerships Rebecca Saletta. So “we were created essentially to clean up the automotive space,” using a pay-per-mile or -kilometre model to carve out a more transparent, flexible financing path for cleaner vehicles.
Zeti Group operates as a financial technology or “fintech” company, managing projects for institutional lenders—banks, pension funds, insurance companies—that are willing to consider clean vehicles as a new asset class. Those investors might already be looking at solar and wind as “climate-focused assets,” Saletta explained, with business propositions that are usually based on comparative energy prices. “So we come in and say, great, let’s diversify that for you. There’s a lot of pressure on ESG in the finance space, and not a lot of differentiation. So we say, if there’s money here, let’s start putting it into vehicles, and we’re the conduit for that.”
A big part of Zeti’s thinking is that the broader focus can give investors a more stable, predictable product. “When you’re financing a more traditional climate asset, energy prices can change by the day,” she said. With fleet operations, by contrast, “once that vehicle is purchased, that’s all that matters. The risk of energy prices goes down now to the operator,” but it’s no longer a concern for the lender.
Saletta opened Zeti Group’s U.S. office two years ago, and was the company’s sole North American representative until it opened a U.S. East Coast office—with UFL as its address.
“They’ve been awesome,” she said. “Our thought process around expanding into New York and investing in that community was to find new finance partners, new capital partners,” but that required “someone who knew how to talk the talk, who knew which circles were best for us.” With that purpose in mind, “they were almost our feet on the ground when we didn’t have anyone there.”
Flying Under the Radar
Over the next couple of years—after the more than 170 start-ups, the 88% success rate, the $288 raised for every dollar spent, and the accolades from participating companies—Pat Sapinsley and the Urban Future Lab are facing down an unfamiliar, new challenge: marketing themselves.
For nearly 15 years, UFL has received most its funding from the New York State Energy Research and Development Authority. But now, the lab is looking to diversify its funding.
Early on, “I mistakenly refused to spend money on marketing,” she said. “I just wanted to put my head down and get the work done. Now I realize we should have been doing this all along. We’re flying under the radar, but we’ve hired a top notch marketing expert to help us get the word out.”