Part III
Besides coming up with a creative and innovative business model, in order to be successful in business, a company needs something very important: money. Our company did something that no one in the field had ever done: we raised a whole lot if money. In fact, through a variety of private and institutional investors (including pension funds), we raised close to $100 million! This was a huge amount, and truly unprecedented. And, it enabled us to move forward and build these systems, which proved to be very costly (somewhere around $2 – 3 million, on average).
In order to begin, we needed to have “host” sites at which to build the systems. This was not a simple task. As mentioned, we decided to focus on office buildings for two main reasons: first, they seemed to be big centers of energy usage, which was necessary (economies of scale); second, almost none of these large commercial office buildings already had DG systems to serve them (perhaps, later, we began to realize why …).
To the second point, we found it very difficult to “sign up” office buildings (actually, their ownership), in part, because they never had anything like this before (a DG system in the building), and so they had little familiarity. It is not too hard to sell a new boiler to a building that has always had boilers. But this was a whole different ball of wax. This was at a time (around the year 2000) when these owners had been through the slew of telecom providers, in the then-newly deregulated world of telecommunications. They had been promised everything under the sun – long-term leases for space they had never rented before, revenue, state-of-the-art services to attract and retain tenants, and so on. What they got was not much money, and then a rash of bankruptcies, following the fall of telecom – not as a result of, but vaguely associated with, the collapse of the “dot-com’s.”
So, this was the first obstacle to signing contracts. Next, was the general unfamiliarity and discomfort with this whole crazy thing we were selling. Again, boilers and the like were easy; but engines that run day and night on my roof …? That was another thing all together. Throw in the fact that we had to connect not only to their electric systems, but to their hot and cold water systems, — well this was just too much. There was real potential for chaos here (in truth, there really was). We would actually cut into their systems and exchange our heat and cold, measure it and then figure out how much to charge them. All of it seemed very confusing and difficult to get one’s arms around – which also made the “sale” very difficult.
Lastly, the true economic benefit for the owners did not seem justified by the rigmarole and perceived risk associated with having the systems operate in the buildings. For buildings that generated millions of dollars annually from tenants’ rent, our rent was a relatively small sum, especially given the various and sundry risks. Nonetheless, we did bring on board some 40 – 50 contracts on buildings we could install, if we decided to.
So, all combined and summed up, it was a complicated undertaking that many property owners did not wish to undertake; for those that did, some thought it would be their undertaking.
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