Monday February 16, 2015 0 comments
Dr. Morgan DeFoort is CEO of Factor(E), a venture development firm co-created by the Colorado State University Energy Institute and Shell Foundation (an independent charity) to accelerate energy access in emerging markets.
He is a Research Fellow and former director of the Energy Institute. Morgan received his B.A in physics from Hastings College and his PhD in mechanical engineering from Colorado State University. In his R&D career, Morgan has managed over $15M in sponsored research, primarily in emissions control for industrial engines, advanced ignition systems, bio-fuels, biomass combustion, and technology for sustainable development. He also is experienced in early-stage technology and venture development, working for CSU Ventures (the university's tech-transfer office) and participating in the creation of several university technology ventures (including Envirofit International and Solix Biofuels) prior to co-founding Factor(E) Ventures. He also serves on the board of directors for Lightning Hybrids, a Factor(E) portfolio company.
Q: Factor(E) was established in 2013 as a joint venture between the Shell Foundation and the Energy Institute at CSU. Why did the Energy Institute turn to Shell Foundation?
A: Actually, Shell Foundation reached out to the Energy Institute. A key focus area for the Foundation is increasing energy access by co-creating and scaling social enterprises with new types of energy product and service offers for low-income consumers. We already had a long history working collaboratively on early-stage technology development through our joint work with Envirofit, a pioneer of the clean cookstove sector.
Together, we supported Envirofit to grow into a global business delivering affordable cleaner cookstoves that significantly lower emissions and fuel usage across the developing world - a scalable way to tackle an issue that affects half the world and kills more than 4.3 million people each year.
We discovered they required a specific blend of patient financial support and technical and business expertise to overcome R&D and supply chain constraints to growth. Over time, Shell Foundation and CSU realized that lack of access to these resources was preventing other energy entrepreneurs from developing viable technologies that possess the potential to benefit millions of people through increased energy access, and we resolved to do something about it.
Q: Factor(E) aims to support early-stage entrepreneurs by helping them to provide energy solutions to underserved markets. Why did Factor(E) choose to focus on the developing world?
A: Nearly two billion people lack access to reliable and affordable modern energy, constraining their health, education and earning potential. Of this group, 60% live entirely without electricity for cooking, lighting and heating at home, for community services such as schools or health centers, or for improving the productivity of small business and farms.
Like the Shell Foundation, we believe that there is a role for market-based solutions in this space that can deliver social and environmental benefits while also being profitable and scalable.
Q: Your website (www.Factor(E)ventures.org) describes Factor(E) as a "first-of-its-kind combination of technology co-development and seed investment. Could you elaborate on that?
A: There are many different approaches to early-stage venture development - especially for pioneers of totally new markets. While incubators and accelerators have become much more common, it's rare to find funding along with the business support they offer.
We provide capital investments in high-risk ventures, and provide a wide range of intensive technical and business resources to selected entrepreneurs, such as technology development, engineering design, financial planning, business planning and model validation. In addition, we are able to provide entrepreneurs access to very unique R&D facilities (through the Energy Institute).
By working alongside these entrepreneurs as co-developers, Factor(E) is able to highlight value and off-set risk for second-stage investors, enabling businesses to scale and fulfill their potential to deliver global impact. It's this combination that we think is unique.
Q: Could you talk a little about the team that's been assembled for Factor(E) and what they bring to the mission?
A: We have a small but diverse team, all with both technical and venture experience. Jason Prapas, our CTO, is an alumni of the Energy Institute and worked with me in cookstoves prior to moving to Factor(E). Before that, Jason worked for an MIT spinout in the biofuels space. Nick Peters, our business manager, comes from the Bay Area where he previously held roles in finance, consulting and philanthropy. Rahul Barua, investment associate, is our latest addition to the team. He has a diverse background from materials to carbon markets and has extensive field experience. One of the most important team members, however, is our Chairman Hal Kruth, who plays a very active role in the company. Hal has been a founder, promoter, fundraiser, manager and active board member in over 50 early-stage companies. He was the senior VP of Ventures and Licensing for Stanford Research Institute, and was one of the top executives responsible for a spin-out of the UK's defense science and engineering labs (QinetiQ). Hal brings a wealth of venture experience to the team and has been instrumental in designing Factor(E). We've also been very fortunate to be advised by Pradeep Pursnani, deputy director at the Shell Foundation and Bryan Willson, director at the Energy Institute.
Q: On the surface, this doesn't sound like a huge money-making proposition. Is this more of an altruistic endeavor, or do you expect real financial returns from these venture investments?
A: Early-stage investing is risky as it is. Add to that fact a focus on energy in the world's toughest markets and yes, Factor(E) is not something you'd look for to guarantee a short-term return on investment.
Yet our ability to identify the market failures that underpin major energy challenges - and to assess the potential of transformative solutions - gives us a good chance of focusing our capital and tailored support towards high-quality ventures with a higher probability of success. We aim to accelerate their growth trajectory and, importantly, our funders are willing to prioritize long-term impact and sustainability over short-term gain.
One example from our portfolio is Lightning Hybrids (which also happens to be a Colorado company). Lightning has developed a hydraulic hybrid system that can be retrofitted or incorporated into trucks and buses, an important market for rapidly growing cities around the world: In India they account for only one percent of the vehicle population, but represent 60-70 percent of passenger miles. Lightning Hybrids has the potential to drastically reduce the emissions and fuel consumption of these vehicles, all while saving money for the vehicle owners and ultimately the passengers.
Such innovative win-win solutions are exactly the types of investments that Factor(E) focuses on supporting. Our role is to facilitate getting this technology into the international markets, especially in developing countries, and to pave the way toward a more sustainable future in transportation. This past November, the Lightning Hybrids system was installed on one of its first overseas customers, an in-service vehicle with the Bangalore Metropolitan Transit Corp in India.
Over time, the investor approach gives the ventures the right discipline as they grow and hopefully will create a return to Factor(E) that will allow us to invest in the next promising technology.